As filed with the Securities and Exchange Commission on December 17, 2018
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F/A
AMENDMENT NO. 1
È REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT
OF 1934
‘ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the transition period from
to
OR
‘ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number:
Takeda Yakuhin Kogyo Kabushiki Kaisha
(Exact name of registrant as specified in its charter)
Takeda Pharmaceutical Company Limited
(Translation of registrant’s name into English)
Japan
(Jurisdiction of incorporation or organization)
1-1, Nihonbashi-Honcho 2-Chome
Chuo-ku, Tokyo 103-8668, Japan
(Address of principal executive offices)
Costa Saroukos
1-1, Nihonbashi-Honcho 2-Chome
Chuo-ku, Tokyo 103-8668, Japan
Tel: +81 3 3278-2306
Fax: +81 3 3278-2268
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Copies to:
Keiji Hatano, Esq.,
Sullivan & Cromwell LLP,
Otemachi First Square, 5-1, Otemachi 1-Chome,
Chiyoda-ku, Tokyo 100-0004, Japan
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class
American Depositary Shares Representing Common Stock
Common Stock, no par value*
Name of Each Exchange On Which Registered
New York Stock Exchange
* Listed not for trading, but only in connection with the registration of the American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
N.A.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ‘ Yes È No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. ‘ Yes ‘ No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ‘ No ‘
Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ‘ No ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of
“large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ‘
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the
Emerging growth company ‘
Non-accelerated filer È
Accelerated filer ‘
extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ‘
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification
after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ‘
International Financial Reporting Standards as issued
by the International Accounting Standards Board È
Other ‘
If “Other” has been checked in response to the previous question,
follow. ‘ Item 17 ‘ Item 18
indicate by check mark which financial statement
item the registrant has elected to
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ‘ Yes ‘ No
TABLE OF CONTENTS
Item 1. Identity of Directors, Senior Management and Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2. Offer Statistics and Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3. Key Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Information on the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4A. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 5. Operating and Financial Review and Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
3
3
27
69
70
Item 6. Directors, Senior Management and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
139
Item 7. Major Shareholders and Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
154
Item 8. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
155
Item 9. The Offer and Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
158
Item 10. Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
159
Item 11. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
179
Item 12. Description of Securities Other Than Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
179
Item 13. Defaults, Dividend Arrearages and Delinquencies.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
187
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds. . . . . . . . . . . . . . . . .
187
Item 15. Controls and Procedures.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
187
Item 16A. Audit Committee Financial Expert. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
187
Item 16B. Code of Ethics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
187
Item 16C. Principal Accountant Fees and Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
187
Item 16D. Exemptions from the Listing Standards for Audit Committees.
. . . . . . . . . . . . . . . . . . . . . . . . . . .
187
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers. . . . . . . . . . . . . . . . . . . . . .
187
Item 16F. Change in Registrant’s Certifying Accountant.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
187
Item 16G. Corporate Governance.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
188
Item 16H. Mine Safety Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
188
Item 17. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
188
Item 18. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
188
Item 19. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
188
ii
As used in this registration statement, references to the “Company,” “Takeda,” “we,” “us” and “our”
are to Takeda Pharmaceutical Company Limited and, except as the context otherwise requires, its consolidated
subsidiaries. References to “Shire” are to Shire plc and, except as the context otherwise requires,
its
consolidated subsidiaries.
On May 8, 2018, we announced our offer to acquire all of the issued and to-be-issued share capital of
Shire (the “Shire Acquisition”). See “Item 4. Information on the Company—A. History and Development of the
Company—Shire Acquisition.” We and Shire operate as independent companies and will continue to do so until
after the closing of the Shire Acquisition. For information on the business of Shire, see “Item 4. Information on
the Company—Appendix: Business of Shire.” For information on the operating results and financial condition of
Shire, see “Item 5. Operating Review and Financial Review and Prospects—Appendix: Operating and Financial
Review and Prospects of Shire.” To the extent referring to periods following the completion of the Shire
Acquisition, references in this registration statement to “Takeda,” “we,” “us” and “our” and to the “combined
company” are to Takeda following its acquisition of Shire.
In this registration statement, we present our audited consolidated financial statements as of March 31,
2017 and 2018 and for the fiscal years ended March 31, 2016, 2017 and 2018. Pursuant to Article 3-05 of
Regulation S-X, we separately present the audited consolidated financial statements of Shire as of December 31,
2016 and 2017 and for the years ended December 31, 2015, 2016 and 2017. Pursuant to Article 11 of Regulation
S-X, we also present an unaudited pro forma condensed combined balance sheet and statement of income as of
and for the fiscal year ended March 31, 2018. Our consolidated financial statements are prepared in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards Board
(“IFRS”). The term IFRS also includes International Accounting Standards (“IAS”) and the related
interpretations of the committees (Standard Interpretations Committee and International Financial Reporting
Interpretations Committee). The consolidated financial statements of Shire are prepared in accordance with
accounting principles generally accepted in the United States (“U.S. GAAP”). Therefore, our results of
operations are not directly comparable with those of Shire.
On November 8, 2018, we published our unaudited interim condensed consolidated financial statements
as of September 30, 2018 and for the six months ended September 30, 2017 and 2018, which were prepared in
accordance with IAS 34 and the Financial Instruments Exchange Act of Japan. An English translation of such
unaudited interim condensed consolidated financial statements is included as an exhibit to this registration
statement.
As used in this registration statement, “yen” or “¥” means the lawful currency of Japan, “U.S. dollar”
or “$” means the lawful currency of the United States of America (“U.S.”), “pound sterling” or “£” means the
lawful currency of the United Kingdom and “euro,” “€,” or “EUR” means the lawful currency of the member
states of the European Monetary Union.
As used in this registration statement, “ADS” means an American Depositary Share, representing
0.5 shares of the Company’s common stock, and “ADR” means an American Depositary Receipt evidencing one
or more ADSs. See “Item 12. Description of Securities Other Than Equity Securities—D. American Depositary
Shares.”
As used in this registration statement, except as the context otherwise requires, the “Companies Act”
means the Companies Act of Japan.
In this registration statement, we present “EBITDA” and “Adjusted EBITDA,” which are not measures
presented in accordance with IFRS. For more information, see “Item 5. Operating and Financial Review and
Prospects—Results of Operations—Certain Non-IFRS Performance Measures.”
1
Amounts shown in this registration statement have been rounded to the nearest indicated digit unless
otherwise specified. In tables and graphs with rounded figures, sums may not add up due to rounding.
Special Note Regarding Forward-Looking Statements
This registration statement contains forward-looking statements. These statements appear in a number of
places in this registration statement and include statements regarding the intent, belief, or current and future
expectations of our management with respect to our business, financial condition and results of operations. In
some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,”
“expect,” “intend,” “project,” “plan,” “aim,” “seek,” “target,” “anticipate,” “believe,” “estimate,” “predict,”
“potential” or the negative of these terms or other similar terminology. These statements are not guarantees of
future performance and are subject
results, performance or
achievements, or those of our industry, may differ materially from any future results, performance or
achievements expressed or implied by these forward-looking statements. In addition, these forward-looking
statements are necessarily dependent upon assumptions, estimates and data that may be incorrect or imprecise
and involve known and unknown risks and uncertainties. These forward-looking statements involve statements
regarding:
to various risks and uncertainties. Actual
•
•
•
•
•
•
•
•
the Shire Acquisition, our ability to complete it or our ability to achieve its expected benefits;
our goals and strategies;
our ability to develop and bring to market new products;
expected changes in our revenue, costs, expenditures, operating income or other components of our
results;
expected changes in the pharmaceutical industry or in government policies and regulations relating
to it;
developments regarding or the outcome of any litigation or other legal, administrative, regulatory or
governmental proceedings;
information regarding competition within our industry; or
the effect of economic, political, legislative or other developments on our business or results of
operations.
Forward-looking statements regarding operating income and operating results are particularly subject to
a variety of assumptions, some or all of which may not be realized. Accordingly, the forward-looking statements
included in this registration statement should not be interpreted as predictions or representations of future events
or circumstances.
Potential risks and uncertainties include those identified and discussed in “Item 3. Key Information—D.
Risk Factors,” “Item 5. Operating and Financial Review and Prospects,” “Item 4. Information on the Company”
and elsewhere in this registration statement. Given these risks and uncertainties, undue reliance should not be
placed on any forward-looking statements, which speak only as of the date of this registration statement. Except
as required by law, we disclaim any obligation to update or review any forward-looking statements contained in
this registration statement, whether as a result of new information, future events or otherwise.
Item 1. Identity of Directors, Senior Management and Advisers
A.
Directors and senior management.
Information about Takeda’s directors and executive officers as of the date of this registration statement
is provided in Item 6. A of this registration statement. Their business address is: 1-1 Nihonbashi-honcho
2-Chome, Chuo-ku, Tokyo, 103-8668, Japan.
2
B.
Advisers.
Not applicable.
C.
Auditors.
For the three years ended March 31, 2018, KPMG AZSA LLC, an independent registered public
accounting firm, has acted as our auditor. The address of KPMG AZSA LLC is Otemachi Financial City South
Tower, 9-7 Otemachi 1-Chome, Chiyoda-ku, Tokyo, 100-8172, Japan. KPMG AZSA LLC is a member of the
Japanese Institute of Certified Public Accountants.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A.
Selected Financial Data
The following table presents selected financial information as of and for the years ended March 31,
2014, 2015, 2016, 2017 and 2018, which is derived from our consolidated financial statements. These financial
statements are prepared in accordance with IFRS.
The selected consolidated financial information set forth below should be read in conjunction with
Item 5. “Operating and Financial Review and Prospects” in this registration statement and our consolidated
financial statements and notes thereto included in this registration statement.
Selected Statements of Operations Data:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . .
Share of profit (loss) of investments accounted for
using the equity method . . . . . . . . . . . . . . . . . . . . . .
Profit (loss) before tax . . . . . . . . . . . . . . . . . . . . . . . . .
Net profit (loss) for the year . . . . . . . . . . . . . . . . . . . . .
Net profit (loss) attributable to owners of the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Per share amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings (losses) . . . . . . . . . . . . . . . . . . . . .
Diluted earnings (losses) . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Cash dividends in U.S. dollars(1)
Selected Statements of Financial Position Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Data:
Number of shares outstanding at end of period . . . . . .
As of and for the fiscal year ended March 31,
2014
2015
2016
2017
2018
(billions of yen and thousands of shares, except
for per share data)
¥ 1,691.7
139.3
¥ 1,777.8
(129.3)
¥ 1,807.4
130.8
¥ 1,732.1
155.9
¥ 1,770.5
241.8
1.0
158.9
109.6
1.3
(145.4)
(143.0)
(0.0)
120.5
83.5
(1.5)
143.3
115.5
(32.2)
217.2
186.7
106.7
(145.8)
80.2
114.9
186.9
¥ 135.10
134.95
180.00
1.75
$
¥ (185.37) ¥ 102.26
101.71
180.00
1.60
(185.37)
180.00
1.50
$
$
¥ 147.15
146.26
180.00
1.62
$
¥ 239.35
237.56
180.00
1.69
$
¥ 4,569.1
2,540.6
63.6
¥ 4,296.2
2,206.2
64.0
¥ 3,824.1
2,011.2
64.8
¥ 4,346.8
1,949.0
65.2
¥ 4,106.5
2,017.4
77.9
789,681
789,924
790,284
790,521
794,688
3
Note:
(1) Calculated using the Japanese yen—U.S. dollar exchange rate as of March 31 of each year, based on the
noon buying rate in New York City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York.
B.
Capitalization and Indebtedness.
The following table shows our capitalization and indebtedness as of March 31, 2018.
The following capitalization table should be read in conjunction with Item 5 of this registration
statement and our audited consolidated financial statements included in this registration statement.
Debt:
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity:
Share capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Authorized—3,500,000,000 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued—794,688,295 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other components of equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income related to assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity attributable to owners of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total capitalization and indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31,
2018
(billions of yen)
¥ 172.9
812.8
¥ 985.7
¥
77.9
90.7
(74.4)
1,557.3
350.6
(4.8)
1,997.4
20.0
¥2,017.4
¥3,003.1
C.
Reasons for the Offer and Use of Proceeds.
Not applicable.
D.
Risk Factors.
Any investment in our ADSs involves risk. Prospective investors should carefully consider, in light of
their own financial circumstances and investment objectives, the following risks before making an investment
decision with respect to our ADSs. If any of the following risks actually occurs, it could have a material adverse
effect on our business, financial condition, results of operations and future prospects, and the market value of
our ADSs may be adversely affected.
The risks discussed below are those that we believe are material, but these risks and uncertainties may
not be the only risks that we face. Additional risks that are not known to us at this time, or that are currently
believed to be not material, could also have a material adverse effect on our business, financial condition, results
of operations, future prospects and the value of our ADSs.
4
Risks Relating to the Shire Acquisition
The Shire Acquisition will be effected pursuant to a Scheme of Arrangement (the “Scheme”) under
Article 125 of the Jersey Companies Law. As of the date of this registration statement, substantially all of the
conditions to the completion of the Shire Acquisition have been fulfilled, including the respective relevant
approvals of our and Shire’s shareholders at our respective shareholders’ meetings on December 5, 2018, and the
receipt of relevant antitrust clearances. Pending the sanction of the Royal Court of Jersey, and conditional upon
our submission of an application for listing of the new shares of our common stock to be issued as consideration
for the Shire Acquisition by no later than three weeks before the effective date of the Scheme to the Tokyo Stock
Exchange and other local Japanese stock exchanges, with no objection having been received, and the approval by
the New York Stock Exchange (the “NYSE”) of our ADRs for listing, subject to official notice of issuance, we
intend that completion of the Shire Acquisition will take place on or around January 8, 2019. For more
information on the Shire Acquisition, see “Item 4. Information on the Company—A. History and Development
of the Company—Shire Acquisition.” The Shire Acquisition and its pending completion subject us to the
following risks.
The consideration payable by us for the Shire Acquisition is not subject to adjustment due to changes in the
relative prices of our and Shire’s common shares.
Under the terms of the Shire Acquisition, each Shire shareholder is entitled to receive $30.33 in cash
and either 0.839 New Takeda shares or 1.678 Takeda ADSs for each share of Shire. The amount of consideration
to which each Shire shareholder is entitled is not subject to adjustment based on fluctuations in the market price
for our common stock relative to the market price for Shire’s ordinary shares. If the price of the shares of our
common stock increases relative to Shire’s, the aggregate value of the consideration payable by us may be more
than expected. The amount of consideration to be paid by us is also not subject to adjustments for fluctuations in
foreign exchange rates.
We will be required to commit substantial time and resources to successfully complete the Shire Acquisition.
The process of and preparations for the closing of the Shire Acquisition will require a significant
commitment of time and resources, including the involvement of senior members of our management team and
key employees from across our corporate structure and various business units worldwide and the retainer of a
number of financial, accounting, legal and other advisors. We have incurred and expect to continue to incur
substantial transaction costs, such as fees paid to legal, financial, accounting and other advisors and other fees
paid in connection with the acquisition, in the current fiscal year and in future fiscal years. In the six months
ended September 30, 2018, we recorded ¥7.9 billion of acquisition-related costs, such as advisory fees, as a
component of selling, general and administrative expenses, ¥3.2 billion of restructuring expense in other
expenses and ¥8.8 billion of finance expense relating to the arrangement of commitments to finance the Shire
Acquisition, and we expect to incur further costs in future periods. We expect that the costs related to the Shire
Acquisition to be incurred in the fiscal year ending March 31, 2019 will be between ¥40.0 billion and ¥60.0
billion. This estimate does not include integration costs, interest on indebtedness and other financial expenses, as
the amount of those expenses is dependent on the timing of the completion of the Shire Acquisition. The
preparations required to achieve the closing may divert management’s attention from other strategic
opportunities and from the day-to-day operation of our business.
We may fail to realize the anticipated benefits of the Shire Acquisition.
The ultimate success of the Shire Acquisition depends on our ability to realize the anticipated growth
opportunities and synergies leading to cost savings we expect from combining the businesses. Even following the
completion of the Shire Acquisition, it will be necessary for us to continue to devote significant time and
resources to the reorganization of our personnel structure, enhancement of cost-efficiency and the strengthening
of management and operational functions in order to realize the anticipated synergies from the integration of
5
Takeda’s and Shire’s businesses. We expect to incur non-recurring cash costs totaling approximately $2.4 billion
in connection with the integration of Shire in the first three fiscal years following the completion of the Shire
Acquisition. The expected synergies and the projected cash costs necessary to achieve them may be affected by
changes in the overall economic, political and regulatory environment, including applicable tax regimes and
fluctuations in foreign exchange rates, and the realization of the other risks relating to our business described
herein. Furthermore,
the integration process may divert management’s attention from other strategic
opportunities and the day-to-day operation of our business. If we are not able to successfully manage the
integration process and create a unified business culture,
the anticipated benefits of the acquisition and
subsequent integration may not be realized fully or at all or may take longer or prove more costly to realize than
expected.
We may face significant challenges in integrating the organizations, business cultures, procedures and
operations of Takeda and Shire, including:
•
•
•
•
•
integrating personnel, operations and systems, such as research and development, manufacturing,
distribution, marketing and promotional activities and information technology systems, while
maintaining focus on selling and promoting existing and newly acquired or produced products;
inability to realize expected benefits from newly acquired or produced products, including pipeline
products under development;
coordinating and integrating geographically dispersed organizations;
changes or conflicts in the standards, controls, procedures and accounting and other policies, as
well as business cultures and compensation structures;
the need to manage, train and integrate Shire’s personnel, who may have limited experience with
the respective companies’ business lines and products, and to retain existing employees, particularly
high-skilled or other key employees and senior members of the management team;
• maintaining and growing Shire’s customer base;
•
incremental tax exposure based on the differences in our corporate structure and Shire’s;
• maintaining business relationships with suppliers,
third-party alliance partners and other key
counterparties; and
•
inefficiencies associated with the integration and management of the operations of the two
companies.
Furthermore, in connection with the Shire Acquisition, we expect to record significant amounts of
goodwill and intangible assets. If we are unable to achieve the anticipated benefits of this acquisition, we could
be required to recognize significant impairment losses related to such goodwill and intangible assets, potentially
up to their full value. Additionally, because we intend to issue a significant number of additional shares of our
common stock as part of the consideration for the Shire Acquisition, a failure to achieve the anticipated benefits
of the Shire Acquisition could negatively affect our earnings per share.
We have substantial debt, and expect to incur significant additional debt in connection with the Shire
Acquisition, which may limit our ability to execute our business strategy, refinance existing debt or incur new
debt, and if we are unable to meet our goals for deleveraging after the Shire Acquisition, we could be at a
greater risk of a downgrade of our credit ratings.
Our consolidated bonds and loans were ¥985.7 billion as of March 31, 2018. In connection with the
Shire Acquisition, on May 8, 2018, we entered into a dollar-denominated 364-Day Bridge Credit Agreement (the
“Bridge Credit Agreement”), with aggregate commitments of $30.85 billion, to finance a portion of the funds
required for the Shire Acquisition. Subsequently, on June 8, 2018, we entered into a Term Loan Credit
6
Agreement (the “Term Loan Credit Agreement”) with an aggregate commitment of $7.5 billion, and reduced
commitments under the Bridge Credit Agreement by the same amount. On October 26, 2018, we entered into a
Senior Short Term Loan Facility Agreement (the “SSTL”), with aggregate commitments of ¥500.0 billion, and
reduced the commitments under the Bridge Credit Agreement by $4.5 billion. On November 21, 2018, we issued
a total aggregate principal amount of €7.5 billion of senior notes, followed by an aggregate principal amount of
$5.5 billion of senior notes on November 26, 2018 (the offering of the euro-denominated notes and the dollar-
denominated notes together, the “2018 Notes”). We subsequently reduced the commitments under the Bridge
Credit Agreement in reference to the net aggregate principal amount of the 2018 Notes. On December 3, 2018,
we entered into a loan agreement with the Japan Bank for International Cooperation (the “JBIC Loan”) for an
aggregate principal amount of up to $3.7 billion, and subsequently reduced the commitments under the Bridge
Credit Agreement by the same amount. We expect to draw down on the commitments to the Term Loan Credit
Agreement, the SSTL and the JBIC Loan at the time of the closing of the Shire Acquisition. Furthermore,
following the completion of the Shire Acquisition, we may refinance all or a portion of the amounts borrowed
under the SSTL pursuant to a Subordinated Syndicated Loan Agreement (the “Subordinated Loan Agreement”)
entered into on October 26, 2018, with aggregate commitments of ¥500.0 billion, subject to our ability to obtain
alternative financing.
Moreover, subject to any potential refinancing, or repurchases completed prior to the closing (if any),
following the Shire Acquisition, Shire’s consolidated borrowings and capital leases, which totaled $15.3 billion
as of September 30, 2018, would be included in our consolidated balance sheet. This significant amount of
aggregate debt and the substantial amount of cash required for payments of interest and principal could adversely
affect our liquidity. Furthermore, we are required to comply with certain covenants within various financing
arrangements and violations of such covenants may require the acceleration and immediate repayment of the
indebtedness, which may in turn have a material adverse effect on our financial condition.
We may desire to or be required from time to time to incur additional borrowings, including refinancing
any of the Term Loan Credit Agreement, the SSTL or any other indebtedness to be incurred in connection with
the Shire Acquisition and settlement of Shire’s existing indebtedness. In particular, any amounts borrowed under
the Bridge Credit Agreement will mature 90 days from the date, following the day after completion of the Shire
Acquisition, when all conditions precedent to drawing under the Bridge Credit Agreement are satisfied or waived
in accordance with the terms of the Bridge Credit Agreement, requiring us to repay, whether by cash on hand or
from other sources, such as dispositions, or to refinance such borrowings soon after they are incurred. We may
also be unsuccessful in pursuing a refinancing alternative to the SSTL other than the Subordinated Loan
Agreement. Our ability to arrange a re-financing will depend on our financial position and performance,
prevailing market conditions and other factors beyond our control.
We aim to decrease our leverage following the Shire Acquisition, with a target ratio of net debt to
Adjusted EBITDA of 2.0x or less within three to five years following completion of the Shire Acquisition, and
are considering selected disposals of non-core assets to increase the pace of deleveraging. However, we may not
be able to meet these goals if we are unable to sufficiently decrease our overall indebtedness, or if we are unable
to achieve sufficient increases in earnings to offset our increased levels of debt. We may also not be successful in
selecting non-core assets for disposal, and disposals may affect our business, financial condition or results of
operations adversely, leading to larger-than-expected decreases in earnings. We may also not be able to dispose
of such assets successfully in a manner that allows us to meet our goals or at all.
If we are unable to decrease our leverage, we may be subject to additional ratings actions by third-party
ratings agencies. For example, in May 2018, Moody’s (Japan) K.K. lowered our credit rating to A2 from A1,
reflecting its expectations for our overall levels of leverage in the future, even in the absence of the Shire
Acquisition. In addition, in May 2018, S&P Global Ratings announced that it was reviewing our credit ratings
with a view to a potential downgrade due to our decision to acquire Shire. Any future downgrades may
negatively influence the terms for the refinancing of our existing debt or new borrowings on terms that we would
consider to be commercially reasonable.
7
The unaudited pro forma condensed combined financial data presented herein is not necessarily
representative of our actual or future financial performance.
The unaudited pro forma condensed combined balance sheet and statement of income as of and for the
fiscal year ended March 31, 2018 included in this registration statement have been prepared in accordance with
the relevant requirements of Article 11 of Regulation S-X and Form 20-F for illustrative purposes only, and show
the effect of:
•
•
•
the Shire Acquisition;
the financing obtained by us to fund the cash portion of the acquisition consideration, reflecting the
drawdown of commitments under the Term Loan Credit Agreement, the SSTL and the JBIC Loan
and the issuance of the 2018 Notes; and
the issuance of shares of our common stock to shareholders of Shire, including shares represented
by ADSs.
The unaudited pro forma condensed combined balance sheet gives effect to these transactions as if they
had occurred on March 31, 2018, while the unaudited pro forma condensed combined statement of income gives
effect to these transactions as if they had occurred on April 1, 2017.
The unaudited pro forma condensed combined financial information has been derived from the audited
historical financial statements of Takeda and Shire, and certain adjustments and assumptions have been made
regarding the combined company after giving effect to the Shire Acquisition. The amount of consideration to be
recorded on our financial statements will vary based on the exchange rate at the date of the closing of the Shire
Acquisition and the value of our and Shire’s respective shares. The terms and conditions of the financing that
will be used to fund the Shire Acquisition, including the amount of debt we actually incur, have not been finally
determined and are subject to change. The unaudited pro forma condensed combined financial information does
not include, among other things, adjustments relating to costs expected to be incurred in relation to restructuring
or integration activities, estimated synergies, the effect of any refinancing of borrowings incurred in connection
with the Shire Acquisition (including any drawdowns of the Subordinated Loan Agreement) or existing
indebtedness of either of Takeda or Shire or other potential items that are currently not factually supportable and,
in the case of the unaudited pro forma condensed combined statement of income, expected to have a continued
impact on our results following the completion of the Shire Acquisition. Certain assets and liabilities of Shire
have been measured at fair value based on preliminary estimates using assumptions that we believe are
reasonable, utilizing information currently available. The process for estimating the fair value of acquired assets
and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates.
These estimates may be revised and may include additional assets acquired or liabilities assumed as additional
information becomes available and as additional analyses are performed. Differences between preliminary
estimates in the unaudited pro forma condensed combined financial information and the final acquisition
accounting may occur and could be material.
In addition, the assumptions used in preparing the unaudited pro forma condensed combined financial
information may not prove to be accurate. Such assumptions can be adversely affected by known or unknown
facts, risks and uncertainties, many of which are beyond our or Shire’s control. Other factors may also affect the
combined company’s financial condition or results of operations following the closing of the Shire Acquisition.
In addition, following the closing of the Shire Acquisition, the financial position and results of operations of
Shire, which are reported under U.S. GAAP, will be converted to IFRS for inclusion in our consolidated financial
position and results of operations, which are reported under IFRS. The unaudited pro forma condensed combined
financial information presents the effect of such conversion based on the information available to us as of the
date hereof. We expect further information to become available to us after the completion of the Shire
Acquisition, and the adjustments actually made to convert Shire’s financial information to IFRS may vary in
material ways from the assumptions made in the unaudited pro forma condensed combined financial information
contained in this registration statement.
8
We will be subject to additional risks arising from the acquired businesses of Shire and from the legal,
regulatory and tax regimes that Shire operates under.
Following the completion of the Shire Acquisition, we will assume the risks related to Shire’s businesses,
which differ from, or will amplify, certain risks we currently face. For example, markets outside Japan, particularly
the United States, represent a larger portion of Shire’s business than ours, and we therefore expect our overall
exposure to these markets to increase following the completion of the Shire Acquisition. As with our products,
Shire’s products are subject
to competition from generic or other competing products, and the successful
introduction of such competitors or the invalidation of patent protections over Shire’s products could materially and
adversely affect the products acquired. Additionally, Shire operates in certain businesses that we currently do not,
including rare diseases and plasma-derived therapies. These businesses will present new or unfamiliar challenges to
us. Shire’s plasma-derived therapies in particular present significant challenges relating to the sourcing, production
and transportation of plasma, all of which are complex and subject to extensive regulation, in addition to being
capital intensive. If we are unable to manage this new business effectively, we may lose market share or customer
confidence, be required to pursue additional manufacturing capability or sourcing (or, in the case of an oversupply,
lower prices charged, record impairment charges on facilities or inventory or close certain facilities) or take other
actions which could materially and adversely affect the plasma-derived therapies business.
Furthermore, we will be subject to additional legal, regulatory and tax regimes that Shire operates under,
many of which are complex and could subject us to additional risks or liabilities. For example, Shire is subject to
evolving and complex tax laws in various jurisdictions and routinely obtains advice on tax matters, including the
tax treatment of the break fee of $1.635 billion it received in connection with the terminated offer to acquire
Shire made by AbbVie, Inc. in 2014. In this respect, the Irish Revenue issued an assessment received by Shire on
December 4, 2018 for €398 million on the basis that the break fee was a taxable capital gain. Based on continued
advice that no tax liability should arise from the break fee, Shire intends to appeal this assessment. In addition, in
connection with its 2016 acquisition of Baxalta Inc. (“Baxalta”), Shire has agreed to indemnify Baxter
International Inc., its affiliates and each of their respective officers, directors and employees against certain tax-
related losses if the merger of Baxalta and Shire causes the prior spin-off of Baxalta by Baxter and related
transactions to fail to qualify as tax-free. Although Shire received an opinion of tax counsel that the merger will
not cause such prior transactions to fail to qualify as tax-free, such opinion is not binding on the tax authorities
and the potential tax indemnification obligations are not limited in amount.
If we are unable to effectively manage these additional risks, our business, results of operations or
financial conditions following the completion of the Shire Acquisition could be materially and adversely
affected.
Risks Relating to Our Business
Research and development of pharmaceutical products are expensive and subject to significant uncertainties,
in bringing commercially successful products to market or recouping
and we may be unsuccessful
development costs.
Our ability to continue to grow our business depends significantly on the success of our research and
development activities in identifying, developing and successfully commercializing new products in a timely and
cost-effective manner. To accomplish this, we commit substantial efforts, funds and other resources to research
and development, both through our in-house resources and through collaborations with third parties. However,
research and development programs for new products by pharmaceutical companies are expensive and involve
intensive preclinical evaluation and clinical trials in connection with a highly complex and lengthy regulatory
to comply with government regulations, regulatory approvals and
approval process. See “—If we fail
reimbursement requirements, our business could be adversely affected.” The research and development process
for a new pharmaceutical product also requires us to attract and retain sufficient numbers of highly-skilled
employees and can take up to 10 years to 15 years or longer from discovery to commercial launch. Moreover,
even if we successfully develop and bring to market new products, there is only a limited available patent life in
which to recoup these development costs.
9
During each stage of the approval process and post-approval life cycle of our products, there is a
substantial risk that we will encounter serious obstacles including the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
unfavorable results from preclinical testing of a new compound;
difficulty in enrolling patients in clinical trials, or delays or clinical trial holds at clinical trial sites;
delays in completing formulation and other testing and work necessary to support an application for
regulatory approval;
adverse reactions to the product candidate or indications of other safety concerns;
insufficient clinical trial data to support the safety or efficacy of the product candidate;
difficulty or delays in obtaining all necessary regulatory approvals in each jurisdiction where we
propose to market such products;
failure to bring a product to market prior to a competitor, or to develop a product sufficiently
differentiated from a competing product to achieve significant market share;
difficulty in obtaining reimbursement at satisfactory rates for our approved products from
governments and insurers;
difficulty in obtaining regulatory approval for additional indications;
to enter
failure
commercialization of products;
into or
implement
successful
alliances
for
the development
and/or
inability to manufacture sufficient quantities of a product candidate for development or
commercialization activities in a timely or cost-efficient manner;
even after we obtain regulatory approval for and commercialize a product, such product and its
manufacturer are subject to continual regulatory review, and any discovery of previously unknown
problems with the product or the manufacturer may result in imposition of restrictions or recalls,
including withdrawal of the product from the market; and
the degree of market acceptance of any approved product candidate by the medical community,
including physicians, healthcare professionals and patients, will depend on a number of factors,
including relative convenience and ease of administration, the prevalence and severity of any adverse
reactions, availability of alternative treatments, pricing and our sales and marketing strategy.
In addition, to the extent that new regulations raise the costs of obtaining and maintaining product
authorizations, or limit the economic value of a new product to its originator, our profitability and growth
prospects could be diminished. Development of new and innovative products can also require the use of
emerging platforms and technologies for which regulations either do not yet exist or are under development or
modification. This may lead to greater uncertainty and risk in establishing the necessary data for approvals to
conduct clinical trials and/or receiving marketing approvals.
As a result of the foregoing or other factors, we may decide to abandon the development of potential
pipeline products in which we have invested significant resources, even where the product is in the late stages of
development. Moreover, there can also be no assurance that we will be successful in bringing new products to
market, marketing them, achieving sufficient acceptance thereof and recouping our investments in their
development. For example, our pipeline compounds may not receive regulatory approval, become commercially
successful or achieve satisfactory rates of reimbursement. Additionally, products approved for use and
successfully marketed in one market may be unable to obtain regulatory approval, become commercially
successful or achieve satisfactory rates of reimbursement in other markets. As a result, we may be unable to earn
returns on investments that we originally anticipated or at all, or may be forced to revise our research and
development strategy, and our business, financial condition and results of operations could be materially and
adversely affected.
10
If we fail to comply with government regulations, regulatory approvals and reimbursement requirements, our
business could be adversely affected.
Obtaining marketing approval for pharmaceutical products is a lengthy, complex and highly regulated
process that requires intensive preclinical and clinical data, and the approval process can vary significantly
depending on the regulatory authority. Relevant health authorities may, at the time of the filing of the application
for a marketing authorization, or later during their review, impose requirements that can evolve over time,
including requiring additional clinical trials, and such authorities may delay or refuse to grant approval. Even
where we have obtained marketing approval for a product in one or more major markets, we may need to invest
significant time and resources in applying for approval in other markets, and there is no assurance that we will be
able to obtain such approval. In recent years, health authorities have become increasingly focused on product
safety and on the risk/benefit profile of pharmaceutical products, which could lead to more burdensome and
costly approval processes and negatively affect our ability to obtain regulatory approval for products under
development. For example, the U.S. Food and Drug Administration (the “FDA”), the European Medicines
Agency (the “EMA”), and the Pharmaceuticals and Medical Devices Agency (the “PMDA”), have been
implementing strict requirements for approval, particularly in terms of the volume of data needed to demonstrate
a product’s efficacy and safety.
Even after regulatory approval is obtained, marketed products are subject to various post-approval
requirements, including continual review, risk evaluations, comparative effectiveness studies and, in some cases,
requirements to conduct post-approval clinical trials to gather additional safety and other data. Regulatory
authorities in many countries have worked to enhance post-approval monitoring in recent years, which has
increased post-approval regulatory burdens. Post-regulatory approval reviews and data analyses can lead to the
issuance of recommendations by government agencies, health professional and patients or other specialized
organizations regarding the use of products; for example, a recommendation to limit the patient population of a
labeling, or the
drug’s indication,
suspension or withdrawal of the product. Any such action can result in reductions in sales volume and/or new or
increased concerns about
regulatory
requirements have, over time, increased the costs associated with maintaining regulatory approvals and achieving
reimbursement for our products.
the adverse reactions or efficacy of a product. These substantial
the imposition of marketing restrictions,
including changes in product
If the regulatory approval process or post-approval, reimbursement or other requirements become
significantly more burdensome in any of our major markets, we could become subject to increased costs and may
be unable to obtain or maintain approval to market our products. Any such adverse changes could materially and
adversely affect our business, results of operations or financial condition.
The expiration or loss of patent or regulatory data protection over our products or patent infringement by
generic manufacturers could lead to significant competition from generic versions of the relevant product and
lead to declines in market share and price levels of our products.
Our pharmaceutical products are generally protected for a defined period by various patents (including
those covering drug substance, drug product, approved indications, methods of administration, methods of
manufacturing, formulations and dosages) and/or regulatory exclusivity, which are intended to provide us with
exclusive rights to market the products for the life of the patent or duration of the regulatory data protection
period. The loss of market exclusivity for pharmaceutical products opens such products to competition from
generic substitutes that are typically priced significantly lower than the original products, which typically
adversely affects the market share and prices of the original products.
Generic substitutes have high market shares in a number of key markets, including the United States,
Europe and many emerging countries, and the adverse effects of the launch of generic products are particularly
significant in such markets. The introduction of generic versions of a pharmaceutical product typically leads to a
swift and substantial decline in the sales of the original product. Our active life cycle management efforts cannot
11
fully mitigate the impact of competition from generics. In the United States and the EU, for example, political
pressure to reduce spending on prescription drugs has led to legislation and other measures that encourage the
use of generic products. In Japan, the government is implementing various measures to control drug costs,
including by encouraging medical practitioners to use and prescribe generic drugs, and in June 2017 announced
its intention to raise generic drug penetration with respect to products for which market exclusivity has expired to
80% by volume by September 2020. Legislation has also been passed in the United States and Europe
encouraging the use of biosimilar products. Similar to generics, biosimilars aim to provide less expensive
versions of innovative biologic products. New legislation has provided abbreviated pathways for the approval
and marketing of biosimilar products, which may affect the profitability and commercial viability of our biologic
products.
Certain of our products have begun to, or are expected over the next several years to, face declining
sales due to the loss of market exclusivity. For example, following the expiration of patent protection over
bortezomib, the active ingredient in VELCADE, one of our largest selling products in the United States, a
competing bortezomib-containing product has been introduced. This has led to a decrease in sales of VELCADE,
and further entry of competing products could result in substantial additional declines. Such decreases may
accelerate following the scheduled expiration of patent protection over the formulation of VELCADE in 2022, or
earlier if a competitor is able to develop a way to formulate VELCADE in a manner that does not infringe the
relevant patent or succeed in getting the formulation patent invalidated. In addition, as patent protection has
expired for PANTOPRAZOLE in many major markets including the United States and the EU, sales of
PANTOPRAZOLE have continued to decline in those markets.
We may also be subject to competition from generic drug manufacturers prior to the expiration of
patents if a manufacturer successfully challenges the validity of our patents, or if the manufacturer believes that
the benefits of launching the generic drug “at risk” (prior to the expiration of our patent) outweigh the costs of
defending infringement litigation. If such a competitor launches a generic product “at risk” before the initiation
or completion of court proceedings, a court may decline to grant us a preliminary injunction to halt further “at
risk” sales and remove the infringing product from the market. While we may be entitled to obtain damages
subsequently, the amount we may ultimately be awarded and able to collect may be insufficient to compensate
for the loss of sales and other harm caused to us. Furthermore, if we lose patent protection as a result of an
adverse court decision or a settlement, in certain jurisdictions, we may face the risk that government and private
third party payers and purchasers of pharmaceutical products may claim damages alleging they have over-
reimbursed or overpaid for a drug.
If our patent and other intellectual property rights are infringed by generic drug manufacturers or other
third parties, we may not be able to take full advantage of the potential or existing demand for our products. The
protection that we are able to obtain for our prescription drugs varies from product to product and country to
country and may not always be sufficient because of local variations in issued patents, or differences in national
law or legal systems, including inconsistency in the enforcement or application of law and limitations on the
availability of meaningful legal remedies. In particular, patent protection in emerging markets is often less
certain than in developed markets. Certain countries may also engage in compulsory licensing of pharmaceutical
intellectual property to other manufacturers as a result of local political pressure. Furthermore, the attention of
our management and other personnel could be diverted from their normal business activities if we decide to
litigate against such infringement. The realization of any such risks could adversely and materially affect our
business, financial condition and results of operations.
We are subject to the risk of intellectual property infringement claims directed to us by third parties.
We are also subject to the risk of infringement claims directed at us by third parties. Although we
monitor our operations to prevent infringement on the intellectual property rights of third parties, if we are found
to have infringed the intellectual property rights of others or if we agree to settle infringement claims, we may be
required to recall the relevant products, terminate manufacturing and sales of such products, pay significant
damages or pay significant royalties.
12
We evaluate any such infringement claims to assess the likelihood of unfavorable outcomes and to
estimate, if possible, the amount of potential losses. Based on these assessments and estimates, and in keeping
with applicable accounting and disclosure standards, we establish reserves and/or disclose the relevant litigation
claims or decide not to establish reserves or disclose. These assessments and estimates are based on the
information available to our management at such time and involve a significant amount of management
judgment. Actual outcomes or losses may differ materially from those envisioned by our current assessments and
estimates. Although the parties to such patent and intellectual property disputes in the pharmaceutical industry
have often settled through licensing or similar arrangements, the costs associated with these arrangements may be
substantial and could include the payment of ongoing royalties. Furthermore, the necessary licenses may not be
available on acceptable terms or at all. Therefore, if we are unable to successfully defend against infringement
claims by third parties, our financial results could be materially and adversely affected.
We face risks from the pursuit of acquisitions, and the anticipated benefits and synergies resulting from
acquisitions may not be realized.
We regularly pursue acquisitions for a number of reasons,
including strengthening our pipeline,
complementing existing lines of business, adding research and development capabilities or pursuing other
synergies. The pursuit of these acquisitions requires the commitment of significant management and capital
resources in various stages, from the exploration of potential acquisition targets to the negotiation and execution
of an acquisition to the integration of an acquired business into our own. The required commitment of time and
resources may divert the attention of management or capital or other resources away from our day-to-day
business. Moreover, we may not be able to recoup the investment of capital or other resources through the
successful integration of acquired businesses, including the realization of any expected cost or other synergies.
Specifically, we may encounter the following difficulties:
• We may face significant challenges in combining the infrastructure, management and information
systems of acquired companies with ours,
including integrating research and development,
manufacturing, distribution, marketing and promotion activities and information technology
systems.
•
There may be difficulties in conforming standards, controls, procedures and accounting and other
policies, as well as business cultures and compensation structures.
• We may not be able to retain key personnel at acquired companies, or our own employees may be
motivated to leave due to acquisitions.
• We may not be successful in identifying and eliminating redundancies and achieving other cost
savings as expected.
• We may not be able to successfully realize benefits from acquired products, including pipeline
products under development.
Integrating the operations of multiple new businesses with that of our own is a complex process that
requires significant management attention and resources. The integration process may disrupt our existing and
other newly acquired businesses and, if implemented ineffectively, could have an adverse impact not only on our
ability to realize the benefits of a given acquisition but also on the results of our existing operations. Integration-
related risks may be heightened in cases where acquired businesses’ operations, employees or customers are
located outside our major markets and we incur higher costs than anticipated due to regulatory changes,
environmental factors or foreign exchange fluctuations. We continue to pursue strategic business acquisitions
globally as a key part of our continuous growth strategy. If we are not able to achieve the anticipated benefits of
any future acquisitions in full or in a timely manner, we could be required to recognize impairment losses, we
may not be able to recoup our investment, and our business, financial position and results of operations could be
materially and adversely affected. Particularly, we may be unable to achieve the expected revenues pursuant to
licensing, co-promotion or co-development agreements or collaborations. We may also assume unexpected
13
contingent or other liabilities, or be required to mark up the fair value of liabilities (or mark down the fair value
of assets) acquired upon the close of an acquisition.
Our operating results and financial condition may fluctuate due to a number of factors and may not be
comparable across periods.
Our operating results and financial condition may fluctuate from quarter to quarter and year to year for a
number of reasons, including acquisitions, divestitures, major product launches, patent expiration or expiration of
regulatory data protection for key products and other reasons. In particular, as part of our efforts to refocus our
business portfolio, we have recently entered into a number of significant transactions that are expected to affect
our results of operations, including:
•
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•
•
•
•
the Shire Acquisition, if closed successfully;
the acquisition of TiGenix NV in July 2018;
the divestment of Wako Pure Chemical Industries, Ltd. (“Wako Pure Chemical”), one of our
consolidated subsidiaries, to FUJIFILM Corporation in April 2017;
the acquisition of ARIAD Pharmaceuticals, Inc. (“ARIAD”) in February 2017;
the sale of our respiratory business to AstraZeneca plc (“AstraZeneca”) in April 2016; and
the transfer of certain long-listed products, consisting of products for which patent protection and
regulatory data protection have expired, to Teva Takeda Yakuhin Ltd., a wholly-owned subsidiary
of Teva Takeda Pharma Ltd., a joint venture we formed with Teva Pharmaceutical Industries Ltd.,
in April 2016, and the subsequent sale of seven additional long-listed products in May 2017.
We intend to continue to pursue both acquisitions of new businesses and dispositions of existing
businesses in the future. As a result, period-to-period comparisons of our results of operations may not always be
directly comparable, and these comparisons should not be relied upon as an indication of future performance.
Our operating results and financial condition are also subject to fluctuations from the risks described throughout
this section.
We have significant global operations, which expose us to additional risks.
Our global operations, which encompass more than 70 countries in diverse regions across the world, are
subject to a number of risks, including the following:
•
•
•
•
•
•
•
•
difficulties in monitoring and coordinating research and development, marketing, supply-chain and
other operations in a large number of jurisdictions;
risks related to various laws, regulations and policies, including those implemented following
changes in political leadership and trade, capital and exchange controls;
changes with respect to taxation, including impositions or increases of withholding and other taxes
on remittances and other payments by our overseas subsidiaries;
varying standards and practices in the legal, regulatory and business cultures in which we operate,
including potential inability to enforce contracts or intellectual property rights;
trade restrictions and changes in tariffs;
complex sanctions regimes in various countries such as the United States, the EU and other
jurisdictions, violations of which could lead to fines or other penalties;
risks related to political instability and uncertain business environments;
changes in the political or economic relationship between Japan and the other countries and regions
in which we operate;
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•
•
acts of terrorism, war, epidemics and other sources of social disruption; and
difficulties associated with managing local personnel and preventing misconduct by local third-
party alliance partners.
Any one or more of these or other factors could increase our costs, reduce our revenues, or disrupt our
operations, with possible material adverse effects on our business, financial condition and results of operations.
Even prior to the announcement of the Shire Acquisition, further expansion overseas has been one of our key
strategies, and, in the fiscal year ended March 31, 2018, regions outside of Japan accounted for 67.2% of our
consolidated revenue, with the United States in particular contributing 33.8% of consolidated revenue. We expect
that markets outside Japan, particularly the United States and also Europe, Canada and emerging markets, will
continue to be increasingly important to our business and results of operations, increasing the likelihood that any
of these risks is realized.
We may not be able to realize the expected benefits of our investments in emerging markets.
We have been taking steps to grow our business in emerging markets, which we define to include
Russia/Commonwealth of Independent States (“CIS”), Latin America, Asia (excluding Japan) and Other
(including the Middle East, Oceania and Africa). Our revenue from emerging markets was ¥278.1 billion (or
15.7% of our total revenue) for the fiscal year ended March 31, 2018, and we intend to pursue further growth in
such emerging markets.
However, there is no guarantee that our efforts to expand sales in emerging markets will succeed. Some
countries may be especially vulnerable to periods of global financial instability or may have very limited
resources to spend on healthcare. In order to successfully implement our emerging markets strategy, we must
attract and retain qualified personnel, despite the possibility that some emerging markets may have a relatively
limited number of persons with the required skills and training. We may also be required to increase our reliance
on third-party agents within less-developed markets, which may put us at increased risk of liability. In addition,
many emerging markets have currencies that fluctuate substantially, and if such currencies are devalued and we
cannot offset the devaluations, our financial performance in such countries may be adversely affected. Further,
many emerging markets have relatively weak intellectual property protection and inadequate protection against
crime, including counterfeiting, corruption and fraud. Operations in certain emerging countries, where corruption
may be more prevalent than in more developed countries and where internal compliance practices may not be
well established, may also pose challenges from a legal and regulatory compliance perspective.
For reasons including but not limited to the above, sales within emerging markets carry significant risks,
and the realization of such risks could have a material adverse effect on our business, financial condition and
results of operations.
We depend on our “growth driver” products to support out future growth, and any events that adversely affect
the markets for these products may adversely affect our business, financial condition and results of
operations.
Our future growth depends largely on our “growth drivers,” which we define as products in our core
therapeutic areas of gastroenterology (“GI”), oncology and neuroscience, as well as emerging markets. As a
result of our focus on these therapeutic areas and markets, any event that adversely affects products aimed at
these therapeutic areas or markets could have a material and adverse effect on our business, financial condition
and results of operations. These events could include discovery of previously unknown adverse reactions, loss of
intellectual property protection, increased costs associated with manufacturing, supply chain issues or product
shortages, regulatory proceedings, changes in labeling, publicity affecting doctor or patient confidence in the
product, material product liability litigation and introduction of new, more effective treatments.
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Our results of operations and financial condition may be adversely affected by foreign currency exchange rate
fluctuations.
We manufacture and sell products to customers in numerous countries, and we have entered and will
enter into acquisition, licensing, borrowings or other financial transactions that give rise to translation and
transaction risks related to foreign currency exposure. Fluctuations in currency exchange rates in the markets
where we are active could negatively affect our results of operations, financial position and cash flows. For the
fiscal year ended March 31, 2018, 67.2% of our sales were in markets outside Japan, and we expect this
proportion to be even higher for subsequent fiscal periods, due to anticipated increases in overseas sales of
growth driver products and the contribution of Shire’s results to our results of operations, particularly in the U.S.
market. Our consolidated financial statements are presented in Japanese yen, and by translating the foreign
currency financial statements of our foreign subsidiaries into yen, the amounts of our revenue, operating profit,
assets and equity, on a consolidated basis, are affected by prevailing rates of exchange. For example, an increase
in the value of Japanese yen relative to the other currencies that we operate in, particularly the U.S. dollar and the
euro, during the fiscal year ended March 31, 2017 was a significant downward factor that contributed to a
decrease in consolidated revenue, presented in Japanese yen, from the fiscal year ended March 31, 2016. In the
fiscal year ended March 31, 2018, this trend reversed, but increases in the strength of the yen in future years may
similarly negatively affect our results of operations.
We utilize certain hedging measures with respect
to some of our foreign currency transactions.
However, such hedging measures do not cover all of our exposures and, even to the extent they do, they may
only delay, or may otherwise be unable to completely eliminate, the impact of fluctuations in foreign currency
exchange rates.
We may not be able to adequately expand our product portfolio through third-party alliance arrangements.
We expect that we will continue to rely on third parties for key aspects of our business, including the
discovery and development of new products, in-licensing products and the marketing and distribution of
approved products. A major part of our research and development strategy is to enhance collaborations with third
parties in the biotechnology industry, academia and the public sector, and we believe that the overall strength of
our research and development program and product pipeline depends on our ability to identify and initiate
partnerships, acquisitions, in-licensing arrangements and other collaborations with third parties. For example, a
including ADCETRIS, TRINTELLIX and AMITIZA, are in-licensed products
number of our key products,
developed through alliances with third parties. However, there can be no assurance that any of our third-party
alliances will lead to the successful development and marketing of new products. Moreover, reliance on third-
party alliances subjects us to a number of risks, including:
• We may be unable to identify suitable opportunities at a reasonable cost and on terms that are
acceptable to us due to active and intense competition among pharmaceutical groups for alliance
opportunities or other factors.
•
Entering into in-licensing or partnership agreements may require the payment of significant
“milestones” well before the relevant products are placed in the market, without any assurance that
such investments will ultimately become profitable in the long term.
• When we research and market our products through collaboration arrangements, the performance of
certain key tasks or functions are the responsibility of our collaboration partners, who may not
perform effectively or otherwise meet our expectations.
•
Decisions may be under the control of or subject to the approval of our collaboration partners, and
we may have differing views or be unable to agree upon an appropriate course of action. Any
conflicts or difficulties that we may have with our partners during the course of these agreements or
at the time of their renewal or renegotiation or any disruption in the relationships with our partners
launch and/or marketing of certain of our products or product
may affect
candidates.
the development,
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In addition, a licensor may attempt to terminate its license agreement with us or elect not to renew it to
pursue other marketing opportunities. Our licensors could also merge with or be acquired by another company, or
experience financial or other setbacks unrelated to our licensing arrangements. Any of these events may force us
to abandon a development project and adversely affect our ability to adequately expand or maintain our product
portfolio.
Our reliance on third parties for the performance of key business functions, particularly research and
development and product commercialization, heightens the risks faced by our business.
We rely on suppliers, vendors and partners, including alliances with other pharmaceutical companies,
for key aspects of our business, including research and development, manufacture and commercialization of
products, support for information technology systems and certain human resource functions. We do not control
these partners, but we depend on them in ways that may be significant to us. If these parties fail to meet our
expectations or fulfill their obligations to us, we may fail to receive the expected benefits. In addition, if any of
these third parties fails to comply with applicable laws and regulations in the course of its performance of
services for us, there is a risk that we may be held responsible for such violations as well. This risk is particularly
serious in emerging markets, where corruption is often prevalent and where many of the third parties on which
we rely do not have internal compliance resources comparable to our own. Any such failures by third parties, in
emerging markets or elsewhere, could adversely affect our business, reputation, financial condition or results of
operations.
We are involved in litigation relating to our operations on an ongoing basis, and such litigation could result in
financial losses or harm our business.
We are involved in various litigation relating to our operations on an ongoing basis, including claims
related to product liability and intellectual property as well as to antitrust, sales and marketing and other
regulatory regimes. Given the inherent unpredictability of litigation, it is possible that an adverse outcome in one
or more pending or future litigation matters could have a material adverse effect on our operating results or cash
flows. For a description of certain ongoing litigation, see “Item 8. Financial Information—A. Consolidated
Statements and Other Financial Information—Legal Proceedings.”
Economic and financial conditions may have a material adverse effect on our business, financial condition
and results of operations.
Growth of the global pharmaceutical market has become increasingly tied to global economic growth. In
this context, a substantial and lasting slowdown of the global economy or major national economies could
negatively affect growth in the global pharmaceutical market and, as a result, adversely affect our business. In
particular, weak economic conditions can have a particularly adverse impact on pharmaceutical demand in
markets having significant co-pays or lacking a developed third-party payer system, as individual patients may
delay or decrease out-of-pocket healthcare expenditures. Negative economic developments could also reduce the
sources of funding for national social security systems, leading to heightened pressure on drug prices, increased
substitution of generic drugs, and the exclusion of certain products from formularies.
Following the global financial crisis in 2008, economic growth continues to be stagnant in major
developed countries while the pace of growth in many emerging economies has declined. The referendum vote in
the U.K. to leave the EU, known as “Brexit,” the transition to a new presidential administration in 2017 and
recent mid-term elections in 2018 in the United States and continued instability in the Middle East and North
Korea have increased political and economic uncertainty. To the extent that economic or financial conditions
weaken in any of our major operating markets, demand for our products or product pricing could be negatively
affected. In addition, to the extent that economic and financial conditions negatively affect the global business
environment, we could experience a disruption or delay in the performance of third parties on which we rely for
parts of our business, including collaboration partners and suppliers. Such disruptions or delays could have a
material and adverse effect on our business, financial condition and results of operations.
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Government policies and other pressures to reduce medical costs could have an adverse effect on sales of our
pharmaceutical products.
We are subject to governmental regulations mandating price controls in various countries in which we
operate. The growth of overall healthcare costs as a percentage of gross domestic product in many countries
means that governments and payers are under intense pressure to control spending even more tightly. See “Item
5. Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Results of
Operations—Revenue—Pricing and Government Regulation.”
In the United States, the largest market for our products, there has been increasing pricing pressure from
managed care groups and institutional and governmental purchasers. In particular, as managed care groups have
grown in size due to market consolidation, pharmaceutical companies have faced increased pressure in pricing
and usage negotiations, and there is fierce competition among pharmaceutical companies to have their products
included in the care providers’ formularies. Moreover, as a result of the Patient Protection and Affordable Care
Act (the “ACA”) enacted in 2010, as amended by the Health Care and Education Reconciliation Act (together,
the “U.S. Healthcare Legislation”), we have experienced heightened pricing pressure on, and limitations on
access to, our branded pharmaceutical products sold in the United States. In addition, there has been increasing
attention paid to the level of pricing of pharmaceutical products, including from the Trump administration and
other politicians, which could lead to political pressure or legislative, regulatory or other measures being
introduced to lower prices. The future of the U.S. Healthcare Legislation, as well as the potential impact of any
new legislation, is uncertain, but we expect the health care industry in the United States will continue to be
subject to increasing regulation as well as political and legal action.
In Japan, manufacturers of pharmaceutical products must have new products listed on the National
Health Insurance (the “NHI”), price list published by the Ministry of Health, Labour and Welfare of Japan (the
“MHLW”). The NHI price list provides rates for calculating the price of pharmaceutical products used in medical
services provided under various public medical care insurance systems. Prices on the NHI price list have been
subject to revision generally once every two years on the basis of the actual prices at which the pharmaceutical
products are purchased by medical institutions in Japan after discounts and rebates from listed price. The average
price of products listed on the NHI price list has decreased as a result of each of the revisions in 2014, 2016 and
2018. The Japanese government is currently undertaking healthcare reform initiatives with a goal of sustaining
the universal coverage of the NHI program, and is addressing the efficient use of drugs, including promotion of
generic use with a target of 80% penetration by volume by September 2020 with respect to products for which
market exclusivity has expired. As part of these initiatives, the NHI price list is expected to be revised annually
beginning in the fiscal year ending March 31, 2022, which could lead to more frequent downward price
revisions.
In Europe, as in the United States, drug prices have been subject to downward pressure due to measures
implemented in each country to control drug costs, and prices continue to come under pressure due to parallel
imports, generic competition, increasing use of health technology assessment based upon cost-effectiveness and
other factors. We are also facing similar pricing pressures in various emerging countries.
We expect these efforts to control costs to continue as healthcare payers around the globe, in particular
government-controlled health authorities, insurance companies and managed care organizations (“MCOs”),
increasingly pursue initiatives to reduce the overall cost of healthcare, restrict access to higher-priced new
medicines, increase the use of generics and impose overall price revisions. Such further implementation of these
policies could have a material adverse effect on our business, financial condition and results of operations.
We may have difficulty in maintaining the competitiveness of our products.
The pharmaceutical industry is highly competitive, and in order to maintain the competitiveness of our
innovations,
product portfolio, we are required to maintain ongoing, extensive research for technological
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including new compounds, to develop and commercialize existing pipeline products, to expand our product
portfolio through acquisitions and in-licensing, and to market our products effectively,
including by
communicating the efficacy, safety and value of our products to healthcare professionals. However, healthcare
professionals and consumers may choose competitors’ products over ours nonetheless, if they perceive these
products to be safer, more reliable, more effective, easier to administer or less expensive. The success of any
product depends on our ability to effectively communicate with and educate the healthcare professionals and
patients and convince them of the advantage of our products over those of our competitors. We often carry out
costly clinical trials even after our products have been launched to produce data to be utilized for these purposes,
but such trials do not always produce the desired outcomes. Furthermore, many of our competitors have greater
financial and other resources to conduct such trials in more detail and with larger patient populations, which may
ultimately enable them to promote their products more effectively than we do.
In Japan, reduced approval times for drugs already marketed outside Japan have led to increased
competition through the introduction of such drugs into the Japanese market by foreign competitors. In addition,
new competing products or the development of superior medical technologies and other treatment options could
make our products or technologies lose their competitiveness or become obsolete. As discussed above, our
products are also subject to competition from inexpensive generic versions of our products, as well as generic
versions of our competitors’ products, upon the expiration or loss of related patent protection and regulatory data
protection, which may result in loss of market share. If we are unable to maintain the competitiveness of our
products, our business, financial position and results of operations could be materially and adversely affected.
Our products may have unanticipated adverse effects or possible adverse effects, which may restrict use of the
product or give rise to product liability claims.
As a pharmaceutical company, we are subject
liability.
Unanticipated adverse reactions or unfavorable publicity from complaints concerning any of our products, or
those of our competitors, could have an adverse effect on our ability to obtain or maintain regulatory approvals or
successfully market our products, and may even result in recalls, withdrawal of regulatory approval or adverse
labeling of the product.
to significant risks related to product
While our products are subject to comprehensive clinical trials and rigorous statistical analysis during
the development process prior to approval, there are inherent limitations with regard to the design of such trials,
including the limited number of patients enrolled in such trials, the limited time used to measure the efficacy of
the product and the limited ability to perform long-term monitoring. In the event that such unanticipated adverse
reactions are discovered, we may be required to add descriptions of the adverse reactions as “precautions” to the
packaging of our products, recall and terminate sales of products or conduct costly post-launch clinical trials.
Furthermore, concerns relating to potential adverse reactions could arise among consumers or medical
professionals, and such concerns, whether justified or not, could have an adverse effect on sales of our products
and our reputation. We could also be subject to product liability litigation by patients who have suffered or claim
to have suffered such adverse reactions resulting in harm to their health. For example, numerous claims for
damages were brought against us in which plaintiffs alleged to have developed bladder cancer or other injuries as
a result of taking products containing Type 2 diabetes treatment pioglitazone, marketed as ACTOS in the
United States. We reached a settlement to resolve the vast majority of ACTOS product liability lawsuits pending
against us in the United States, resulting in a charge of ¥274.1 billion in the fiscal year ended March 31, 2015.
See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal
Proceedings” for a description of these proceedings. We may also be subject to claims regarding manufacturing
defects and labeling problems.
Although we maintain product liability insurance at coverage levels that we believe are appropriate, we
could be subject to product liability that significantly exceeds such levels. Product liability coverage is also
increasingly difficult and costly to obtain, and may not be available in the future on acceptable terms. Therefore,
in the future, it is possible that we may need to rely increasingly on self-insurance for the management of product
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liability risk. In cases where we self-insure, the legal costs that we would bear for handling such claims and
potential indemnifications to be paid to claimants could materially and adversely affect our financial condition.
In addition, the negative publicity from product liability claims, whether or not justified, may damage our
reputation and may negatively impact the number of prescriptions of the product in question or our other
products. As a result, our business, financial condition and results of operations could be materially and
adversely affected.
The manufacture of our products is technically complex and highly regulated, and supply interruptions,
product recalls or other production problems caused by unforeseen events may reduce sales, adversely affect
our operating results and financial condition and delay the launch of new products.
The manufacture of our products is technically complex and highly regulated, and as a result we may
experience difficulties or delays including but not limited to the following:
•
•
•
•
•
•
•
•
•
seizure or recalls of products or shut-downs of manufacturing plants;
problems with business continuity, including as a result of a natural or man-made disaster, at one of
our facilities or at a critical supplier or vendor;
failure by us or by any of our vendors or suppliers to comply with Current Good Manufacturing
Practices and other applicable regulations and quality assurance guidelines, which could lead to
manufacturing shutdowns, product shortages and delays in product manufacturing;
problems with manufacturing, quality assurance/quality control or supply, or governmental
approval delays, due to our consolidation and rationalization of manufacturing facilities and the sale
or closure of certain sites;
failure of a sole source or single source supplier to provide us with necessary raw materials,
supplies or finished goods for an extended period of time, which could impact continuous supply;
failure of a third-party manufacturer to supply us with semi-finished or finished products on time;
construction or regulatory approval delays related to new facilities or the expansion of existing
facilities;
additional costs related to deficiencies identified by regulatory agencies in connection with
inspections of our facilities, and enforcement, remedial or punitive actions by regulatory authorities
if we fail to remedy any deficiencies; and
other manufacturing or distribution problems including limits to manufacturing capacity due to
regulatory requirements, changes in the types of products produced, physical limitations or other
business interruptions that could impact continuous supply.
Any of the above may reduce sales, delay the launch of new products, and adversely affect our business,
financial condition and results of operations.
In July 2018, we acquired Tigenix NV, which develops novel stem cell therapies for serious medical
conditions. The development and manufacture of stem cell products and other biologics, including products we
expect to add to our portfolio following the completion of the Shire Acquisition, present heightened or additional
risks. The manufacture of biologics, including stem cell products, is highly complex and is characterized by
inherent risks and challenges, such as raw material inconsistencies, logistical and sourcing challenges, significant
quality control and assurance requirements, manufacturing complexity (including heightened regulatory
requirements) and significant manual processing. Unlike products that rely on chemicals for efficacy, such as
most pharmaceuticals, biologics are difficult to characterize due to the inherent variability of biological input
materials. As a result, assays of the finished product may not be sufficient to ensure that the product will perform
in the intended manner. Problems with the manufacturing process, even minor deviations from the normal
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process, could result in product defects or manufacturing failures that result in, among other things, lot failures,
product recalls, product liability claims or insufficient inventory, which could be costly to us or result in
reputational damage.
The illegal distribution and sale by third parties of counterfeit versions of our products or products stolen
from us could have an adverse effect on our reputation and business.
Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet the
rigorous manufacturing and testing standards to which our products are subject. A patient who receives a
counterfeit drug may be at risk for a number of dangerous health consequences. Reports of adverse reactions to
counterfeit drugs or increased levels of counterfeiting could materially affect patient confidence in our products,
which could have a material adverse effect on our reputation and financial results. In addition, thefts at
warehouses, at plants, or in transit of inventory that is not properly stored or that is sold through unauthorized
channels could adversely affect patient safety, our reputation and our results of operations.
We are increasingly dependent on information technology systems and our systems and infrastructure face the
risk of theft, exposure, tampering or other intrusions.
information regarding our patients, clinical
Certain important processes relating to the research and development, production and sales of our
products depend heavily on our information systems, including cloud-based computing, or those of third party
providers to whom we outsource certain business functions, including the storage and transfer of critical,
trials, vendors, customers,
confidential, sensitive or personal
employees and others. The size and complexity of these computer systems make them potentially vulnerable to
service interruptions, malicious intrusions and random attacks. Cyber-attacks are increasing in frequency,
sophistication and intensity. Such attacks are made by groups and individuals with a wide range of motives
including organized criminal groups,
(including, but not
“hacktivists,” nation-states and others. Cyber-attacks could include the deployment of harmful malware, denial of
service attacks, worms, social engineering and other means to affect service reliability and threaten data
confidentiality, integrity and availability. The development and maintenance of systems to safeguard against such
attacks is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome
security measures become increasingly more sophisticated. Despite our efforts, the possibility of a future data
compromise cannot be eliminated entirely, and risks associated with intrusion, exposure, tampering, and theft
remain.
industrial espionage) and expertise,
limited to,
If our data systems are compromised, our business operations may be impaired, we may lose profitable
opportunities or the value of those opportunities may be diminished, and we may lose revenue because of
unlicensed use of our intellectual property. If personal
information of our customers or employees is
misappropriated, our reputation with our customers and employees may be injured resulting in loss of business
and/or morale, and we may incur costs to remediate possible injury to our customers and employees or be
required to pay fines or take other action with respect to judicial or regulatory actions arising out of such
incidents. Data privacy or security breaches by employees and others with permitted access to our systems,
including in some cases third-party service providers to which we may outsource certain business functions, may
also pose a risk that sensitive data, including intellectual property or personal information, will be exposed to
unauthorized persons or to the public.
Changes in data privacy and protection laws and regulations, particularly in Europe, or any failure to comply
with such laws and regulations, could adversely affect our business and financial results.
We are subject to laws and regulations globally regarding privacy, data protection, and data security,
including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data.
Significant uncertainty exists as privacy and data protection laws may be interpreted and applied differently from
country to country and may create inconsistent or conflicting requirements. For example, the EU’s General Data
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Protection Regulation (the “GDPR”), which imposes additional obligations on companies regarding the handling
of personal data and provides certain individual privacy rights to persons whose data is stored, became effective
on May 25, 2018. Furthermore, legislators and regulators in the United States are proposing new and more robust
cybersecurity rules in light of the recent broad-based cyberattacks at a number of companies. Compliance with
existing, proposed and recently enacted laws (including implementation of the privacy and process enhancements
called for under GDPR) and regulations can be costly; any failure to comply with these regulatory standards
could subject us to legal and reputational risks. Misuse of or failure to secure personal information could also
result in violation of data privacy laws and regulations, proceedings against us by governmental entities or others
or damage to our reputation and credibility and could also have a negative impact on revenues and profits.
Social media platforms and new technologies present risks and challenges for our reputation and business.
Consumers, the media, pharmaceutical companies and other parties increasingly use social media and
other new technologies to communicate about pharmaceutical products and the diseases they are intended to
treat. For pharmaceutical companies, the use of these technologies requires specific attention, monitoring
programs and moderation of comments. For example, negative or inaccurate posts or comments about us or our
products on any social media networking platforms could damage our reputation and business. Social media
could also be used to bring negative attention to us or to the pharmaceutical industry as a whole, which could in
turn cause reputational harm to us and negatively impact our business. The nature of evidence-based health care,
however, may prevent us from rapidly and adequately defending our interests against such comments. In
addition, our employees and partners may use social media and mobile technologies inappropriately, which may
expose us to liability, or which could lead to breaches of data security, loss of trade secrets or other intellectual
property or public disclosure of sensitive information, including information about our employees, clinical trials
or customers.
Our dependence on third parties for the inputs for our products subjects us to various risks, and changes in
the costs of materials may adversely affect our profitability.
Although we develop and manufacture the active ingredients used in some of our products at our own
facilities, we are dependent on third-party suppliers for a substantial portion of the raw materials and compounds
used in the products we produce. The price and availability of the raw materials for our products, including
chemical compounds and biologics, are subject to the effects of weather, natural disasters, market forces, the
economic environment, fuel costs and foreign exchange rates. If our cost for such materials increases, we may
not be able to make corresponding increases in the prices of our products due to market conditions or our
relationships with our customers, and as a result, our profitability could be materially and adversely affected.
Sources of some materials may be limited to a single supplier, and if such supplier faces any difficulty in
supplying the materials, we may not be able to find an alternative supplier in a timely manner or at all. If
materials become unavailable or if quality problems related to the materials arise, we may be forced to halt
production and sales of products that use them. In the event that any of our third-party suppliers is delayed in its
delivery of such raw materials or compounds, is unable to deliver the full quantity ordered by us at the
appropriate level of quality, or is unable to deliver any raw materials or compounds at all, our ability to sell our
products in the quantities demanded by the market may be impaired, which could damage our reputation and
relationships with customers. In such a case, our business and results of operations could be adversely affected.
Sales to wholesalers are concentrated, which exposes us to credit risks and pricing pressures.
A significant portion of our global sales are made to a relatively small number of wholesale distributors,
retail chains and other purchasing groups. In the fiscal year ended March 31, 2018, our largest wholesale
distributor accounted for 12.4% of our total revenue. If one of our significant wholesale distributors encounters
financial or other difficulties, such distributor may decrease the amount of business that it does with us, and we
may be unable to collect the amounts that the distributor owes us on a timely basis or at all. Furthermore, the
concentration of wholesale distributors has been increasing through mergers and acquisitions. In addition to
22
increased credit risks, this has resulted in such distributors gaining additional purchasing leverage, which may
increase pricing pressure on our products. Such credit concentration risks and pricing pressure could adversely
affect our business, financial condition and results of operations.
We may incur substantial costs due to our environmental compliance efforts or claims relating to our use,
manufacture, handling, storage or disposal of hazardous materials.
including
Our research and development and manufacturing processes use hazardous materials,
chemicals and radioactive and biological materials, and produce hazardous waste. National and local laws and
regulations in many of the jurisdictions in which we operate impose substantial potential liability for the
improper use, manufacture, handling, storage and disposal of hazardous materials as well as for land
contamination, and, in some cases, this liability may continue over long periods of time. Despite our compliance
efforts, we cannot completely eliminate the risk of accidental contamination and any resultant injury from these
materials. For example, real properties that we owned or used in the past or that we own or use now or in the
future may contain undetected contamination resulting from our manufacturing operations at those sites or the
activities of prior owners or occupants. While we have not experienced any material expenses or liability in
connection with hazardous materials, we may suffer from expenses, claims or liability in the future which may
fall outside of or exceed our insurance coverage. Furthermore, changes to current environmental laws and
regulations may impose further compliance requirements on us that may impair our research, development and
production efforts as well as our other business activities.
We may suffer large losses in the event of a natural or other disaster, such as an earthquake, terrorist attack
or other catastrophic event, in any of the markets in which we operate.
Japan and other regions in the world in which we operate are subject to the risk of earthquakes and other
natural disasters, including volcanic eruptions, tidal waves, typhoons, floods and hurricanes. For example, the
Great East Japan Earthquake and subsequent tsunami that occurred in March 2011 caused unprecedented
property and other damage, although we did not incur any significant damage to our facilities. In addition, other
events outside our control, such as war, civil or political unrest, deliberate acts of sabotage, or industrial
accidents such as fire and explosion, whether due to human or equipment error, could damage, cause operational
interruptions, or otherwise adversely affect certain of our manufacturing or other facilities as well as potentially
cause injury or death to our personnel. In the event of a major natural disaster or other uncontrollable event or
accident, our facilities, particularly our production plants, may experience catastrophic loss, operations at such
facilities may be halted, shipments of products may be suspended or delayed and large losses and expenses to
repair or replace facilities may be incurred. Such negative consequences could cause product shortages,
significant losses of sales or require significant unexpected expenditures, and materially adversely affect our
business, financial condition and results of operations.
We regularly conduct inspections of all of our facilities for maintenance purposes and to prevent
potential damage from disaster, and we have global group insurance to cover property damage and business
interruption for certain potential losses at our production facilities, although we do not maintain earthquake
insurance in Japan. These insurance policies may not be adequate to cover all possible losses and expenses. In
addition, our business may also be adversely affected if our suppliers or business partners were to experience a
catastrophic loss due to natural disasters, accidents or other uncontrollable events.
We may have to recognize additional charges on our statements of income due to impairment of goodwill and
other intangible assets.
We carry significant amounts of goodwill and intangible assets on our balance sheet as a result of past
acquisitions. If completed as expected, we also expect to record significant additional goodwill and intangible
assets in connection with the Shire Acquisition. As of March 31, 2018, we had goodwill of ¥1,029.2 billion and
intangible assets of ¥1,014.3 billion. Goodwill and intangible assets recorded in relation to acquisitions are
23
recognized on our balance sheet on the acquisition date. Under IFRS, we are required to examine such assets for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical
Accounting Policies—Impairment of Goodwill and Intangible Assets.” The recognition of such impairment
charges may adversely affect our business, financial condition and results of operations.
We may not be able to attract and retain key management and other personnel.
In order to produce, develop, support and market our products, we depend on the expertise and
leadership of our senior management team and other key members of our organization. The loss of key members
of our organization, including senior members of our scientific and management teams, high-quality researchers
and development specialists, could delay or prevent the achievement of major business objectives. The market
for such talents has become increasingly competitive, including in specific geographic regions and in specialized
fields such as clinical development and biosciences, and we are required to invest heavily in the recruitment,
training and retention of qualified individuals, including salary and other compensation to reward performance
and incentivize employees. Despite our efforts to retain them, key employees could terminate their employment
with us for any reason or for no reason, and there can be no assurance that we will be able to attract or retain key
employees and successfully manage them. Our inability to attract, integrate and retain highly skilled personnel,
particularly those in leadership positions, may weaken our succession plans and may materially adversely affect
our ability to implement our strategy and meet our strategic objectives, which could ultimately adversely affect
our business and results of operations.
If we fail to maintain effective internal control over financial reporting, the accuracy and timeliness of our
financial reporting may be adversely affected, which could cause investors to lose confidence in our reported
financial information and may lead to a decline in the trading price of our ADSs.
Our common stock is currently listed only on the Tokyo Stock Exchange and other local Japanese stock
exchanges, and we have established internal control over financial reporting pursuant to the requirements
applicable to companies listed only in Japan. Following the effectiveness of this registration statement, our
common stock and ADSs will be registered under the Securities Exchange Act of 1934 (the “Exchange Act”),
and we will become subject to, among other things, the requirements under the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”). The standards for internal control over financial reporting under the Sarbanes-Oxley Act
are significantly more extensive than those applicable to companies listed only in Japan. For example, we will be
required, pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”), to furnish a report by management
on, among other things, the effectiveness of our internal control over financial reporting. This assessment will
need to include disclosure of any material weaknesses identified by our management in our internal control over
financial reporting, as well as a statement that our independent registered public accounting firm has issued an
opinion on our internal control over financial reporting. Pursuant to the instructions to Form 20-F, we expect to
include this report in our second annual report filed with the Securities and Exchange Commission (the “SEC”)
following the effectiveness of this registration statement, which we currently expect will be filed by no later than
July 31, 2020. We are still in the costly and challenging process of compiling the system and processing
documentation necessary to perform the evaluation needed to comply with Section 404.
Neither our management nor independent registered public accounting firm has ever performed a
comprehensive evaluation of our internal control over financial reporting in accordance with the provisions of the
Sarbanes-Oxley Act because no such evaluation has been required, and we cannot be certain that material
weaknesses in our internal control over financial reporting will not develop or be identified. Any failure to
achieve and maintain adequate internal control over financial reporting or to implement required, new or
improved controls, or difficulties encountered in their implementation could cause material weaknesses or other
deficiencies in our internal control over financial reporting in the future. If we are unable to successfully
remediate any material weaknesses or other deficiencies in our internal control over financial reporting, the
accuracy and timing of our financial reporting may be adversely affected and investors may lose confidence in
24
our financial reporting, and the price of our ADSs may decline as a result. In addition, if we are unable to
continue to meet these requirements, we may not be able to remain listed on the NYSE.
Risks Relating to the ADSs
A holder of ADSs will have fewer rights than a shareholder has and such holder will have to act through the
depositary to exercise those rights.
The rights of shareholders under Japanese law to take various actions, including voting their shares,
receiving dividends and distributions, bringing derivative actions, examining a company’s accounting books and
records and exercising appraisal rights, are available only to holders of record. Because the depositary, through
its custodian agents, is the record holder of the shares underlying the ADSs, only the depositary can exercise
those rights in connection with the deposited shares. Pursuant to the deposit agreement, the depositary will
endeavor, to the extent practicable, to make efforts to vote or cause to be voted the shares underlying the ADSs
as instructed by the holders and will pay to the holders the dividends and distributions collected from the
Company. The depositary and its agents may not be able to send voting instructions to holders of ADSs or carry
out their voting instructions in a timely manner. Furthermore,
the depositary and its agents will not be
responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the
effect of any such vote. As a result, holders of ADSs may not be able to exercise their right to vote. Moreover, in
the capacity as an ADS holder, such holder will not be able to bring a derivative action, examine the Company’s
accounting books or records or exercise appraisal rights except through the depositary.
Rights of shareholders under Japanese law may be more limited than under the laws of other jurisdictions.
Our Articles of Incorporation, Regulations of the Board of Directors, Regulations of the Audit and
Supervisory Committee and the Companies Act govern our corporate affairs. Legal principles relating to such
matters as the validity of corporate procedures, directors’ and officers’ fiduciary duties, and shareholders’ rights
may be different from those that would apply to a non-Japanese company. Shareholders’ rights under Japanese
law may not be as extensive as shareholders’ rights under the laws of other jurisdictions. ADS holders may have
more difficulty in asserting their rights as a shareholder than such holders would as shareholders of a corporation
organized in another jurisdiction. In addition, Japanese courts may not be willing to enforce liabilities against the
Company in actions brought in Japan that are based upon the securities laws of other jurisdictions.
Because of daily price range limitations under Japanese stock exchange rules, a holder of ADSs who has
surrendered his or her ADSs in favor of shares of our common stock may not be able to sell his/her shares of
our common stock at a particular price on any particular trading day, or at all.
Stock prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium
between bids and offers. These exchanges are order-driven markets without specialists or market makers to guide
price formation. To prevent excessive volatility,
these exchanges set daily upward and downward price
fluctuation limits for each stock, based on the previous day’s closing price. Although transactions may continue
at the upward or downward limit price if the limit price is reached on a particular trading day, no transactions
may take place outside these limits. Consequently, a holder of ADSs who has surrendered his or her ADSs in
favor of shares of our common stock wishing to sell on a Japanese stock exchange at a price above or below the
relevant daily limit may not be able to sell his or her shares at such price on a particular trading day, or at all.
U.S. investors may have difficulty in serving process or enforcing a judgment against us or our directors or
executive officers.
We are a limited liability, joint stock corporation incorporated under the laws of Japan. Many of our
directors and executive officers reside in Japan, Europe or elsewhere outside of the United States, and a large
portion of our assets and the assets of these persons are located in Japan and elsewhere outside the United States.
25
It may not be possible, therefore, for U.S. investors to effect service of process within the United States upon us
or these persons or to enforce against us or these persons judgments obtained in U.S. courts predicated upon the
civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability
in Japan, in original actions or in actions for enforcement of judgment of U.S. courts, of liabilities predicated
solely upon the federal securities laws of the United States.
Investors holding less than a full unit of shares will have limited rights as shareholders.
Our Articles of Incorporation provide that 100 shares of our common stock constitute one unit.
Although holders of ADSs may withdraw shares of our common stock constituting less than one unit, in
connection with the direct holding of the shares of our common stock, the Companies Act imposes significant
restrictions and limitations on holders of shares of our common stock that do not constitute a full unit. In general,
holders of shares of our common stock constituting less than one unit do not have the right to vote with respect to
those shares.
Dividend payments and the amount you may realize upon a sale of our ADSs will be affected by fluctuations
in the exchange rate between the U.S. dollar and the Japanese yen.
Cash dividends, if any, in respect of the shares of our common stock represented by our ADSs will be
paid to the depositary in Japanese yen and then converted by the depositary into U.S. dollars, subject to certain
conditions. Accordingly, fluctuations in the exchange rate between the Japanese yen and the U.S. dollar will
affect, among other things, the U.S. dollar amounts a holder of ADSs will receive from the depositary in respect
of dividends, the U.S. dollar value of the proceeds that a holder of ADSs would receive upon sale in Japan of the
shares of our common stock obtained upon surrender of ADSs and the secondary market price of ADSs.
Our shareholders of record on a given record date may not receive the dividend they anticipate.
The customary dividend payout practice of publicly listed companies in Japan may significantly differ
from that widely followed or otherwise deemed necessary or fair in foreign markets. We ultimately have a
discretion to determine any dividend payment amount to our shareholders of record as of a record date, including
whether we will make any dividend payment to such shareholders at all, only after such record date. For that
reason, our shareholders of record on a given record date may not receive the dividends they anticipate.
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement,
which could result in less favorable outcomes to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs provides that, to the fullest extent permitted by law, ADS
holders waive the right to a jury trial for any claim they may have against us or the depositary arising out of or
relating to our shares, the ADSs or the deposit agreement, which may include any claim under the U.S. federal
securities laws.
If we or the depositary were to oppose a jury trial based on this waiver, the court would have to
determine whether the waiver was enforceable based on the facts and circumstances of the case in accordance
with applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial
waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the
United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is
generally enforceable, including under the laws of the State of New York, which govern the deposit agreement,
or by a federal or state court in the City of New York, which has jurisdiction over matters arising under the
deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver, courts will
generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We
believe that this would be the case with respect to the deposit agreement and the ADSs. It is advisable that
prospective investors consult legal counsel regarding the jury waiver provision before investing in the ADSs.
26
As a result, if a holder or beneficial owner of ADSs brings a claim against us or the depositary in
connection with matters arising under the deposit agreement or the ADSs, including claims under federal
securities laws, such holder or beneficial owner may not be entitled to a jury trial with respect to such claims,
which may have the effect of limiting and discouraging lawsuits against us or the depositary. If a lawsuit is
brought against us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the
applicable trial court, which would be conducted according to different civil procedures and may result in
different outcomes than a trial by jury would have, including outcomes that could be less favorable to the
plaintiff(s) in any such action.
Nevertheless, if this jury trial waiver is not enforced under applicable law, an action could proceed
under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit
agreement or the ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary
of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations
promulgated thereunder.
Item 4. Information on the Company
A.
History and Development of the Company.
We are a global, research and development-driven pharmaceutical company with a presence in more
than 70 countries. We bring highly-innovative, life-changing medicines to patients across the globe, with
prescription drugs marketed directly or through our partners in approximately 100 countries worldwide. Our
global workforce of more than 27,000 employees is committed to bringing better health and a brighter future to
patients. We develop and market pharmaceutical products to treat a broad range of medical conditions including
GI diseases, cancer, neurological and psychiatric diseases and other medical conditions, including diabetes and
hypertension, as well as vaccines. We are also committed to our corporate social responsibility program, which is
dedicated to global health, and our access to medicine strategy, which aims to increase access to innovative and
potentially life-saving medicines for patients with some of the highest unmet medical needs across the world.
We have a focused, agile and innovative research and development organization whose goal is to impact
patients’ lives by translating science into transformative medicines. We focus on highly innovative medicine,
with 41 clinical stage assets with active development programs as of October 31, 2018, more than one-third of
which have orphan drug designation. We focus our research and development efforts on our three key therapeutic
areas: GI, oncology and neuroscience, plus vaccines. We have successfully built a distinct research and
development strategy based on therapeutic area focus, a robust research engine and a comprehensive,
differentiated partnership model of collaborations with academia, biotech firms and startups. Our research and
development program aims to leverage a combination of internal and external expertise to deliver a sustainable
pipeline, and we currently have approximately 180 active partnerships, helping us actively pursue additional
innovation.
We are focusing on three key priorities in the mid-term: growing our portfolio, strengthening our
pipeline and boosting our profitability. Pursuing portfolio growth involves a focus on our expected key growth
drivers, namely the three key therapeutic areas of GI, oncology and neuroscience, as well as emerging markets.
This also includes further strengthening our specialty capabilities, while at the same time working to optimize
our portfolio through targeted acquisitions and selected disposals of non-core assets.
Our 237-year history started in 1781, when Chobei Takeda I began selling traditional Japanese and
Chinese medicines in Doshomachi, Osaka. After Japan’s Meiji Restoration opened the country to increased
overseas trade in the late 1860s, we were one of the first companies to begin importing western medicines into
Japan. In 1895, we began our pharmaceutical manufacturing business, and our research division was formed in
1914, allowing us to begin to introduce our own pharmaceutical products. In 1925, we were incorporated as
Chobei Takeda & Co., Ltd. and our name was later changed to Takeda Pharmaceutical Company Limited. In
1949, our shares were listed on the Tokyo and Osaka stock exchanges. We began expanding into overseas
27
markets in the 1960s, first in Asia and, subsequently, other markets around the world. We began enhancing our
overseas business infrastructure in the late 1990s, with the formation of new subsidiaries in the United States and
Europe.
Since 2014, Takeda has been focused on becoming an agile, research and development driven, global
pharmaceutical company that is well positioned to deliver highly innovative medicines and transformative care to
patients around the world. We believe that we have successfully strengthened our reputation by our world-class
products and innovation, while remaining true to our values. In addition to our efforts to enhance our research
and development capabilities, we have a strong track record of successful cross-border merger and acquisition
activities and post-acquisition integration, including our acquisition of ARIAD in 2017, Nycomed A/S in 2011
and Millennium Pharmaceuticals, Inc. (“Millennium”) in 2008. In July 2018, we acquired TiGenix NV, an
advanced biopharmaceutical company developing novel stem cell therapies for serious medical conditions, with
the aim to bring new treatment options to patients with gastrointestinal disorders. We also entered into more than
50 collaborations with third parties during the fiscal year ended March 31, 2018 to help strengthen our pipeline.
With the Shire Acquisition, we are pursuing the next major step in our development
into a global
pharmaceuticals company. See “—Shire Acquisition.”
Our principal capital expenditures during the three fiscal years ended March 31, 2018 consisted of
additions to property, plant and equipment and additions to intangible assets. In the fiscal years ended March 31,
2016, 2017 and 2018, excluding acquisitions, we made capital expenditures (consisting of the additions to
property, plant and equipment and intangible assets recorded on our consolidated balance sheet) of
¥125.8 billion, ¥148.1 billion and ¥124.1 billion, respectively, including the following highlights:
•
•
•
In the fiscal year ended March 31, 2016, we invested $30 million to acquire a biologics
manufacturing facility located in Brooklyn Park, Minnesota, United States from Baxalta US Inc.;
In the fiscal year ended March 31, 2017, we invested ¥8.3 billion to prepare the manufacturing
facility in Brooklyn Park, Minnesota acquired from Baxalta US. Inc. for the production of
ENTYVIO; and
In the fiscal year ended March 31, 2018, we invested ¥17.9 billion to construct our new global
headquarters in Tokyo. We also invested ¥11.4 billion to purchase manufacturing equipment at our
German subsidiary, Takeda GmbH, including ¥4.9 billion in equipment for manufacturing of
vaccines for dengue fever.
During the same period, our main acquisitions and divestitures included:
•
•
•
In the fiscal year ended March 31, 2016, the transfer of all the shares we owned in Mizusawa
Industrial Chemicals, Ltd. to Osaka Gas Chemicals Co., Ltd. and sale of our respiratory portfolio to
AstraZeneca;
In the fiscal year ended March 31, 2017, the acquisition of ARIAD and the transfer of certain of our
long-listed products in Japan to Teva Takeda Yakuhin Ltd., a wholly-owned subsidiary of Teva
Takeda Pharma Ltd., a joint venture we formed with Teva Pharmaceutical Industries Ltd., in which
we hold a 49% interest;
In the fiscal year ended March 31, 2018, the sale of our shares in Wako Pure Chemical to
FUJIFILM Corporation, and the sale of seven additional long-listed products to Teva Takeda
Yakuhin Ltd.
In December 2017, we entered into an agreement with Takashimaya Company Limited to sell our
Tokyo Takeda building and the Takeda Shin-Edobashi building. In July 2018, we completed our acquisition of
TiGenix NV, as discussed above, and we sold and divested all our shares and assets in Multilab Indústria e
Comércio de Produtos Farmacêuticos Ltda. to Novamed Fabricação de Produtos Farmacêuticos Ltda. In August
2018, we sold and divested all our shares and assets in Guangdong Techpool Bio-Pharma Co., Ltd. to Shanghai
Pharmaceutical Holding Co. Ltd., pursuant to the agreement we signed in May 2018.
28
The address of our registered head office is 1-1, Doshomachi 4-Chome, Chuo-ku, Osaka, 540-8645,
Japan, and the address of our global head office is 1-1, Nihonbashi-Honcho 2-Chome, Chuo-ku, Tokyo,
103-8668, Japan; telephone number: 81-3-3278-2306. Takeda’s agent in the United States in connection with this
registration statement is Takeda Pharmaceuticals U.S.A., Inc., 1 Takeda Parkway, Deerfield, IL 60015 U.S.A.,
telephone number: 1-224-554-6500.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC at www.sec.gov. As a foreign private issuer,
we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements
to shareholders. Our corporate website is www.takeda.com.
Shire Acquisition
Overview
On May 8, 2018, the boards of Takeda and Shire reached agreement on the terms of a recommended
offer pursuant to which Takeda will acquire the entire issued and to be issued ordinary share capital of Shire,
which we refer to as the “Shire Acquisition.” The Shire Acquisition is expected to close on or around January 8,
2019. Under the terms of the Shire Acquisition, each Shire shareholder is entitled to receive $30.33 in cash and
either 0.839 New Takeda shares or 1.678 Takeda ADSs for each share of Shire. The expected aggregate
consideration is approximately £46 billion (approximately ¥6.96 trillion). This estimate is based on the following
assumptions:
•
•
the closing price of our shares on the Tokyo Stock Exchange of ¥4,923 per share; and
exchange rates of £1.00 to ¥151.51 and £1.00 to $1.3945.
In each case, such assumptions are as of April 23, 2018, being the day prior to the announcement that
the Shire board would, in principle, be willing to recommend the Shire Acquisition at such consideration. The
estimated aggregate consideration is further based on a total issued and to-be-issued share capital of Shire
totaling 937,925,528 shares as of May 4, 2018, the last practicable date prior to the announcement of the Shire
Acquisition.
Immediately following completion of the Shire Acquisition, we expect that Shire shareholders will own
approximately 50% of the combined group. We believe the Shire Acquisition will create a global, values-based
and research and development-driven biopharmaceutical company incorporated and headquartered in Japan, with
an attractive geographic footprint and the scale to drive future development. Specifically, we expect that the
Shire Acquisition will strengthen Takeda’s core therapeutic areas, bringing together Takeda and Shire’s
complementary positions in GI and neuroscience and provide leading positions in rare diseases and plasma-
derived therapies to complement our existing strength in oncology and focused efforts in vaccines.
Takeda Following the Shire Acquisition
We believe that
there is a compelling strategic and financial rational for undertaking the Shire
Acquisition, and that
the Shire Acquisition will allow us to create a global, values-based, research and
development-driven biopharmaceutical company incorporated and headquartered in Japan, with an attractive
geographic footprint and the scale to drive future development. In particular, we expect that the combined group
will have attractive positions in Japan and the United States, with the United States in particular accounting for
nearly half of consolidated revenues, while also maintaining a strong presence in other international markets.
We expect that the combined company will have leading positions in four main therapeutic areas: GI,
oncology, neuroscience and rare diseases, with additional strength in plasma-derived therapies and vaccines.
Moreover, we and Shire have complementary product development pipelines, with our strength in early stage
development, research-oriented development and small molecules being complemented by Shire’s expertise in
rare diseases, its modality-diverse mid- and late-stage pipeline enriched with large molecule programs and
innovative gene therapy and recombinant protein technologies.
29
Following the completion of the Shire Acquisition and the following integration of Shire’s business into
ours, we expect to be able to achieve significant, recurring pre-tax synergies of at least $1.4 billion annually by
the end of the third fiscal year after the completion of the Shire Acquisition, originating from efficiencies in the
combined company’s sales, marketing and administrative functions, research and development efforts and
product manufacturing and supply. We believe that the realization of these synergies will require non-recurring
costs of approximately $2.4 billion in the first
three fiscal years following the completion of the Shire
Acquisition. We believe that the substantial cash flow generation expected to result from the Shire Acquisition
will enable us to maintain our well-established dividend policy, and de-lever following completion. We intend to
maintain our investment grade credit rating, with a target net debt to Adjusted EBITDA ratio of 2.0x or less
within three to five years following completion of the Shire Acquisition, and are considering disposals of non-
core assets to increase the pace of deleveraging.
We also believe that the combined company will be able to realize additional revenue synergies, arising
from leveraging the combined strengthened global infrastructure of Takeda and Shire and through greater market
presence in our key therapeutic areas, particularly GI and neuroscience.
Following the Shire Acquisition, we intend to maintain our global headquarters in Japan, to expand our
research and development presence in the Boston area and to have major regional locations in Japan, Singapore,
Switzerland and the United States. We plan to commence a review of the functions to be undertaken at Shire’s
current headquarters in Dublin within the first year following completion of the Shire Acquisition. Takeda’s
shareholders approved the election of three Shire directors to join Takeda’s board of directors at
the
extraordinary general meeting of shareholders on December 5, 2018. See “Item 6. Directors, Senior Management
and Employees—A. Directors and Senior Management—Directors.” The election of these new directors is
conditional upon the Scheme taking effect as planned and will become effective upon the date of completion of
the Shire Acquisition, which we intend to be on or around January 8, 2019.
B.
Business Overview.
We are a global pharmaceutical company with an innovative portfolio, engaged primarily in the
research, development, production and marketing of pharmaceutical products. We have a diversified global
business base operating in more than 70 countries and our prescription drugs are marketed in approximately 100
countries. We develop and market pharmaceutical products to treat a broad range of medical conditions including
GI diseases, cancer, neurological and psychiatric diseases, and other medical conditions, including diabetes and
hypertension, as well as vaccines.
We are focusing on the three key priorities in the mid-term: growing our portfolio, strengthening our pipeline
and boosting our profitability. Pursuing portfolio growth involves a focus on our expected key growth drivers,
particularly in our three key therapeutic areas of GI, oncology and neuroscience, as well as emerging markets. We are
also pursuing further improvements in specialty capabilities, particularly for unmet treatment needs, while making
targeted acquisitions and divestitures to further increase our level of focus on our key growth drivers.
Our three core therapeutic areas are GI, oncology and neuroscience. Our key growth driver products in
these core therapeutic areas include ENTYVIO, TAKECAB, NINLARO, ADCETRIS, ICLUSIG, ALUNBRIG and
TRINTELLIX. We also focus on developing vaccines to address global health needs.
In GI, our principal products include:
•
ENTYVIO, a treatment for moderate to severe ulcerative colitis and Crohn’s disease, and a product
we expect to be a driver for growth in the future. Sales of ENTYVIO have grown strongly since its
launch in 2014 to become our top selling product in the fiscal year ended March 31, 2018. In July
2018, we obtained a New Drug Application (“NDA”) approval for ENTYVIO for the treatment of
patients with moderately to severely active ulcerative colitis in Japan. ENTYVIO is now approved in
more than 50 countries worldwide, and we continue to seek approval for ENTYVIO in additional
countries. In the fiscal year ended March 31, 2018, our revenue from ENTYVIO was ¥201.4 billion.
30
•
•
•
•
PANTOPRAZOLE, a proton-pump inhibitor used to treat gastroesophageal reflux disease. We
obtained this product in our acquisition of Nycomed A/S in 2011. PANTOPRAZOLE is sold
worldwide in a number of countries and regions, and while our substance patents have expired in
several key markets, including the United States and the EU, it continues to generate strong sales in
emerging markets. In the fiscal year ended March 31, 2018, our revenue from PANTOPRAZOLE
was ¥65.8 billion.
DEXILANT, a treatment for erosive gastroesophageal reflux disease that was launched in the United
States in 2009. DEXILANT has also been approved in Europe and in a number of emerging markets.
In the fiscal year ended March 31, 2018, our revenue from DEXILANT was ¥65.7 billion.
TAKECAB, a treatment for acid-related diseases, and a product we expect to be a driver for growth
in the future. TAKECAB was launched in Japan in 2015 and has achieved significant growth
following the expiration of the prescription limitation period in March 2016. In the fiscal year
ended March 31, 2018, our revenue from TAKECAB was ¥48.5 billion.
AMITIZA, a treatment for constipation that was launched in the United States in 2006. AMITIZA is
in-licensed from Sucampo Pharmaceuticals, Inc., which became a wholly-owned subsidiary of
Mallinckrodt plc in February 2018, and we have the exclusive rights to further develop and
commercialize AMITIZA in all global markets, except Japan and the People’s Republic of China. In
the fiscal year ended March 31, 2018, our revenue from AMITIZA was ¥33.8 billion.
In oncology, our principal products include:
•
•
•
•
LEUPRORELIN, a treatment for prostate cancer, breast cancer and endometriosis, is marketed in
approximately 100 countries worldwide. In the fiscal year ended March 31, 2018, our revenue from
LEUPRORELIN was ¥108.1 billion.
VELCADE, a treatment for multiple myeloma (“MM”) and relapsed mantle cell lymphoma that is
approved in more than 90 countries worldwide. VELCADE is indicated in the United States,
Europe, and Japan as a first-line treatment for MM patients. Janssen Pharmaceutical Companies
have commercialization rights outside the United States and pay royalties to us on VELCADE sales
in their territories. In the fiscal year ended March 31, 2018, our revenue from VELCADE was
¥113.7 billion in the United States, and we recognized ¥23.6 billion from sales outside the United
States. Following the expiration of patent protection over its active ingredient in 2017, generic
versions of VELCADE have been introduced.
NINLARO, the first oral proteasome inhibitor for the treatment of MM, and a product we expect to
be a driver for growth in the future. NINLARO has experienced a strong uptake in sales since
launching in the United States in 2015. Due to its efficacy and safety profile and convenient orally
administered dosing of one capsule per week, we believe NINLARO has significant potential to
improve treatment outcomes in MM by extending therapy duration. We believe NINLARO has the
potential to become a broadly-used treatment for MM. NINLARO was approved in the EU in 2016
and in Japan in 2017, and we are seeking marketing authorization in a number of additional
countries. In the fiscal year ended March 31, 2018, revenue from NINLARO was ¥46.4 billion.
ADCETRIS, an anti-cancer agent used to treat Hodgkin lymphoma (“HL”) and systemic anaplastic
large cell lymphoma (“sALCL”), and a product we expect to be a driver for growth in the future.
ADCETRIS was launched in the United States, the EU and Japan in 2011, 2012 and 2014,
respectively. ADCETRIS has received marketing authorization by regulatory authorities in more
than 60 countries worldwide. We jointly develop ADCETRIS with Seattle Genetics, Inc. and have
commercialization rights in countries outside the United States and Canada. We believe that
ADCETRIS has the potential to become a cornerstone in the treatment of malignancies with the
presence of CD30, a key driver of classical HL tumor pathogenesis, and we are working to expand
the target patient population with new indications. In the fiscal year ended March 31, 2018, our
revenue from ADCETRIS was ¥38.5 billion.
31
•
•
ICLUSIG, a treatment for chronic myeloid leukemia and Philadelphia chromosome positive acute
lymphoblastic leukemia, and a product we expect to be a driver for growth in the future. ICLUSIG
was developed by ARIAD and is approved in the United States, the EU, Australia, Switzerland,
Israel, Canada and Japan. In the fiscal year ended March 31, 2018, our revenue from ICLUSIG was
¥23.1 billion.
ALUNBRIG, an orally administered small molecule anaplastic lymphoma kinase (“ALK”) inhibitor
used to treat non-small cell lung cancer (“NSCLC”), and a product we expect to be a driver for
growth in the future. ALUNBRIG was developed by ARIAD. ALUNBRIG was granted accelerated
approval in the United States in April 2017, and is currently under regulatory review in the EU. We
believe ALUNBRIG has the potential to be the best-in-class ALK inhibitor, and we are conducting
studies that aim to broaden its approved indications. In the fiscal year ended March 31, 2018, our
revenue from ALUNBRIG was ¥2.8 billion.
In neuroscience, our principal product is:
•
TRINTELLIX, an antidepressant indicated for the treatment of major depressive disorder in adults,
and a product we expect to be a driver for growth in the future. TRINTELLIX was co-developed
with H. Lundbeck A/S, and was launched in 2014 in the United States. We have commercialization
rights in the United States and Japan (although TRINTELLIX has not yet been launched in Japan). In
2016, the drug was renamed from BRINTELLIX to TRINTELLIX in the United States to avoid name
confusion with another unrelated treatment. In the fiscal year ended March 31, 2018, our revenue
from TRINTELLIX was ¥48.4 billion in the United States.
Clinical Development Activities
The following table shows a summary of the status of our clinical-stage pipeline as of October 31, 2018,
including approved products in life cycle management. “Approved with Life Cycle Management” refers to those
products which have been approved for any indication and for which we are pursuing regional expansions,
additional indications or new formulations.
Category
Phase I
Phase II
Phase III /
Filed
GI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oncology . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Neuroscience . . . . . . . . . . . . . . . . . . . . . . . . . .
Vaccine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
4
6
7
2
19
2
3
2
2
9
—
—
2
1
3
Approved
with Life
Cycle
Management
3
6
1
—
10
32
The following table lists the compounds that we are developing as of October 31, 2018. The compounds
in our pipeline are in various stages of development, and the contents of the pipeline may change as compounds
currently under development drop out and new compounds are introduced. Whether the compounds listed below
are ever successfully released as products depends on various factors, including the results of pre-clinical and
clinical trials, market conditions for various drugs and regulatory approvals.
GI Pipeline
Development code
Brand name
(country/region)(1)
MLN0002
ENTYVIO (U.S.,
EU, Japan)
Drug Class
(administration
route)
Humanized
monoclonal
antibody against
α4ß7 integrin
(injection)
Cx601
ALOFISEL (EU)
A suspension of
allogeneic
expanded
adipose-derived
stem cells
(injection)
TAK-438
TAKECAB (Japan)
Potassium-
competitive acid
blocker (oral)
TAK-954
TAK-906(3)
5-HT4 receptor
agonist
(injection)
Dopamine D2/D3
receptor
antagonist (oral)
Indications /
additional formulations
Crohn’s disease
Ulcerative colitis
Subcutaneous formulation
(for Ulcerative colitis,
Crohn’s disease)
Adalimumab head-to-head
in patients with ulcerative
colitis
Graft-versus-host disease
prophylaxis in patients
undergoing allogeneic
hematopoietic stem cell
transplantation
Refractory complex perianal
fistulas in patients with
Crohn’s disease
Stage(2)
Filed (July 2018)
Japan
P-III
China
China P-III
In-house/
In-license
In-house
U.S.
EU
Japan
P-III
P-III
P-III
Global P-III
— P-II(a)
U.S.
P-III
In-house
Acid-related diseases
China Filed (February
2018)
In-house
Japan P-III
EU
P-II(b)
Non-erosive reflux disease
in patients with Gastro-
esophageal Reflux Disease
Gastro-esophageal reflux
disease in patients who have
a partial response following
treatment with a proton
pump inhibitor
Enteral feeding intolerance
— P-II(b)
In-license
(Theravance
Biopharma, Inc.)
Gastroparesis
— P-II(a)
In-house
33
Development code
Brand name
(country/region)(1)
Drug Class
(administration
route)
TIMP-GLIA(4)
Tolerizing
Immune
Modifying
nanoParticle
(TIMP) (injection)
Indications /
additional formulations
Stage(2)
In-house/
In-license
Celiac Disease
— P-I
In-license (Cour
Pharmaceutical
Development
Company, Inc.)
In-license (PvP
Biologics, Inc.)
Kuma-062(5)
Glutenase (oral) Celiac Disease
— P-I
TAK-671
TAK-018
Protease inhibitor
(injection)
FimH antagonist
(oral)
Acute pancreatitis
— P-I
In-house
Crohn’s disease
— P-I
In-license
(Enterome
Bioscience SA)
Notes:
(1) Brand name and country/region indicate the brand name and country in which the specific asset has already
been approved for any indication in any of the U.S., EU, Japan or China and Takeda has commercialization
rights for such asset.
(2) Country/region in this column denote where a clinical study is ongoing or a filing has been made with our
specific intention to pursue approval in any of the U.S., EU, Japan or China.
(3) TAK-906 was previously known as ATC 1906. In March 2017, Takeda executed its option right to acquire
Altos Therapeutics.
(4) Cour Pharmaceutical Development Company, Inc. led Phase I development.
(5) PvP Biologics, Inc. led Phase I development.
Oncology Pipeline
Development code
Brand name
(country/region)(1)
Drug Class
(administration
route)
ALUNBRIG (U.S.)
ALK inhibitor
(oral)
Indications /
additional formulations
Stage(2)
2L ALK-positive metastatic
Non-Small Cell Lung Cancer
in patients previously treated
with crizotinib
EU
China
Filed (February
2017)
P-1
In-house/
In-license
In-house
1L ALK-positive Non-Small
Cell Lung Cancer
2L ALK-positive Non-Small
Cell Lung Cancer in Japanese
patients previously treated with
ALK inhibitors
U.S.
EU
China
P-III
P-III
P-I
Japan P-II(a)
34
Development code
Brand name
(country/region)(1)
Drug Class
(administration
route)
SGN-35
ADCETRIS
(EU, Japan)
CD30
monoclonal
antibody-drug
conjugate
(injection)
Indications /
additional formulations
Stage(2)
Front line Hodgkin Lymphoma EU Filed
(November
2017)
In-house/
In-license
In-license
(Seattle
Genetics, Inc.)
Front line Peripheral T-cell
Lymphoma
Relapsed/refractory Hodgkin
Lymphoma
Relapsed/refractory systemic
Anaplastic large-cell
lymphoma
MLN9708
NINLARO (Global)
Proteasome
inhibitor (oral)
Newly diagnosed multiple
myeloma
Maintenance therapy in
patients with newly diagnosed
MM following autologous
stem cell transplant
Maintenance therapy in
patients with newly diagnosed
MM not treated with stem cell
transplant
Relapsed/refractory primary
amyloidosis
Relapsed/refractory MM
(doublet regimen with
dexamethasone)
Relapsed/refractory MM
(triplet regimen with
daratumumab and
dexamethasone)
Front line Philadelphia
chromosome-positive acute
lymphoblastic leukemia
Dose ranging study for second-
line patients with chronic-
phase chronic myeloid
leukemia
ICLUSIG (U.S.)
BCR-ABL
inhibitor (oral)
TAK-924
NEDD 8
activating
enzyme inhibitor
(injection)
High risk myelodysplastic
syndromes, chronic
myelomonocytic leukemia,
low-blast acute myelogenous
leukemia
In-house
EU
Japan
P-III
P-III
China P-II
China P-II
U.S.
EU
Japan
China
P-III
P-III
P-III
P-I
U.S.
EU
Japan
China
P-III
P-III
P-III
P-I
GlobalP-III
U.S.
EU
China
U.S.
EU
Japan
P-III
P-III
P-III
P-III
P-III
P-III
Global P-II
U.S. P-III
In-house
U.S. P-II(b)
U.S.
EU
P-III
P-III
In-house
TAK-385
LH-RH
antagonist (oral)
Prostate cancer
Japan
China
P-III
P-I
In-house
35
Development code
Brand name
(country/region)(1)
Drug Class
(administration
route)
TAK-228
mTORC1/2
inhibitor (oral)
TAK-659
TAK-931
SYK/FLT3
kinase inhibitor
(oral)
CDC7 inhibitor
(oral)
Indications /
additional formulations
Stage(2)
In-house/
In-license
Endometrial cancer
U.S. P-II(b)
In-house
Diffuse large B-cell lymphoma — P-II(a)
In-house
Solid tumors, Hematologic
malignancies
Metastatic colorectal cancer,
Squamous esophageal cancer,
Squamous Non-Small Cell
Lung Cancer
P-I
— P-II(a)
In-house
Multi-targeted
kinase inhibitor
(oral)
2L Renal cell carcinoma
Japan P-II(a)
2L Hepatocellular carcinoma
Japan P-II(a)
In-license
(Exelixis, Inc.)
TAK-079
TAK-164
TAK-573
TAK-788(3)
TAK-522 / XMT-
1522(4)
TAK-981
Anti-CD38
monoclonal
antibody
(injection)
Anti-guanylyl
cyclase C
antibody drug
conjugate
(injection)
CD38-targeted
lgG4 genetically
fused with an
attenuated IFNα
(injection)
EGFR/HER2
inhibitor (oral)
HER2 dolaflexin
antibody-drug
conjugate
(injection)
SUMO inhibitor
(injection)
PARP1/2
inhibitor (oral)
Relapsed/refractory multiple
myeloma
— P-I
In-house
Systemic lupus erythematosus — P-I
GI Malignancies
— P-I
In-house
Relapsed/refractory MM
— P-I
In-license
(Teva
Pharmaceutical
Industries Ltd.)
Non-Small Cell Lung Cancer — P-I
In-house
HER2 positive solid tumors
— P-I
Multiple cancers
Multiple cancer
— P-I
Japan P-I
In-license
(Mersana
Therapeutics,
Inc.)
In-house
In-license
(Tesaro, Inc.)
Notes:
(1) Brand name and country/region indicate the brand name and country in which the specific asset has already
been approved for any indication in any of the U.S., EU, Japan or China and Takeda has commercialization
rights for such asset.
(2) Country/region in this column denote where a clinical study is ongoing or a filing has been made with our
specific intention to pursue approval in any of the U.S., EU, Japan or China.
(3) TAK-788 was previously known as AP32788.
(4) Takeda and Mersana Therapeutics, Inc. (“Mersana”) will co-develop XMT-1522, and Mersana will lead
execution of the Phase I trial.
36
Neuroscience Pipeline
Development code
Brand name
(country/region)(1)
Lu AA21004
TRINTELLIX (U.S.)
TAK-935(3)
TAK-831
WVE-120101(4)
WVE-120102(4)
TAK-041
TAK-418
TAK-653
TAK-925
Drug Class
(administration
route)
Multimodal anti-
depressant (oral)
CH24H inhibitor
(oral)
D-amino acid
oxidase (DAAO)
inhibitor (oral)
mHTT SNP1
antisense
oligonucleotide
(injection)
mHTT SNP2
antisense
oligonucleotide
(injection)
GPR139 agonist
(oral)
LSD1 inhibitor
(oral)
Indications /
additional formulations
Stage(2)
Major depressive disorder
Japan Filed (September
2018)
In-house/
In-license
In-license
(H. Lundbeck
A/S)
Rare pediatric epilepsies
— P-II(a)
In-house
Friedreich’s ataxia
Negative symptoms and/or
cognitive impairment
associated with schizophrenia
Huntington’s disease
— P-II(a)
— P-II(a)
— P-I/II
Huntington’s disease
— P-I/II
In-house
In-license
(Wave Life
Sciences Ltd.)
In-license
(Wave Life
Sciences Ltd.)
Negative symptoms and/or
cognitive impairment
associated with schizophrenia
— P-I
In-house
Kabuki syndrome
— P-I
In-house
AMPA receptor
potentiator (oral)
Treatment Resistant
Depression
— P-I
In-house
Orexin 2R
agonist
(injection)
Narcolepsy
— P-I
In-house
TAK-341 / MEDI-
1341(5)
Alpha-synuclein
antibody
(injection)
Parkinson’s Disease
— P-I
In-license
(AstraZeneca)
Notes:
(1) Brand name and country/region indicate the brand name and country in which the specific asset has already
been approved for any indication in any of the U.S., EU, Japan or China and Takeda has commercialization
rights for such asset.
(2) Country/region in this column denote where a clinical study is ongoing or a filing has been made with our
specific intention to pursue approval in any of the U.S., EU, Japan or China.
(3) Co-development with Ovid Therapeutics Inc.
(4) 50:50 co-development and co-commercialization with Wave Life Sciences Ltd.
(5) Partnership with AstraZeneca. AstraZeneca leads Phase I development.
37
Vaccine Pipeline
Development code
Brand name
(country/region)(1)
TAK-003
Type of vaccine
(administration
route)
Tetravalent
dengue vaccine
(injection)
Indications /
additional formulations
Stage(2)
In-house/
In-license
Prevention of dengue fever
caused by dengue virus
— P-III
In-house
TAK-214
TAK-195
TAK-021
TAK-426
Norovirus
vaccine
(injection)
Prevention of acute
gastroenteritis caused by
norovirus
— P-II(b)
In-house
Sabin inactivated
polio vaccine
(injection)
EV71 vaccine
(injection)
Prevention of poliomyelitis
— P-I/II
In-house
Prevention of hand, foot and
mouth disease caused by
enterovirus 71
— P-I
In-house
Zika vaccine
(injection)
Prevention of the Zika virus
infection
— P-I
In-house
Notes:
(1) Brand name and country/region indicate the brand name and country in which the specific asset has already
been approved for any indication in any of the U.S., EU, Japan or China and Takeda has commercialization
rights for such asset.
(2) Country/region in this column denote where a clinical study is ongoing or a filing has been made with our
specific intention to pursue approval in any of the U.S., EU, Japan or China.
Recent Progress in Clinical Trials
The chart below shows recent progress in clinical trial stages since May 14, 2018, when the results for
the fiscal year ended March 31, 2018 were announced.
Development code
MLN0002
MLN0002
MLN9708
MLN0002
Kuma062
TAK-164
Indications /
additional formulations
Country/Region(1)
Progress in stage
Ulcerative colitis
Japan
Approved (July 2018)
Crohn’s disease
Japan
Filed (July 2018)
Relapsed/refractory MM
(triplet regimen with
daratumumab and
dexamethasone)
Graft-versus-Host Disease
prophylaxis in patients
undergoing allogeneic
hematopoietic stem cell
transplantation
Celiac disease
GI malignancies
38
Global
P-II
—
P-II(a)
—
—
P-I
P-I
Development code
SGN-35
Lu AA21004
Lu AA21004
Indications /
additional formulations
Country/Region(1)
Progress in stage
Front line Hodgkin Lymphoma
Japan
Approved (September
2018)
U.S.
Approved (October 2018)
Data added to labeling that
demonstrated superiority over
escitalopram in improving
SSRI-induced sexual
dysfunction in patients with
Major Depressive Disorder
Major depressive disorder
Japan
Filed (September 2018)
Front line Philadelphia
chromosome-positive acute
lymphoblastic leukemia
U.S.
P-III
2L hepatocellular carcinoma
Japan
P-II(a)
WVE-120101
< - >
WVE-120102
< - >
TAK-671
< - >
TAK-981
< - >
TAK-018
< - >
Huntington’s disease
Huntington’s disease
Acute pancreatitis
Multiple cancers
Crohn’s disease
—
—
—
—
—
P-I/II
P-I/II
P-I
P-I
P-I
Note:
(1) Country/region in this column denotes where a clinical study is ongoing or a filing has been made with our
specific intention to pursue approval in any of the U.S., EU, Japan or China.
Breakdown of Revenues by Category of Activity and Geographic Market
See “Item 5. Operating and Financial Review and Prospects—A. Operating Results” of this registration
statement.
Availability of Raw Materials
Although we develop and manufacture the active ingredients used in some of our products at our own
facilities, we are dependent on third-party suppliers for a portion of the raw materials and compounds used in
some of the other products we produce. Although we believe that, in the event we are unable to source any
products or ingredients from any of our major suppliers, we could replace those products or substitute ingredients
from other suppliers, we may not be able to do so without significant difficulty or significant increases in our cost
of goods sold.
We closely monitor, continuously review and revise the supply sourcing strategy for our products to
identify in a timely manner any risks in our supply chain, including risks arising from our dependency on
outsourced manufacturing relationships with third party suppliers. Where necessary, inventory levels of either
key materials and finished products are managed strategically to address potential risks relating to operational
and quality issues, production capacity and single sourcing among others. For critical and new technology
39
products, we have decided to make significant long-term capital investments to build internal manufacturing
capacity and secure dual sources to reduce the current dependency on outsourced manufacturing relationship
with third-party suppliers.
Sales and Marketing
We organize our sales channels under five regional business units, United States, Japan Pharma,
Emerging Markets, Europe-Canada (“EUCAN”) and Japan Consumer Healthcare, and two global specialty
business units, Oncology and Vaccines.
Our regional business units, United States, Japan Pharma, Emerging Markets and EUCAN, are focusing
on investments that support growth potential in the market and enhance efficiency. Our primary sales and
marketing activities are organized around these four business units.
The U.S. business unit focuses on recently approved products in the United States,
the largest
pharmaceutical market in the world. It has a specialized sales force to support ENTYVIO to better meet the needs
of those who treat and manage IBD, as well as a general medicine sales force, and added a dedicated
neuroscience sales team to support TRINTELLIX to reach psychiatrists who treat major depressive disorder
(“MDD”).
The Japan Pharma business unit focuses on retaining our position as one of the leading pharmaceutical
companies in our home market of Japan, where the government is driving stricter control of drug prices and
promoting the penetration of generics.
The Emerging Markets business unit makes focused investments in order to maximize growth potential
in areas across Asia Pacific, Greater China, Latin America, Near East, Middle East & Africa and Russia/CIS.
Established Products, or branded generics (also referred to as Value Brands in the Emerging Markets), are valued
by our customers as quality medicine, and innovative products such as ENTYVIO, NINLARO and ADCETRIS are
also crucial for Emerging Markets, as we expect these key growth drivers to exhibit strong growth in the coming
years.
The EUCAN business unit continues to grow the business with a more specialized approach in the
European and Canadian markets, where public insurance has set a higher bar for the reimbursement of medicines,
requiring innovation and differentiation for the products to be reimbursed. As Canada’s health insurance system
is very similar to that of Europe, the Canadian market is managed by the EUCAN business unit.
Intellectual Property
Due to the lengthy development periods for new drugs, the high costs of research and development and
the small percentage of researched compounds that reach the market, intellectual property considerations play an
important role in the return of investments for research and development of a new drug.
We seek intellectual property protection under applicable laws for significant product developments in
major markets. Patents are our primary means of protecting the technologies we use in relation to prescription
drugs. Patents provide the holder with the right to exclude others from using an invention related to the drug. We
use various types of patents to protect our pharmaceutical products, including substance patents, which cover
active ingredients, as well as patents covering usage, manufacturing processes and formulation of drugs. The
substance patent is a drug’s primary form of intellectual property protection, and its status can impact the
commercial viability of the drug.
In the U.S., patents generally expire twenty years after the filing date of the application, subject to
potential patent term adjustments for delays in patent issuance based upon certain delays in prosecution by the
United States Patent and Trademark Office. A U.S. pharmaceutical patent that claims a product, method of
treatment using a product or method of manufacturing a product may also be eligible for a patent term extension
40
based on the time the FDA took to approve the product. This type of extension may only extend the patent term
for a maximum of five years, and may not extend the patent term beyond fourteen years from regulatory
approval. Only one patent may be extended for any product based on FDA delay. In addition to patent
exclusivities, the FDA may provide data or market exclusivity for a new chemical entity or an “orphan drug,”
each of which run in parallel to any patent protection. Regulatory data protection or exclusivity prevents a
potential generic competitor from relying on clinical trial data that were generated by the sponsor when
establishing the safety and efficacy of its competing product. Market exclusivity prohibits any marketing of the
same drug for the same indication.
Similarly, in Japan, a patent can be issued for active pharmaceutical ingredients. Although methods of
treatment, such as dosage and administration, are not patentable in Japan, pharmaceutical compositions for a
specific dosage or administration method as well as processes to make a pharmaceutical composition are
patentable. Patents in Japan generally expire 20 years after the filing date of the patent application. Patents for
pharmaceuticals may be extended for up to five years, depending on the amount of time spent for the drug
approval process. Japan also has a regulatory data protection system called a “re-examination period” of eight
years for pharmaceuticals that contain new active pharmaceutical ingredients and four years to six years for new
indications and formulations and a ten year orphan drug exclusivity system.
Patent applications in Europe may be filed in the European Patent Office (“EPO”) or in a particular
country in Europe. The EPO system permits a single application to be granted for the EU, plus certain other
non-EU countries, such as Switzerland and Turkey. When the EPO grants a patent, it is then validated in the
countries that the patent owner designates. The term of a patent granted by the EPO or a European country office
is generally 20 years from the filing date of the patent application, subject to potential patent term extensions and
adjustments. Pharmaceutical patents can be granted a further period of exclusivity under the Supplementary
Protection Certificate (“SPC”) system. SPCs are designed to compensate the owner of the patent for the time it
took to receive marketing authorization by the European Health Authorities. An SPC may be granted to provide,
in combination with the patent, up to 15 years of exclusivity from the date of the first European marketing
authorization. However, an SPC cannot last longer than five years. The SPC duration can additionally be
extended by a further Pediatric Extension of six months if the product is the subject of an agreed pediatric
investigation plan. The post-grant phase of patents, including the SPC system, is currently administered on a
country-by-country basis under national laws that are intended to but do not always have the same effect. The EU
also provides a system of regulatory data exclusivity for authorized human medicines, which runs in parallel to
any patent protection. The system for drugs being approved today is usually referred to as “8+2+1” because it
provides an initial period of eight years of data exclusivity, during which a competitor cannot rely on the relevant
data, a further period of two years of market exclusivity, during which the data can be used to support
applications for marketing authorization but the competitive product cannot be launched and a possible one-year
extension of the market exclusivity period if, during the initial eight-year data exclusivity period, the sponsor
registered a new therapeutic indication with “significant clinical benefit.” This system applies both to national
and centralized authorizations. The EU also has an orphan drug exclusivity system for medicines similar to the
U.S system. If a medicine is designated as an orphan drug, it benefits from ten years of market exclusivity,
during which time a similar medicine for the same indication will not receive marketing authorization. Under
certain circumstances, this exclusivity can be extended with a two-year Pediatric Extension.
Worldwide, we experience challenges in the area of intellectual property from factors such as the
penetration of generic versions of our products following the expiry of the relevant patents and the launch by
competitors of over-the-counter versions of our products. We work to secure extended patent rights by adding
new indications and changing formulations. Our Global General Counsel is responsible for the oversight of our
Intellectual Property operations, as well as our legal and compliance operations. Our Intellectual Property
Department supports our overall corporate strategy by focusing efforts on three main themes:
• maximization of the value of our products and research pipeline and protection of related rights
aligned to the strategies of our therapeutic area units;
•
facilitation of more dynamic harnessing of external innovation through partner alliance support; and
41
•
securing and protection of intellectual property rights around the world, including in emerging
markets.
As infringement of our intellectual property rights poses a risk of loss of expected earnings derived from
those rights, we have internal processes in place to manage patents and other intellectual property. This program
includes both remaining vigilant against patent infringement by others as well as exercising caution, starting at
the research and development stage, to ensure that our products and activities do not violate intellectual property
rights held by others. As part of our strategy to manage intellectual property rights worldwide, we have overseas
intellectual property operations in the United States, based in Chicago, San Diego and Cambridge; and in
Switzerland, based in Zurich.
The following table shows a summary of the current substance patents (where applicable and unless
otherwise noted) and trademarks covering each of our main pharmaceutical products in Japan, the United States
and the EU. The “Expiry Date” means an original patent expiry date which may be extended by a patent term
extension or supplementary protection certificate (“SPC”). The “Extended Expiry” means an extended patent
expiry date. Information is not listed for markets over which we do not have commercialization rights. For
certain of these products, there are other patents related to, for example, methods of manufacturing or use of the
products in the treatment of particular diseases or conditions, which may protect them even following the
expiration of the relevant substance patent. We may also protect our products using other forms of intellectual
property, such as trade secrets and proprietary know-how. In addition, expiration dates set forth below do not
necessarily reflect possible changes to the patent term caused by patent term extensions, the outcome of litigation
or other proceedings or other reasons.
Our product
Japan
United States
EU
GI:
ENTYVIO . . . . . . . . . . . . Substance Patent
—(1)
PAT# 7147851 (biologics,
no orange-book listed
patent)
Expiry Date: 7/24/2017
Extended Expiry Date:
9/27/2021
PAT# 0918797
Expiry Date: 8/6/2017
Extended Expiry: 8/6/2022
in AT, BE, GR, LU, PT, SI,
RO, LT and LV
Trademark
Reg. No. 5600446
Reg. No. 4580498
Reg. No. 10493369
PANTOPRAZOLE . . . . . . Substance Patent
—(1)
Trademark
Reg. No. 1004803
—(1)
—(1)
Reg. No. 2207706
Reg. No. 1481985
Reg. No. 3175783
DEXILANT . . . . . . . . . . . Substance Patent
N/A
Crystal form patent
Trademark
—
N/A
Crystal form patent
N/A
Crystal form patent
Reg. No. 3887989
Reg. No. 9680745
Reg. No. 9680596
TAKECAB . . . . . . . . . . . . Substance Patent
PAT# 4035559
Expiry Date: 8/29/2026
Extended Expiry Date:
8/29/2031
Trademark
Reg. No. 5579687
PAT# 7977488
Expiry Date: 8/11/2028
PAT# 1919865
Expiry Date: 8/29/2026
Reg. No. 4988099
Reg. No. 9608613
42
Our product
AMITIZA . . . . . . . . . . . . . Substance Patent
Japan
United States
EU
N/A(2)
Bicyclic Tautomer of
AMITIZA
N/A
Bicyclic Tautomer of
AMITIZA
N/A
Bicyclic Tautomer of
AMITIZA
Oncology:
LEUPROLIN . . . . . . . . . . Substance Patent
—(1)
Trademark
Reg. No. 2426577
VELCADE . . . . . . . . . . . . Substance Patent
—(1)
—
—(1)
Reg. No. IR258104
PAT# 04162491
Expiry Date: 1/25/2022
PAT# 6713446
Expiry Date: 7/25/2022
PAT# 788360
Expiry Date: 4/28/2019
PAT# 6958319
Expiry Date: 7/25/2022
(including pediatric
exclusivity)
Trademark
Reg. No. 4643739
Reg. No. 2795745
Reg. No. 2727287
NINLARO . . . . . . . . . . . . Substance Patent
PAT# 5261488
Expiry Date: 8/6/2027
Extended Expiry Date:
July 2031
PAT# 7442830
Expiry Date: 8/6/2027
Extended Expiry Date:
not yet granted but expected
to be Nov 2029.
PAT# 2178888
Expiry Date: 2027/8/6
Extended Expiry Date:
11/23/2031
PAT# 5566380
Expiry Date: 6/16/2029
PAT# 7687662
Expiry Date: 8/6/2027
PAT# 2318419
Expiry Date: 6/16/2029
PAT# 6010066
Expiry Date: 6/16/2029
Trademark
Reg. No. 2426577
ADCETRIS(3) . . . . . . . . . . Substance Patent
PAT# 4095444
Expiry Date: 2022/4/30
PAT# 4303964(4)
Expiry Date: 11/28/2021
Extended Expiry Date:
8/12/2026
PAT# 4741838
Expiry Date: 7/31/2023
Extended Expiry Date:
4/3/2026
Trademark
Reg. No. 5366258
PAT# 8003819
Expiry Date: 8/6/2027
—
N/A
Reg. No. IR258104
PAT#1545613
Expiry Date: 7/31/2023
Extended Expiry Date:
10/24-30/2027(5)
N/A
Reg. No. 9271453
43
Our product
Japan
United States
EU
ALUNBRIG . . . . . . . . . . . Substance Patent
PAT# 6190415
Expiry Date: 5/21/2029
PAT# 6271064
Expiry: 5/21/2029
Trademark
Reg. No. 1303378
PAT# 9012462
Expiry Date: 7/31/2020
Extended Expiry Date:
not yet granted but expected
to be April 28, 2031.
PAT# 2300013
Expiry Date: 5/21/2029
Reg. No. 5251769
Reg. No. 015091317
ICLUSIG . . . . . . . . . . . . . Substance Patent
PAT# 5200939(6)
Expiry Date: 7/27/2030(7)
Trademark
Reg. No. 5473841
Neuroscience:
TRINTELLIX . . . . . . . . . . Substance Patent
PAT# 3896116
Expiry Date: 10/2/2022
Trademark
Reg. No. 5904166
PAT# 8114874
Expiry Date: 12/22/2026(8)
PAT# 1973545(9)
Expiry Date: 7/3/2028(10)
Reg. No. 4324899
Reg. No. 010087633
N/A
PAT# 7144884
Expiry Date: 10/2/2022
Extended Expiry Date:
6/17/2026 (to be issued
soon)
Reg. No. 5023071
N/A
Notes:
(1) The substance patent has expired.
(2) Takeda has the exclusive rights to commercialize AMITIZA in all global markets, except Japan and the
People’s Republic of China.
(3) Takeda has commercialization rights for ADCETRIS outside the United States and Canada.
(4) This patent is granted for the scope of use.
(5) Current SPC ranges from Oct 24-30, 2027 for the expiry dates.
(6) Out-licensed to Otsuka Pharmaceutical Co., Ltd.
(7)
(8) Excludes additional 33 days of patent term adjustment awarded by the United States District Court for the
Eastern District of Virginia, but not recognized by the Patent and Trademark Office. Excludes possible
pediatric exclusivity.
Includes patent term extension.
(9) Out-licensed to Incyte Corporation.
(10) Includes SPC. Excludes possible pediatric exclusivity.
Licensing and Collaboration Agreements
In the ordinary course of our business, we enter into agreements for licensing or collaboration in the
development and commercialization of products. Our business does not materially depend on any one of these
agreements. Instead, they overall form a portion of Takeda’s strategy to leverage a mix of internal and external
resources to develop and commercialize new products. Certain of the agreements which have led to successful
commercialization to date are summarized below:
•
ADCETRIS: We entered into a Collaboration Agreement with Seattle Genetics in 2009 for the
global co-development of ADCETRIS and its the commercialization around the world (other than
the United States and Canada, where ADCETRIS is commercialized by Seattle Genetics). We may
be required to pay milestone payments related to regulatory and commercial progress by us under
the collaboration. We also pay tiered royalties with percentages ranging from the mid-teens and to
the mid-twenties based on net sales of ADCETRIS within our licensed territories. We and Seattle
Genetics equally co-fund the cost of selected development activities conducted under the
44
•
•
collaboration. Either party may terminate the collaboration for cause, or by mutual consent. We
may terminate the collaboration at will, and Seattle Genetics may terminate the collaboration in
certain circumstances. If neither party terminates the collaboration agreement, then the agreement
automatically terminates on the expiration of all payment obligations. As of September 30, 2018,
our aggregate potential development and commercial milestone payments under the ADCETRIS
collaboration were approximately $155 million.
TRINTELLIX: We entered into a License, Development, Supply and Commercialization Agreement
with H. Lundbeck A/S in September 2007 for
the exclusive co-development and co-
commercialization in the United States and Japan of several compounds in Lundbeck’s pipeline for
the treatment of mood and anxiety disorders, under which agreement we commercialize
TRINTELLIX in the United States (TRINTELLIX has not yet been launched in Japan). Under the
agreement, we and Lundbeck have agreed to jointly develop the relevant compounds, with the
majority of development funding from us. Revenues for TRINTELLIX are booked by us, and we pay
to Lundbeck a portion of our sales, as well as tiered royalties ranging from the mid-teens to twenties
on the portion of sales retained by us. We have also agreed to pay to Lundbeck certain development
and commercialization milestone payments relating to regulatory and commercial progress under
the collaboration. The term of the agreement is indefinite, but agreement may be terminated by
mutual decision of the parties or for cause. As of September 30, 2018, our aggregate potential
development and commercial milestone payments under the TRINTELLIX collaboration were
approximately $145 million.
AMITIZA:
In October 2004, we entered into an agreement with Sucampo Pharmaceuticals
(subsequently acquired by Mallinckrodt) to purchase, develop and commercialize AMITIZA for
gastrointestinal indications in the U.S. and Canada. The initial term of the agreement is through
December 31, 2020, after which the agreement continues automatically until terminated by us. We
purchase AMITIZA from Mallinckrodt under the agreement at an agreed-upon price, and pay tiered
royalties on sales in North America ranging from the high teens to mid-twenties, resetting each year.
Beginning on January 1, 2021, we will share equally with Mallinckrodt in the net annual sales revenue
from branded AMITIZA sales. We have agreed to fund development costs, including regulatory-
required studies, subject to agreed-upon caps, with excess costs being shared equally, with certain
exceptions. We have a similar agreement with Mallinckrodt covering the rest of the world, except for
Japan and the People’s Republic of China. We have agreed to additional commercial milestone
payments contingent on the achievement of certain net sales revenue targets, and to provide a
minimum annual commercial investment during the term of the agreement, which we may reduce
when a generic equivalent enters the market. As of September 30, 2018, our total potential
commercial milestone payments under the AMITIZA collaboration were approximately $85 million.
Competition
Competitors in the prescription drug industry include large international companies whose capabilities
cover the entire drug creation process from research and development to production and marketing. Competitors
also include smaller companies that focus on selling generic versions of drugs for which patent protection and
regulatory data protection have lapsed.
The competition we face often differs by product and geographic market, and companies emerge and
fall away as competitors over time due to innovations, merger activity and other business and market changes.
45
The following table shows the current principal competing products for our main pharmaceutical
products:
Our product
GI:
DEXILANT, PANTOPRAZOLE
Principal competing product
Primary manufacturer or distributor
(Protonix)
. . . . . . . . . . . . . . . . generic lansoprazole, esomeprazole —
ENTYVIO . . . . . . . . . . . . . . . . . . . Remicade
Humira
Simponi
Stelara
Cimzia
generic infliximab
TAKECAB . . . . . . . . . . . . . . . . . . Nexium
generic lansoprazole, omeprazole
Oncology:
ADCETRIS . . . . . . . . . . . . . . . . . chemotherapy regimens
ALUNBRIG . . . . . . . . . . . . . . . . . Xalkori
Zykadia
Alecensa
ICLUSIG . . . . . . . . . . . . . . . . . . . Gleevec
Tasigna
Sprycel
Bosulif
Leuprorelin (Leuplin) . . . . . . . . . Zoladex
generic leuprorelin
NINLARO, VELCADE . . . . . . . . . Revlimid
Pomalyst/Imnovid
Kyprolis
Darzalex
Empliciti
Neuroscience:
TRINTELLIX . . . . . . . . . . . . . . . . Viibryd
Fetzima
generic duloxetine, escitalopram
Other:
AZILVA . . . . . . . . . . . . . . . . . . . . generic candesartan, olmesartan
NESINA . . . . . . . . . . . . . . . . . . . . Januvia
generic pioglitazone
Regulation
Janssen Biotech
Abbvie
Janssen Biotech
Janssen Biotech
UCB
—
AstraZeneca
—
—
Pfizer
Novartis
Roche
Novartis
Novartis
Bristol-Myers Squibb
Pfizer
AstraZeneca
—
Celgene
Celgene
Amgen
Janssen Biotech
Bristol-Myers Squibb
Allergan
Allergan
—
—
Merck Co., Inc.
—
The pharmaceutical industry is subject to extensive global regulation by regional, national, state and
local agencies. The FDA and other federal statutes and regulations in the United States, MHLW in Japan and
laws and regulations of foreign governments govern the testing, approval, production, labeling, distribution, post-
market surveillance, advertising, dissemination of information and promotion of our products.
The introduction of new pharmaceutical products generally entails a lengthy approval process. Products
must be authorized or registered prior to marketing, and such authorization or registration must subsequently be
maintained. In recent years, the registration process has required increased testing and documentation for the
approval of new drugs, with a corresponding increase in the expense of product introduction. To register a
pharmaceutical product, a registration dossier containing evidence establishing the safety, efficacy and quality of
46
the product must be submitted to regulatory authorities. Generally, a therapeutic product must be registered in
each country in which it will be sold. It is possible that a drug can be registered and marketed in one country
while the registration authority in another country may, prior to registration, request additional information from
the pharmaceutical company or even reject the product. It is also possible that a drug may be approved for
different indications in different countries. The registration process generally takes between six months and
several years, depending on the country, the quality of the data submitted, the efficiency of the registration
authority’s procedures and the nature of the product. Many countries provide for accelerated processing of
registration applications for innovative products of particular therapeutic interest. In recent years, efforts have
been made among the US, the EU and Japan to harmonize registration requirements in order to achieve shorter
development and registration times for medical products.
Regulations in the United States
All pharmaceutical manufacturers selling products in the United States are subject
to extensive
regulation by the U.S. federal government, principally by FDA, the Drug Enforcement Administration, and, to a
lesser extent, by state and local governments. Applications for drug registration are submitted to and reviewed by
the FDA, which regulates the testing, manufacturing, labeling and approval for marketing of pharmaceutical
products intended for commercialization. The FDA continues to monitor the safety of pharmaceutical products
after they have been approved for sale in the US market. When a pharmaceutical company has gathered data to
demonstrate a drug’s safety, efficacy and quality, it may file for the drug a NDA or Biologics License
Application (“BLA”), along with information regarding the clinical experiences of patients tested in the drug’s
clinical trials. A Supplemental New Drug Application (“sNDA”) or BLA amendment must be filed for new
indications for a previously approved drug.
Once an application is submitted, the FDA assigns reviewers from its staff, including experts in
biopharmaceutics, chemistry, clinical microbiology, pharmacology/toxicology, and statistics. After a complete
review, these content experts then provide written evaluations of the NDA or BLA. These recommendations are
consolidated and are used by senior FDA staff in its final evaluation of the NDA or BLA. Based on that final
evaluation, the FDA then provides to the NDA or BLA’s sponsor an approval, or a “complete response” letter if
the NDA or BLA application is not approved. If not approved, the letter will state the specific deficiencies in the
NDA or BLA which need to be addressed. The sponsor must then submit an adequate response to the
deficiencies in order to restart the review procedure. Once the FDA has approved an NDA, BLA, sNDA or BLA
amendment, the company can make the new drug available for physicians to prescribe. The drug owner must
submit periodic reports to the FDA, including any cases of adverse reactions. For some medications, the FDA
requires additional post-approval studies (Phase IV) to evaluate long-term effects or to gather information on the
use of the product under specified conditions. Throughout the life cycle of a product, the FDA requires
compliance with standards relating to good laboratory, clinical and manufacturing practices. The FDA also
requires compliance with rules pertaining to the manner in which we may promote our products.
The Drug Price Competition and Patent Restoration Term Act of 1954, known as the Hatch-Waxman
Act, established the application procedures for obtaining FDA approval for generic forms of brand-name drugs.
This act also provides market exclusivity provisions for brand-name drugs that can delay the submission and/or
the approval of abbreviated new drug applications (“ANDAs”). Under this procedure, instead of conducting full-
scale pre-clinical and clinical trials, the FDA can accept data establishing that the drug formulation, which is the
subject of an abbreviated application, is bio-equivalent and has the same therapeutic effect as the previously
approved drug, among other requirements. The Orphan Drug Act of 1983 grants seven years of exclusive
marketing rights to a specific drug for a specific orphan indication. The term “orphan drug” refers, generally, to a
drug that treats a rare disease affecting fewer than 200,000 Americans. Market exclusivity provisions are distinct
from patent protections and apply equally to patented and non-patented drug products. Another provision of the
Hatch-Waxman Act extends certain patents for up to five years as compensation for the reduction of effective life
of the patent which resulted from time spent in clinical trials and time spent by the FDA reviewing a drug
application.
47
Under the Hatch-Waxman Act, any company submitting an ANDA or an NDA under Section 505(b)(2)
of the Federal Food, Drug and Cosmetic Act (i.e., an NDA that, similar to an ANDA, relies, in whole or in part,
on the FDA’s prior approval of another company’s drug product; also known as a “505(b)(2) application”) must
make certain certifications with respect to the patent status of the drug for which it is seeking approval. In the
event that such applicant plans to challenge the validity or enforceability of an existing listed patent or asserts
that the proposed product does not infringe an existing listed patent, it files a “Paragraph IV” certification. In the
case of ANDAs, the Hatch-Waxman Act provides for a potential 180-day period of generic exclusivity for the
first company to submit an ANDA with a Paragraph IV certification. This filing triggers a regulatory process in
which the FDA is required to delay the final approval of subsequently filed ANDAs containing Paragraph IV
certifications until 180 days after the first commercial marketing. For both ANDAs and 505(b)(2) applications,
when litigation is brought by the patent holder, in response to this Paragraph IV certification, the FDA generally
may not approve the ANDA or 505(b)(2) application until the earlier of 30 months or a court decision finding the
patent invalid, not infringed or unenforceable. Submission of an ANDA or a 505(b)(2) application with a
Paragraph IV certification can result in protracted and expensive patent litigation.
As a result of factors such as the adoption of the ACA, the recurring political focus on deficit reduction
and public pressure on elected officials in reaction to price increases by certain pharmaceutical manufacturers,
there is a significant likelihood of continued actions to control prices. The ACA mandated the creation of a new
entity, the Independent Payment Advisory Board (the “IPAB”), which was granted unprecedented authority to
implement broad actions to reduce future costs of the Medicare program. As part of its 2018 spending bill,
Congress repealed the IPAB in February 2018. However, price reduction remains a major priority, and there is a
strong possibility that government officials will continue to search for additional ways to reduce or control
prices, including new federal or state legislation mandating drug price controls, which could include limits on
annual price increases or maximum price levels. In 2017, several states passed legislation impacting pricing or
requiring price transparency reporting, including California, Louisiana, Nevada and Maryland. The California
law will require 60 day advance notification of price increases for products exceeding a specific threshold over
the past two years, as well as additional quarterly reporting requirements.
Regulations in Japan
The Pharmaceutical Act
Manufacturers and sellers of drugs, quasi-drugs, cosmetics, medical devices and regenerative medical
products in Japan are subject to the supervision of the Minister of Health, Labour and Welfare (the “Minister”)
primarily under the Act on Securing Quality, Efficacy and Safety of Pharmaceuticals, Medical Devices,
Regenerative and Cellular Therapy Products, Gene Therapy Products, and Cosmetics of Japan (the
“Pharmaceutical Act”). Part of the work performed under the authority of the Minister may be undertaken by
prefectural governors.
Under the Pharmaceutical Act, a person is required to obtain from the Minister a renewable, generally
five-year manufacturing and marketing license in order to conduct the business of marketing, leasing or
providing drugs, quasi-drugs, cosmetics, medical devices or regenerative medical products (“Designated
Products”), as the case may be, that are manufactured (or outsourced to a third party for manufacturing) or
imported by such person. The Minister has the power not to grant the license if (i) the methods of quality control
for Designated Products are not in conformity with the standards known as the Good Quality Practice or the
Quality Management System (“QMS”), each of which is stipulated by the ministerial ordinance of the MHLW,
(ii) the methods of post-marketing safety management (collection and analysis of information and data necessary
for proper use, including those related to quality, efficacy and safety, and necessary measures to be taken based
on the results thereof) of the Designated Products are not in conformity with the standards known as the Good
Vigilance Practice (“GVP”), stipulated by the ministerial ordinance of the MHLW or (iii) an applicant falls under
certain disqualifying provisions of the Pharmaceutical Act. A manufacturer and seller that have obtained a
manufacturing and marketing license must appoint a qualified general manufacturing and marketing supervisor
in order to supervise product quality control and post-marketing safety management. The manufacturing and
48
marketing license holder must also comply with various other items stipulated by the ministerial ordinances of
the MHLW conducting the licensed business.
In order to conduct the business of manufacturing drugs, quasi-drugs, cosmetics or regenerative medical
products, as the case may be, a person is also required to obtain from the Minister a renewable, generally five-
year manufacturing license for each manufacturing site, which is classified in accordance with the ministerial
ordinance of the MHLW. The Minister has the power not to grant a license if (i) the facilities and equipment of
the manufacturing site for drugs, quasi-drugs, cosmetics or regenerative medical products, as the case may be, are
not in conformity with the standards stipulated by the ministerial ordinance of the MHLW or (ii) an applicant
falls under certain disqualifying provisions of the Pharmaceutical Act. In order to engage in manufacturing of
medical devices, a manufacturer is required to undertake a renewable registration, generally having a five-year
term, for each manufacturing site.
In addition, in order to conduct the business of marketing, leasing or providing Designated Products, it
is necessary under the Pharmaceutical Act to obtain product approval from the Minister for manufacturing and
marketing for each kind of product (other than those specified by the Minister). An approval shall not be granted
if (i) an applicant has not obtained the manufacturing and marketing license as set out above, (ii) a manufacturing
site for the product has not obtained a manufacturing license to manufacture the relevant type of Designated
Product, or has not undertaken a registration to manufacture the relevant type of medical devices, as the case may
be, as set out above, (iii) as a result of a review of, among other things, the trade name, ingredients, quantities,
manufacturing method, dosage and administration, method of use, indications, performance, side effects and
other characteristics (in the case of regenerative medical products, cellular components and introduced genes will
also be subject to review), (a) the relevant Designated Product are not recognized to have the indications or
performance specified in the application, (b) the relevant Designated Product are found to have no value as drugs,
quasi-drugs, medical devices or regenerative medical products since they have harmful side effects outweighing
their indications or performance, or (c) the relevant Designated Product fall under the cases prescribed by the
ministerial ordinances of the MHLW as not being appropriate as the relevant category of Designated Product or
(iv) the methods of manufacturing control or quality control used in the manufacturing site for the relevant
Designated Product, is not in conformity with Good Manufacturing Practices, QMS and the Good Gene, Cellular,
and Tissue-based Products Manufacturing Practice stipulated by the ministerial ordinances of the MHLW.
The data of results of clinical trials and other pertinent data must be attached for an application for
approval. If the drugs, medical devices or regenerative medical products under application are of types
designated by ministerial ordinance of the MHLW, the attached data mentioned above must be obtained in
compliance with the standards established by the Minister, such as the Good Laboratory Practice (“GLP”) and
the Good Clinical Practice (“GCP”) stipulated by the ministerial ordinances of the MHLW. GLP is the standard
for non-clinical safety studies on drugs, medical devices and regenerative medical products which provide the
standards for personnel and organization for the tests, testing facilities and equipment, operation of testing, as
well as for handling of certain substances/materials. GCP is the standard for clinical studies on drugs, medical
devices and regenerative medical products for preparing, management and conducting of clinical trials. An
application for the approval must be made through the PMDA, an independent administrative agency, which
actually implements an approval review as set out above.
Any manufacturing and marketing license holder that obtained product approval for manufacturing and
marketing of a new kind of drug or regenerative medical product as described above must have that drug or
regenerative medical product re-examined by the Minister or the PMDA after a period ranging from four to ten
years (depending on each type of product) from the date of the product approval if the drug or regenerative
medical product
is a new kind of product designated by the Minister. The re-examination is made by
reconfirming whether the drug or regenerative product falls under any of the conditions for denying product
approval which are described in (iii) above. Results of usage and other pertinent data must be attached for an
application for a re-examination. In addition, if the product in question is a type of drug or regenerative medical
product designated by ministerial ordinance of the MHLW, the attached data mentioned above must be obtained
49
pursuant to GLP, GCP and standards known as Good Post-marketing Study Practice. The manufacturing and
marketing license holder that obtained the product approval is also required to investigate, among other things,
the results of usage and to periodically report to the Minister pursuant to the Pharmaceutical Act and the
ministerial ordinances of the MHLW.
In addition, drug and regenerative medical product will be subject to re-evaluation by the Minister if the
Minister so designates in consultation with the Pharmaceutical Affairs and Food Sanitation Council and releases
a public notice about the re-evaluation. In that event, the re-evaluation is made by reconfirming whether the drug
or regenerative medical product falls under any of the conditions for denying product approval in the same way
as the re-examination described above.
If any manufacturer and seller that obtained a manufacturing and marketing license as mentioned above
becomes aware of an alleged serious side effect or infection from its products of a type prescribed by ministerial
ordinance of the MHLW, the manufacturing and marketing license holder must report to the Minister in
accordance with the ministerial ordinance of the MHLW generally within 15 or 30 days depending on the
seriousness of the side effect or infection. In addition, generally, under the GVP, any manufacturer and seller
who obtained a manufacturing and marketing license as mentioned above must intensively examine the post-
marketing safety of the products for a six-month period from their release in order to promptly detect any
harmful side effect or infection.
The Pharmaceutical Act also provides for special regulations applicable to drugs, quasi-drugs, cosmetics
and medical devices made of biological raw materials. These regulations impose various obligations on
manufacturers and other persons in relation to manufacturing facilities, explanation to patients, labeling on
products, record-keeping and reporting to the Minister.
Furthermore, under the Pharmaceutical Act, the Minister or a prefectural governor may take various
measures to supervise manufacturing and marketing license holders of Designated Products. For example, the
Minister or a prefectural governor may require manufacturing and marketing license holders of Designated
Products to submit reports, and carry out inspections at their offices, if deemed necessary to monitor their
compliance with the laws and regulations. The Minister has authority to order manufacturing and marketing
license holders to temporarily suspend the marketing, leasing or providing of the Designated Products in order to
prevent risks, or increases in risks, to the public health. Also, the Minister may revoke a license or approval
granted to a manufacturing and marketing license holders, or order a temporary business suspension under
certain limited circumstances such as violation of laws relating to drugs.
Price Regulation
In Japan, public medical insurance systems cover virtually the entire Japanese population. The public
medical insurance system, however, is not applicable to any pharmaceutical product which is not listed on the
NHI price list published by the Minister. To sell a pharmaceutical product in Japan, a manufacturer or a seller of
pharmaceutical products must first have a new pharmaceutical product listed on the NHI price list for coverage
under the public medical care insurance systems. Most prescription pharmaceutical products are used in medical
services under the public medical insurance systems. The NHI price list provides rates for calculating the costs of
pharmaceutical products used in medical services which may be charged to insurers, such as the national
government, local government and health insurance societies, under the public medical insurance systems.
When a new pharmaceutical product is listed on the NHI price list, the price of the pharmaceutical
product is determined either by daily price comparison of comparable pharmaceutical products with necessary
adjustments for, such as, innovativeness, usefulness or size of the market, or, in the absence of comparable
pharmaceutical products, by the cost calculation method, after consideration of the opinion of the manufacturer.
Prices on the NHI price list are subject to revision, generally once every two years, on the basis of the actual
prices at which the pharmaceutical products are purchased by medical institutions. To date, various methods,
including a formula intended to accurately reflect the actual market prices, have been used.
50
In December 2016, the Japanese government announced basic reform principles for fundamental
reforms of the drug pricing system, including an increase in the frequency of price revisions from every other
year to annually. Annual price revisions are scheduled to become applicable from the fiscal year ending
March 31, 2022.
In addition to the foregoing, we are subject to other laws and regulations in Japan applicable to
pharmaceutical companies, including with respect to the possession and handling of regulated pharmaceutical
substances.
Regulations in the EU
In the EU, there are three main procedures for application for authorization to market pharmaceutical
products in the EU Member States: the Centralized Procedure, the Mutual Recognition Procedure and the
Decentralized Procedure. It is also possible to obtain a pure national authorization for products intended for
commercialization in a single EU Member State only, or for additional indications for licensed products.
Under the Centralized Procedure, applications are made to the EMA for an authorization which is valid
throughout the EU. The Centralized Procedure is mandatory for all biotechnology products and for new chemical
entities in cancer, neurodegenerative disorders, diabetes and AIDS, autoimmune diseases or other immune
dysfunctions and optional for other new chemical entities or innovative medicinal products or in the interest of
public health. When a pharmaceutical company has gathered data which it believes sufficiently demonstrates a
drug’s safety, efficacy and quality, then the company may submit an application to the EMA. The EMA then
receives and validates the application and the Committee for Medicinal Products for Human Use (the “CHMP”)
appoints a Rapporteur and Co-Rapporteur to lead review of the dossier. The entire review cycle must be
completed within 210 days, although there is a “clock stop” at day 120, which allows the company to respond to
questions set forth in the Rapporteur and Co-Rapporteur’s Assessment Report. After the company’s complete
response is submitted to the EMA, the clock restarts on day 121. If there are further aspects of the dossier
requiring clarification, the EMA will then request an Oral Explanation on day 180, in which case the sponsor
must appear before the CHMP to provide the requested additional information. On day 210, the CHMP will then
take a vote to recommend the approval or non-approval of the application. The final decision under this
Centralized Procedure is a European Community decision which is binding in its entirety on all EU Member
States. This decision occurs on average 60 days after a positive CHMP recommendation. In the case of a negative
opinion, a written request for re-examination of the opinion can be made by the applicant within a time limit of
15 days from the date of the opinion. The detailed grounds for re-examination must be submitted to the EMA
within 60 days from the date of the opinion.
Under the Mutual Recognition Procedure (the “MRP”),
the company first obtains a marketing
authorization from a single EU Member State, called the Reference Member State (the “RMS”), which will act
for the marketing authorization holder to progressively gain national approval in the other EU Member States on
the basis of the RMS’s assessment. In the Decentralized Procedure (the “DCP”), the application is done
simultaneously in selected or all Member States if a medicinal product has not yet been authorized in a Member
State. During the DCP, the RMS drafts a Preliminary Assessment Report within 70 days, which is sent to the
Concerned Member States (the “CMS”) for comments by day 100. On day 105, if no consensus is reached on
approval, there is a “clock stop.” The clock is restarted on day 106 after the applicant’s responses are received by
the RMS and CMSs. Between day 106 and day 120, the RMS updates the preliminary assessment report for
consideration by CMSs. If consensus is reached on day 120, then the procedure is closed. This will then proceed
to the 30 days national procedure for implementing the decision if the product is considered approvable.
Otherwise, the procedure will continue until day 210 or until consensus is reached. If consensus is not reached on
day 210, the matter is referred to the Co-ordination Group for Mutual Recognition and Decentralized Procedures
– Human and eventually to the CHMP for arbitration.
After the Marketing Authorizations have been granted, the company must submit periodic safety reports
to the EMA, if approval was granted under the Centralized Procedure, or to the National Health Authorities, if
approval was granted under the DCP or the MRP. In addition, several pharmacovigilance measures must be
51
implemented and monitored including Adverse Event collection, evaluation and expedited reporting and
implementation, as well as update Risk Management Plans. For some medications, post approval studies
(Phase IV) may be required to complement available data with additional data to evaluate long term effects
(called a Post Approval Safety Study) or to gather additional efficacy data (called a Post Approval Efficacy
Study).
European Marketing Authorizations have an initial duration of five years. After this first five year
period, the holder of the marketing authorization must apply for its renewal, which may be granted based on the
competent authority’s full benefit-risk review of the product. Once renewed, the marketing authorization is
generally valid for an unlimited period. Any Marketing Authorization which is not followed within three years of
its granting by the actual placing on the market in any EU member state of the corresponding medicinal product
ceases to be valid.
In addition, our operations are subject to significant price and marketing regulations. Many governments
in the EU are introducing healthcare reforms in an attempt to curb increasing healthcare costs. The governments
in the EU influence the price of pharmaceutical products through their control of national healthcare systems that
fund a large part of the cost of such products to patients. The general downward pressure on healthcare costs,
particularly with regard to prescription drugs, has been increasing. In addition, prices for marketed products are
referenced within and amongst the EU Member States, which further affect pricing in each EU Member State. As
an additional control for healthcare budgets, some EU Member States have passed legislation to impose further
mandatory rebates for pharmaceutical products and financial claw-backs on the pharmaceutical industry. The
impact of these rebates and claw-backs on pricing of pharmaceutical products can be difficult to predict.
Others
Many other countries around the world are also taking steps to control prescription drug prices. For
example, in 2017, China organized national price negotiations for certain products directly linked to national
drug reimbursement, which will apply nationwide both in public and military hospitals, with drug price
reductions of more than 60% in some cases. Drug prices in China may further decline due to a stated national
policy of reducing healthcare costs, including continued strategic initiatives specifically designed to reduce drug
prices. Canada has proposed amendments to its Patented Medicines Regulations in 2017 that could reduce prices
for specialty medicines, such as biologics and medicines for rare diseases, by as much as 30% to 40%.
52
C.
Organizational Structure.
The following table lists the Company’s consolidated subsidiaries (including those organized as
partnerships) as of March 31, 2018 and their respective countries of incorporation.
Name
Country
Ownership
Interest
Italy
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Takeda Pharmaceuticals International, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States
Takeda Pharmaceuticals U.S.A., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States
Millennium Pharmaceuticals, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States
ARIAD Pharmaceuticals, Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States
Takeda California, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States
Takeda Vaccines, Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States
Takeda Development Center Americas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States
Takeda Ventures, Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States
Takeda Europe Holdings B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
Takeda A/S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Denmark
Takeda Pharmaceuticals International AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Switzerland
Takeda GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
Takeda Pharma Vertrieb GmbH & Co.KG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
Takeda Italia S.p.A.
Takeda Austria GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Austria
Takeda Pharma Ges.m.b.H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Austria
Takeda France S.A.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
Takeda Pharma A/S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Denmark
Takeda AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Norway
Takeda Belgium SCA/CVA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Belgium
Takeda UK Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.
Takeda Oy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finland
Takeda Pharma AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Switzerland
Takeda Farmaceutica Espana S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spain
Takeda Nederland B.V.
Takeda Pharma AB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sweden
Takeda Pharma Sp.z o.o.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Poland
Takeda Hellas S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Greece
Ireland
Takeda Ireland Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Takeda Development Centre Europe Ltd.
Takeda Canada Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada
Takeda Pharmaceuticals Limited Liability Company . . . . . . . . . . . . . . . . . . . . . . . . . Russia
Takeda Yaroslavl Limited Liability Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Russia
Takeda Ukraine LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ukraine
Takeda Kazakhstan LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kazakhstan
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil
Takeda Distribuidora Ltda.
. . . . . . . . . . . . . . Brazil
Multilab Indústria e Comércio de Produtos Farmacêuticos Ltda.(1)
Takeda Pharma Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil
Takeda Mexico S.A. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico
Takeda Pharma, S.A.
Takeda (China) Holdings Co., Ltd.
Takeda Pharmaceuticals (Asia Pacific) Pte. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Singapore
Guangdong Techpool Bio-Pharma Co., Ltd(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
Takeda Pharmaceutical (China) Company Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . China
Tianjin Takeda Pharmaceuticals Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
Takeda Pharmaceuticals Korea Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Korea
Takeda (Thailand), Ltd.(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thailand
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Argentina
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.
53
(%)
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
51.3
100.0
100.0
100.0
52.0
Name
Country
Ownership
Interest
Takeda Pharmaceuticals Taiwan, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taiwan
P.T. Takeda Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Takeda Healthcare Philippines, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Philippines
Takeda Development Center Asia, Pte. Ltd.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Singapore
Takeda Vaccines Pte. Ltd.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Singapore
Takeda (Pty.) Ltd.
Takeda Pharmaceuticals Australia Pty. Ltd.
Takeda I˙laç Sag˘lık Sanayi Ticaret Limited S¸ irketi
Takeda Consumer Healthcare Company Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nihon Pharmaceutical Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Takeda Healthcare Products Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Axcelead Drug Discovery Partners, Inc.(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71 additional immaterial subsidiaries
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . South Africa
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia
. . . . . . . . . . . . . . . . . . . . . . . . . . . Turkey
Japan
Japan
Japan
Japan
Indonesia
(%)
100.0
70.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
87.3
100.0
100.0
Notes:
(1)
(2)
(3)
In July 2018, we sold and divested all our shares and assets in Multilab Indústria e Comércio de Produtos
Farmacêuticos Ltda. to Novamed Fabricação de Produtos Farmacêuticos Ltda.
In August 2018, we sold and divested all our shares and assets in Guangdong Techpool Bio-Pharma
Co., Ltd. to Shanghai Pharmaceutical Holding Co. Ltd., pursuant to the agreement we signed in May 2018.
In April 2018, we purchased additional shares of Takeda (Thailand), Ltd. and we own 100.0% of its
ownership interests as of September 30, 2018.
In August 2018, we entered into an agreement with Whiz Partners, Inc. to create a joint investment fund,
Drug Discovery Gateway Investment Limited Partnership, for which we will make an in-kind investment of
Axcelead Drug Discovery Partners Inc. After we make such in-kind investment, Axcelead Drug Discovery
Partners Inc. will no longer be our wholly-owned subsidiary.
(5) We completed the acquisition of TiGenix NV on July 31, 2018.
(4)
D.
Property, Plants and Equipment.
Our head offices are located in Osaka, Japan and Tokyo, Japan. We generally own our facilities, or have
entered into long-term lease arrangements for them.
As of March 31, 2018, the net book values of the buildings and structures, land, machinery and vehicles
and tools, furniture and fixtures we owned were ¥293.6 billion, ¥69.7 billion, ¥99.0 billion and ¥19.6 billion,
respectively. We own the substantial majority of our facilities, none of which are subject to any material
encumbrances. The following table describes our major facilities as of March 31, 2018:
Group Company
Name of facility (location)
Type of facility
Takeda Pharmaceutical Company Limited . . . . . Head Office (Chuo-ku,
Administrative and sales
Osaka and other)
Takeda Pharmaceutical Company Limited . . . . . Global Head Office
Administrative and sales
Takeda Pharmaceutical Company Limited . . . . . Osaka Plant (Yodogawa-ku,
(Chuo-ku, Tokyo)
Takeda Pharmaceutical Company Limited . . . . . Hikari Plant (Hikari,
Yamaguchi)
Takeda Pharmaceutical Company Limited . . . . . Shonan Research Center
(Fujisawa, Kanagawa)
Osaka)
Manufacturing, Research and
Development
Manufacturing, Research and
Development
Research
Takeda Real Estate Co, Ltd.
. . . . . . . . . . . . . . . . Takeda Midosuji Building
Lease facilities
Nihon Pharmaceutical Co. Ltd. . . . . . . . . . . . . . . Osaka Plant and other
and others (Chuo-ku, Osaka)
(Izumisano, Osaka)
54
Manufacturing, Research and
Development
Group Company
Name of facility (location)
Type of facility
Takeda Healthcare Products Co., Ltd. . . . . . . . . . Head Office Plant
Manufacturing
(Fukuchiyama, Kyoto)
Millennium Pharmaceuticals, Inc. . . . . . . . . . . . . Head Office Plant and other
Research and Development
properties (Cambridge,
Massachusetts, U.S.)
Takeda Ireland Limited . . . . . . . . . . . . . . . . . . . . Head Office Plant and other
Manufacturing
properties (Kilruddery and
Dublin, Ireland)
Takeda Pharmaceuticals U.S.A., Inc.
. . . . . . . . . Head Office (Deerfield,
Administrative and sales
Illinois, U.S.)
Environmental Matters
We are subject to laws and regulations concerning the environment, safety matters, regulation of
chemicals and product safety in the countries where we manufacture and sell our products or otherwise operate
our business. These requirements include regulation of the handling, manufacture, transportation, use and
disposal of materials, including the discharge of pollutants into the environment. In the normal course of our
business, we are exposed to risks relating to possible releases of hazardous substances into the environment,
which could cause environmental or property damage or personal injuries, and which could require remediation
of contaminated soil and groundwater, in some cases over many years, regardless of whether the contamination
was caused by us, or by previous occupants of the property. See “Item 3. Key Information—D. Risk Factors—
We may incur substantial costs due to our environmental compliance efforts or claims relating to our use,
manufacture, handling, storage or disposal of hazardous materials.”
Glossary of Technical Terminology
By its nature, any description of the pharmaceuticals business requires the use of certain technical
terminology. The following glossary of technical terminology is intended to assist investors in understanding our
business.
Term
Description
Anaplastic lymphoma kinase (ALK) . . . . . . . . . . An enzyme with chromosomal rearrangements that are key
drivers in a subset of NSCLC patients.
Antibody-drug conjugate (ADC) . . . . . . . . . . . . . An important pharmaceutical class of drugs designed as a
targeted therapy for the treatment of cancer.
Ataxia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . An inability to coordinate voluntary muscular movements
that is symptomatic of some disorders of the central nervous
system.
Chronic myeloid leukemia . . . . . . . . . . . . . . . . . . A form of leukemia affecting predominantly blood-forming
cells (called myeloid cells) in the bone marrow and leading
to the accumulation of these leukemia cells in the blood.
Crohn’s disease . . . . . . . . . . . . . . . . . . . . . . . . . . . An
bowel
inflammatory
causes
inflammation of the digestive tract lining, which can lead to
abdominal pain, severe diarrhea, fatigue, weight loss and
malnutrition.
disease
(IBD)
that
Endometriosis . . . . . . . . . . . . . . . . . . . . . . . . . . . . The presence and growth of functioning endometrial tissue
in places other than the uterus that often results in severe
pain and infertility.
55
Term
Description
Epidermal growth factor receptor (EGFR) . . . . . . The protein found on the surface of some cells to which
epidermal growth factor binds, causing the cells to divide. It
is found at abnormally high levels on the surface of many
types of cancer cells, so these cells may divide excessively in
the presence of epidermal growth factors. Also called ErbB1
and HER1.
Epilepsy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Any of various disorders marked by abnormal electrical
discharges in the brain and typically manifested by sudden
brief episodes of altered or diminished consciousness,
involuntary movements, or convulsions.
Gastroenterology (GI) . . . . . . . . . . . . . . . . . . . . . . The branch of medicine concerned with the structure,
the stomach and
functions, diseases, and pathology of
intestines.
Gastroesophageal reflux disease (GERD)
. . . . . . A more serious form of gastroesophageal reflux (GER).
GER occurs when the lower esophageal sphincter opens
spontaneously, for varying periods of time, or does not close
properly, causing stomach contents
rise up into the
esophagus.
Generic drug . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A pharmaceutical
usually
product,
be
interchangeable with an innovator product, which is
manufactured without a license from the innovator company
and marketed after the expiry date or invalidation of the
patent or other exclusive rights.
intended
to
Good Clinical Practice (GCP) . . . . . . . . . . . . . . . . A set of standards for the design, conduct, performance,
monitoring, auditing, recording, analysis and reporting of
clinical
the data and
reported results are credible and accurate, and that the rights,
integrity and confidentiality of trial subjects are protected.
trials that provides assurance that
Good Laboratory Practice (GLP) . . . . . . . . . . . . . A set of rules and criteria that provides a framework within
which laboratory studies are planned, performed, monitored,
recorded, reported and archived.
Hodgkin lymphoma (HL) . . . . . . . . . . . . . . . . . . . Hodgkin’s disease is a type of lymphoma. Lymphoma is
cancer of lymph tissue found in the lymph nodes, spleen,
liver, and bone marrow.
Human monoclonal antibody . . . . . . . . . . . . . . . . An antibody, which is used to identify, quantify, isolate or
remove the target molecule in complex biological mixtures
or in tissues and injected into patients for the treatment of a
cancer,
wide
cardiovascular diseases and autoimmune diseases.
including infections,
range of diseases
Hypertension . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1: Abnormally high arterial blood pressure that is usually
indicated by an adult systolic blood pressure of 140 mm Hg
or greater or a diastolic blood pressure of 90 mm Hg or
greater
is chiefly of unknown cause but may be
attributable to a preexisting condition (such as a renal or
endocrine disorder), that typically results in a thickening and
inelasticity of arterial walls and hypertrophy of the left heart
that
56
Term
Description
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ventricle and that is a risk factor for various pathological
conditions or events (such as heart attack, heart failure,
stroke, end-stage renal disease or retinal hemorrhage).
2: A systemic condition resulting from hypertension that is
either
is accompanied especially by
dizziness, palpitations, fainting, or headache.
symptomless or
Indication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A symptom or particular circumstance that
justifies a
specific medical treatment or procedure.
Lead compound . . . . . . . . . . . . . . . . . . . . . . . . . . . A chemical
compound that has pharmacological or
biological activity and whose chemical structure is used as a
starting point for chemical modifications in order to improve
potency, selectivity, or pharmacokinetic parameters.
LH-RH agonist
. . . . . . . . . . . . . . . . . . . . . . . . . . . A compound that is similar to luteinizing hormone-releasing
hormone (LH-RH) in structure and can act like LH-RH.
Major depressive disorder (MDD) . . . . . . . . . . . . A medical illness that causes a persistent feeling of sadness and
loss of interest. MDD can cause physical symptoms as well.
Multiple myeloma (MM) . . . . . . . . . . . . . . . . . . . A type of cancer affecting plasma cells, a type of white
blood cell that produces antibodies and is located in the bone
marrow, that is characterized by the presence of numerous
myelomas in various bones of the body.
Neuroscience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The study of the central nervous system (i.e., the brain and
the spinal cord) and the therapeutic area relating to disorders
thereof.
Non-small cell lung cancer (NSCLC) . . . . . . . . . . A group of lung cancers excluding small cell lung cancer
that affects various types of lung cells and together constitute
the most common types of lung cancer. The most common
types of NSCLC are adenocarcinoma,
squamous cell
carcinoma and large cell carcinoma.
Oncology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The branch of medicine dealing with the physical, chemical,
and biological properties of tumors and cancers, including
study of
treatment and
prevention.
their development, diagnosis,
Parkinson’s disease . . . . . . . . . . . . . . . . . . . . . . . . A chronic progressive neurological disease chiefly affecting
people in later life that is linked to decreased dopamine
production in the substantia nigra. Parkinson’s disease is of
unknown cause, and is marked especially by tremor of
resting muscles, rigidity, slowness of movement, impaired
balance, and shuffling gait. Also referred to as paralysis
agitans,
parkinsonism or
Parkinson’s syndrome.
parkinsonian
syndrome,
Philadelphia chromosome positive acute
lymphoblastic leukemia . . . . . . . . . . . . . . . . . . A form of leukemia affecting immature white blood cells
called lymphocytes in the bone marrow and characterized by
the presence of the Philadelphia chromosome, which refers
to a specific genetic abnormality in the leukemia cells.
57
Term
Description
Prescription drug . . . . . . . . . . . . . . . . . . . . . . . . . . A drug that is regulated by legislation to require a medical
prescription from a doctor, dentist or other healthcare
professional before it can be obtained.
Proteasome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A protein degradation “machine” within the cell that can
digest a variety of proteins into short polypeptides and amino
acids.
Proteasome inhibitor . . . . . . . . . . . . . . . . . . . . . . . A drug that blocks the action of proteasomes, which are
cellular complexes that break down proteins such as the p53
protein. Proteasome inhibitors are being studied in the
treatment of cancer, especially MM.
Proton pump . . . . . . . . . . . . . . . . . . . . . . . . . . . . . An enzyme that functions in the final stages of acid secretion
in gastric parietal cells.
Proton pump inhibitor . . . . . . . . . . . . . . . . . . . . . . A drug whose main action is to reduce the production of acid
by the stomach and works to help symptoms of GERD.
Quasi-drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A category of products found in the Pharmaceutical Act.
Quasi-drugs are products that have a mild effect on the
human body, used to treat conditions such as the following:
nausea, halitosis (bad breath), body odor, heat rash, skin
inflammation, hair loss and unwanted hair growth. Quasi-
drugs also include certain health drinks that contain vitamins
and/or calcium and digestive or gastric remedies.
Relapsed mantle cell lymphoma . . . . . . . . . . . . . . A late form of non-HL, which is a cancer of the white blood
cells.
Schizophrenia . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schizophrenia is a severe, lifelong brain disorder. Persons
suffering from schizophrenia may hear voices, experience
reading or
hallucinations or believe
controlling their minds.
that others
are
Substance patent . . . . . . . . . . . . . . . . . . . . . . . . . . The patent covering a drug’s active ingredient.
Systemic anaplastic large cell lymphoma
(sALCL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Anaplastic large cell lymphoma (ALCL) is a distinct form of
non-Hodgkin lymphoma. Systemic ALCL is more common
than the cutaneous form and most frequently occurs in the
three decades of life. Clinically, systemic ALCL is
first
characterized by advanced disease at presentation (75% of
pediatric ALCL) with a high incidence of nodal involvement
(>90%), frequent association with B symptoms (75%), and
frequent extra-nodal involvement including skin (25%), lung
(10%), bone (17%) and liver (8%).
Ulcerative colitis . . . . . . . . . . . . . . . . . . . . . . . . . . A form of inflammatory bowel disease (IBD). Ulcerative
colitis is a form of colitis, a disease of the intestine,
specifically the large intestine or colon, which causes ulcers,
or open sores, in the colon. The main symptom of active
disease is usually constant diarrhea mixed with blood, of
gradual onset. Ulcerative colitis has similarities to Crohn’s
disease, another form of IBD.
58
Appendix: Business of Shire
Shire and its subsidiaries is the leading global biotechnology company focused on serving people with
rare diseases and other highly specialized conditions. Shire has grown both organically and through acquisition,
completing a series of major transactions that have brought therapeutic, geographic and pipeline growth and
diversification.
Currently marketed products
The table below lists Shire’s main marketed products as of September 30, 2018, indicating the disease
area and the key territories in which Shire markets the product.
Products
Hematology
ADVATE (Antihemophilic Factor
Disease area
Key territories
(Recombinant)) . . . . . . . . . . . . . . . . . . . . . . . . . . . Hemophilia A
ADYNOVATE/ADYNOVI (Antihemophilic Factor
(Recombinant), PEGylated)
RIXUBIS (Coagulation Factor IX
. . . . . . . . . . . . . . . . . Hemophilia A
(Recombinant)) . . . . . . . . . . . . . . . . . . . . . . . . . . . Hemophilia B
VONVENDI/VEYVONDI (von Willebrand Factor
Global
U.S., Europe, Canada and
Japan
U.S., Japan, Europe,
Australia and Canada
(Recombinant)) . . . . . . . . . . . . . . . . . . . . . . . . . . . Von Willebrand Disease
FEIBA (Anti-Inhibitor Coagulant Complex) . . . . . . Hemophilia A and B
U.S. and EU
Global
OBIZUR (Factor VIII)
. . . . . . . . . . . . . . . . . . . . . . . Hemophilia A
MyPKFiT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hemophilia A
patients with inhibitors
Global
U.S. (amendment
to Drug
BLA) and EU (CE marked
Class I medical device)
Genetic Diseases
ELAPRASE (idursulfase) . . . . . . . . . . . . . . . . . . . . . Hunter Syndrome
Global(1)
(Mucopolysaccharidosis
Type II, MPS II)
REPLAGAL (agalsidase alfa) . . . . . . . . . . . . . . . . . . Fabry Disease
VPRIV (velaglucerase alfa)
. . . . . . . . . . . . . . . . . . . Gaucher disease, Type I
Neuroscience
VYVANSE/VENVANSE/ELVANSE/TYVENSE/
VUXEN/ ADUVANZ (lisdexamfetamine
dimesylate)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attention Deficit
Europe, Latin America and
Asia Pacific(2)
Global
Hyperactivity Disorder
(“ADHD”) and binge eating
disorder (“BED”)
ADHD only
U.S., Canada,
Europe and Brazil(3)
ADDERALL XR (mixed salts of a single-entity
amphetamine) . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADHD
U.S. and Canada
MYDAYIS (mixed salts of a single-entity
amphetamine) . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADHD
U.S.
Immunology
GAMMAGARD LIQUID/KIOVIG (Immune
globulin intravenous (Human)) . . . . . . . . . . . . . . . Primary immunodeficiency Global(4)
GAMMAGARD S/D (Immune globulin intravenous
(Human)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Primary immunodeficiency
U.S., Europe, Canada and
Japan
59
Products
Disease area
Key territories
HYQVIA (Immune Globulin Infusion 10%
(Human) with Recombinant Human
Hyaluronidase)
. . . . . . . . . . . . . . . . . . . . . . . . . . . Primary immunodeficiency
U.S., Europe, Canada and
Australia
CUVITRU (Immune Globulin Subcutaneous
(Human)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Primary immunodeficiency U.S., Europe and Canada
FLEXBUMIN (Human Albumin) . . . . . . . . . . . . . . . Hypovolemia,
Global
hypoalbuminemia
CINRYZE (C1 esterase inhibitor (human))
. . . . . . . HAE
FIRAZYR (icatibant)
. . . . . . . . . . . . . . . . . . . . . . . . HAE
U.S., Canada, Europe and
Latin America(5)
Global
Internal Medicine
FOSRENOL (lanthanum carbonate) . . . . . . . . . . . . . Hyperphosphatemia in
Global(6), (7), (8)
LIALDA (mesalamine)/MEZAVANT
(mesalamine) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ulcerative Colitis
CKD-5D
PENTASA (mesalamine)
GATTEX/REVESTIVE (teduglutide (rDNA
. . . . . . . . . . . . . . . . . . . . . Ulcerative Colitis
origin)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short Bowel Syndrome
(SBS)
U.S., Canada, Europe and
Japan(8), (9), (10)
U.S.
U.S., Europe, Canada and
Australia(11)
NATPAR/A (parathyroid hormone) . . . . . . . . . . . . . Control of hypocalcemia in
Global(12)
Ophthalmic
patients with
hypoparathyroidism
XIIDRA (lifitegrast ophthalmic solution) 5% . . . . . . Dry eye disease
Global
Notes:
(1) Marketed by Genzyme in Asia Pacific, Japan and South Africa under license.
(2) Marketed in Japan under license by Sumitomo Dainippon Pharma Co., Ltd., and distributed in Taiwan by
Excelsior Company Ltd.
(3) Marketed in Brazil as VENVANSE and in the EU as ELVANSE or TYVANSE.
(4) Marketed in the U.S. as GAMMAGARD LIQUID and in the EU as KIOVIG.
(5) Shire owns European rights, except in Belgium, Finland, Luxembourg and the Netherlands, which are
owned by Sanquin.
(6) Marketed in Japan by Bayer under license.
(7) Depending on the market, available as chewable tablet and/or oral powder.
(8) Marketed by distributors in certain other markets.
(9) Marketed in Japan by Mochida under license.
(10) Marketed in the U.S. as LIALDA and in Europe as MEZAVANT XL or MEZAVANT.
(11) Marketed in the U.S. as GATTEX and in Europe and Canada as REVESTIVE.
(12) Global rights, with the exception of Israel.
In hematology, Shire’s principal products include:
•
ADVATE (Antihemophilic Factor (Recombinant)), a recombinant Factor VIII (rFVIII) therapy.
ADVATE is a recombinant antihemophilic factor indicated for use in adults and children with
hemophilia A (congenital Factor VIII deficiency) for control and prevention of bleeding episodes,
perioperative management and routine prophylaxis to prevent or reduce the frequency of bleeding
episodes. It was approved in the U.S. in 2003 and the EU in 2004. As of September 30, 2018, it was
approved in 70 countries worldwide.
60
•
•
•
•
ADYNOVATE/ADYNOVI, an extended halflife rFVIII treatment for hemophilia A based on
ADVATE. ADYNOVATE/ADYNOVI uses the same manufacturing process as ADVATE and adds
a proven technology, PEGylation (a chemical process that prolongs the amount of time a compound
remains in circulation, potentially allowing for fewer injections), which Shire has exclusively
licensed from Nektar Therapeutics. ADYNOVATE was approved in the U.S. in November 2015
and in Japan in March 2016. It was approved under the name ADYNOVI in the EU in January 2018
and in Switzerland in September 2016.
RIXUBIS (Coagulation Factor IX (Recombinant)) was launched in the U.S. in 2013 for the
treatment of hemophilia B. RIXUBIS is an injectable medicine used to replace clotting Factor IX
that is missing in people with hemophilia B. RIXUBIS was approved in the EU in December 2014
and Japan in December 2014. As of September 30, 2018, RIXUBIS was approved in 46 countries.
FEIBA (Activated Prothrombin Complex Concentrate—aPCC), a plasma based inhibitor bypass
therapy. Currently, FEIBA is the only agent indicated for use in all three settings; on demand,
prophylaxis and surgery. FEIBA can be used in both hemophilia A and hemophilia B patients with
inhibitors for control of spontaneous bleeding episodes, to cover surgical interventions and routine
prophylaxis to prevent or reduce the frequency of bleeding episodes. FEIBA was first approved in
the U.S. in 1986, and as of September 30, 2018 was approved in 74 countries. In a number of
markets (not the U.S.), FEIBA is also approved for acquired hemophilia.
VONVENDI/VEYVONDI, a recombinant von Willebrand factor (VWF) used to replace the VWF
the body is missing in von Willebrand disease. VONVENDI is a first in class recombinant factor
and was approved by the FDA in December 2015, for on-demand treatment and control of bleeding
episodes in adults 18 years and above with VWD. VONVENDI/VEYVONDI can also be given
independent of recombinant Factor VIII (rFVIII), based on patient need. This attribute allows for
tailored treatment for patients who may not require additional FVIII. VONVENDI/VEYVONDI
was approved in the EU in August 2018.
• myPKFiT is Shire’s latest development in the personalization of hemophilia care, building on
Shire’s strong commitment to continued innovation in hematology. Patients have complex needs
and treatment goals that cannot be met with a one-size-fits-all approach. myPKFiT offers a
personalized approach to hemophilia care that allows healthcare professionals to consider their
patients’ individual needs and to educate them on their personal pharmacokinetic (PK) profiles.
Healthcare professionals can estimate a full PK curve with as few as two measurable blood
samples, compared to 9 to 11 as recommended by international guidelines. Using the patient’s
individualized PK curve and additional patient information, healthcare professionals can develop a
personalized, PK-guided prophylactic ADVATE or ADYNOVATE treatment regimen tailored to
the individual patient’s needs and treatment plan. The myPKFiT software is accompanied by a
track their
mobile application for patients that allows users to view estimated FVIII levels,
treatment, and export data. myPKFiT is only approved in the U.S. for use with ADVATE.
In genetic diseases, Shire’s principal products include:
•
•
REPLAGAL, an enzyme replacement marketed for the treatment of Fabry disease outside of the
U.S. Fabry disease is a rare, inherited genetic disorder resulting from a deficiency in the activity of
the lysosomal enzyme alpha-galactosidase A, which is involved in the breakdown of fats.
REPLAGAL is a fully human alpha-galactosidase A protein made in a human cell line which is
designed to replace the deficient alpha-galactosidase A with an active enzyme to ameliorate certain
clinical manifestations of Fabry disease. In August 2001, REPLAGAL was granted marketing
authorization in the EU. As of September 30, 2018, REPLAGAL was approved in 61 countries,
excluding the U.S.
VPRIV, an enzyme replacement treatment for type 1 Gaucher disease. Gaucher disease is a rare,
the lysosomal enzyme beta-
inherited genetic disorder which results in a deficiency of
61
glucocerebrosidase. VPRIV was approved by the FDA in February 2010, for long term enzyme
replacement therapy for patients with type 1 Gaucher disease. The EMA approved the marketing
authorization for the use of VPRIV in August 2010. VPRIV has been granted orphan drug status in
the EU with up to 12 years of market exclusivity from August 2010. As of September 30, 2018,
VPRIV was approved in 54 countries.
•
for Hunter
ELAPRASE, an enzyme replacement
syndrome (also known as
treatment
Mucopolysaccharidosis Type II or MPS II). Hunter syndrome is a rare, inherited genetic disorder,
mainly affecting males that interferes with the body’s ability to break down and recycle waste
substances. ELAPRASE was approved by the FDA in July 2006 and granted marketing
authorization by the EMA in January 2007 for the long term treatment of patients with Hunter
syndrome. ELAPRASE benefits from the 12 years of data exclusivity from the date of grant of
registration given to innovator biologics in the U.S. under the ACA. ELAPRASE received approval
from the MHLW in October 2007. As part of an agreement with Genzyme, Genzyme manages the
sales and distribution of ELAPRASE in Japan as well as certain other countries in the Asia Pacific
region. As of September 30, 2018, ELAPRASE was approved in 71 countries.
In neuroscience, Shire’s principal products include:
•
•
VYVANSE, a stimulant for the treatment of ADHD, where the amino acid l-lysine is linked to
d-amphetamine. VYVANSE is therapeutically inactive until metabolized in the body. The FDA
approved VYVANSE as a once-daily treatment for children aged 6 to 12 with ADHD in February
2007, for adults in April 2008 and for adolescents aged 13 to 17 in November 2010. In addition,
VYVANSE became the first drug in its class to be approved by the FDA for maintenance treatment,
having been approved both as a maintenance treatment in adults with ADHD in January 2012, and
for maintenance treatment in pediatrics and adolescents aged 6 to 17 in April 2013. VYVANSE is
available in the U.S. in seven dosage strengths and in two different formulations capsules and
chewable. The product is approved and marketed in selected European countries, Australia, Canada
and Latin America under a variety of
trade names VYVANSE/VENVANSE/ELVANSE/
TYVENSE/VUXEN/ADUVANZ. VYVANSE was also approved in the U.S. in January 2015 as the
first and only treatment of moderate to severe BED in adults. VYVANSE was approved for the
treatment of BED in Canada on September 30, 2018.
ADDERALL XR, an extended release treatment for ADHD designed to provide once-daily dosing.
The FDA approved ADDERALL XR as a once-daily treatment for children aged 6 to 12 with
ADHD in October 2001, for adults in August 2004 and for adolescents aged 13 to 17 in July 2005.
• MYDAYIS (mixed salts of a single-entity amphetamine product), a once-daily, extended-release
treatment composed of three types of drug-releasing beads now available for prescription in the
United States. The FDA approved MYDAYIS on June 20, 2017 for patients 13 years and older with
ADHD. MYDAYIS is not for use in children 12 years and younger.
In immunology, Shire’s principal products include:
•
GAMMAGARD LIQUID (Immune Globulin Intravenous (Human) 10%), a liquid formulation of
the antibodyreplacement therapy immunoglobulin product. It was originally approved by the FDA
in April 2005. GAMMAGARD LIQUID is used to treat adult and pediatric patients two years of
age or older with primary immunodeficiencies
(“PID”) and can be administered either
intravenously or subcutaneously. GAMMAGARD LIQUID is also used to treat adult patients with
multifocal motor neuropathy (MMN) administered intravenously. It can be administered either
intravenously or subcutaneously. KIOVIG is the brand name used for GAMMAGARD LIQUID in
many countries outside of the U.S. KIOVIG is approved in Europe for use by patients with PID and
certain secondary immunodeficiencies, and for adults with MMN. As of September 30, 2018,
GAMMAGARD LIQUID/KIOVIG was approved in 72 countries.
62
•
•
•
GAMMAGARD S/D (Immune Globulin Intravenous (Human)) IgA less than 1 μg/mL in a 5%
solution is indicated for the treatment of PID in patients two years old and older. GAMMAGARD
S/D is also indicated for prevention of bacterial infections in hypogammaglobulinemia and/or
recurrent bacterial infections associated with Bcell chronic lymphocytic leukemia (CLL), treatment
of adult patients with chronic idiopathic thrombocytopenic purpura (ITP) to increase platelet count
and to prevent and/or control bleeding, and prevention of coronary artery aneurysms associated
with Kawasaki Syndrome in pediatric patients. GAMMAGARD S/D is provided for patients who
require a low IgA content in their IV treatment (IgA less than 1 μg/mL in a 5% solution).
GAMMAGARD S/D was initially approved in the U.S. in 1994. As of September 30, 2018,
GAMMAGARD S/D was approved in 21 countries.
HYQVIA (Immune Globulin Infusion 10% (Human) with Recombinant Human Hyaluronidase), a
product consisting of human normal immunoglobulin (IG) and recombinant human hyaluronidase
(licensed from Halozyme). The IG provides the therapeutic effect and the recombinant human
hyaluronidase facilitates the dispersion and absorption of the IG administered subcutaneously,
increasing its bioavailability. The IG is a 10% solution that is prepared from human plasma
consisting of at least 98% immunoglobulin G, which contains a broad spectrum of antibodies.
HYQVIA is the only subcutaneous IG treatment for PID patients with a dosing regimen requiring
only one infusion up to once per month and one injection site per infusion to deliver a full
therapeutic dose of IG. HYQVIA is approved in Europe for use by patients with PID syndromes
and myeloma or CLL with severe secondary hypogammaglobulinemia and recurrent infections, and
in the United States for adults with PID. HYQVIA was approved in Europe in May 2013 and the
U.S. in September 2014. As of September 30, 2018, HYQVIA was approved in 36 countries.
therapy for primary humoral
CUVITRU, an Immune Globulin Subcutaneous (Human) (IGSC) 20% Solution indicated as
replacement
immunodeficiency in adult and pediatric patients
two years of age and older. CUVITRU is also indicated in the EU for the treatment of certain
secondary immunodeficiencies. CUVITRU is the only 20% subcutaneous IG treatment option
without proline and with the ability to infuse up to 60 mL (12 grams) per site and 60 mL per hour,
per site as tolerated, resulting in fewer infusion sites and shorter infusion durations compared to
other conventional subcutaneous IG treatments. CUVITRU was approved in the U.S. in September
2016. As of September 30, 2018, CUVITRU was approved in 21 countries.
In bio therapeutics, Shire’s principal products include:
•
FLEXBUMIN (Human Albumin in a bag) and Human Albumin (glass) are available as 5% and
25% solutions. Both products are indicated for hypovolemia, hypoalbuminemia due to general
causes and burns, and for use during cardiopulmonary bypass surgery as a component of the pump
prime. FLEXBUMIN 25% is also indicated for hypoalbuminemia associated with adult respiratory
distress syndrome and nephrosis, and hemolytic disease of the newborn. FLEXBUMIN was first
approved in the U.S.
in 2005. As of September 30, 2018, FLEXBUMIN was approved in
49 countries.
In Hereditary Angioedema (HAE), Shire’s principal products include:
•
TAKHZYRO (SHP643), a fully human monoclonal antibody that specifically binds and decreases
plasma kallikrein. TAKHZYRO is the only monoclonal antibody (mAb) that provides targeted
inhibition of plasma kallikrein, an enzyme which is chronically uncontrolled in people with
hereditary angioedema (HAE), to help prevent attacks. Shire added TAKHZYRO to its HAE
portfolio with the acquisition of Dyax Corp., which was completed in January 2016. On August 23,
2018, the FDA approved TAKHZYRO injection for prophylaxis to prevent attacks of HAE in
patients 12 years of age and older. On November 30, 2018, the European Commission granted
marketing authorization for TAKHZYRO for the prevention of HAE attacks.
63
•
•
CINRYZE (C1 esterase inhibitor (human)), a C1 esterase inhibitor therapy for routine prophylaxis
against HAE attacks. CINRYZE is marketed and sold in the U.S. for routine prophylaxis against
HAE attacks in adolescent and adult patients with HAE. CINRYZE enjoys U.S. biological data
exclusivity until October 2020. CINRYZE includes a self-administration option for appropriately
trained patients. In June 2011, marketing authorization in the EU was granted for CINRYZE in
adults and adolescents with HAE for routine prevention, pre-procedure prevention and acute
treatment of angioedema attacks. In March 2017, the European Commission approved a label
extension for routine prevention of angioedema attacks in children (ages six years and above) with
severe and recurrent attacks of HAE who are intolerant to or insufficiently protected by oral
preventions treatments, or patients who are inadequately managed with repeated acute treatment.
The EC also approved CINRYZE for the treatment and pre-procedure prevention of angioedema
attacks in children (ages two years and above) with HAE. As of September 30, 2018, CINRYZE
was approved in 36 countries.
FIRAZYR (icatibant injection), a bradykinin B2 receptor antagonist developed for the treatment of
acute attacks of HAE. In July 2008, the EC granted marketing authorization throughout the EU for
the use of FIRAZYR for the symptomatic treatment of acute attacks of HAE in adults, and in March
2011 approved FIRAZYR for self-administration after training in subcutaneous injection technique
by a healthcare professional. In August 2011, the FDA granted marketing approval for FIRAZYR
in the U.S. for treatment of acute attacks of HAE in adults aged 18 and older and, after injection
training, patients may self-administer FIRAZYR. FIRAZYR has been granted orphan drug
exclusivity by both the FDA and the EMA, providing it with up to seven and ten years market
exclusivity in the U.S. and EU, respectively, from the date of the grant of the relevant marketing
authorization. On October 26, 2017, Shire announced that the EC approved a label extension for
FIRAZYR (icatibant injection), broadening its use to adolescents and children aged 2 years and
older, with HAE caused by C1-esterase-inhibitor (C1-INH) deficiency. As of September 30, 2018,
FIRAZYR was approved in 46 countries.
In internal medicine, Shire’s principal products include:
•
•
•
GATTEX/REVESTIVE (teduglutide rDNA origin) for injection is the first prescription medicine
for the long-term treatment of adults with SBS who are dependent on parenteral support. SBS is an
ultra rare condition in which a large portion of the intestine has been removed by surgery. As a
result, people cannot absorb enough nutrients or fluids from food and liquids to maintain good
health. GATTEX/REVESTIVE may help the remaining intestine absorb more fluids and reduce the
need for parenteral support. GATTEX was approved by the FDA in December 2012. REVESTIVE
was approved in the EU in August 2012. As of September 30, 2018, GATTEX/REVESTIVE was
approved in the U.S., Canada, EU, Australia, Israel, South Korea and Switzerland.
NATPARA (parathyroid hormone) for injection is indicated as an adjunct to calcium and vitamin D
to control hypocalcemia in patients with hypoparathyroidism (HPT). HPT is a rare condition in
which the parathyroid glands fail to produce sufficient amounts of parathyroid hormone (PTH) or
where the PTH lacks biologic activity. NATPARA was approved by the FDA in January 2015.
NATPARA has been granted orphan drug exclusivity by the FDA. NATPARA also benefits from
the 12 years of data exclusivity from the date of registration given to innovator biologics in the U.S.
under the ACA. NATPAR was granted conditional marketing authorization in Europe by CHMP in
April 2017. As of September 30, 2018, NATPAR/A was approved in the U.S., EU and Israel.
LIALDA/MEZAVANT is approved for the induction of remission in patients with active mild to
moderate UC and for the maintenance of remission of UC. LIALDA is marketed in certain
territories outside the U.S. by Shire under the trade name MEZAVANT and MEZAVANT XL. As
of September 30, 2018, LIALDA/MEZAVANT was approved in 32 countries and made available
either directly or through distributor arrangements. Generic versions of LIALDA are now available
in the U.S.
64
In oncology, Shire’s principal products previously included:
•
•
ONCASPAR is approved in the U.S., Canada and EU as a component of a multi-agent
chemotherapeutic regimen for the first-line treatment of patients with ALL. As of August 31, 2018,
ONCASPAR was approved in 46 countries.
ONIVYDE (pegylated liposomal formulation of irinotecan) is approved in the U.S. and EU in
combination with fluorouracil (5-FU) and leucovorin (LV), for the treatment of patients with
metastatic adenocarcinoma of the pancreas after disease progression following gemcitabine based
therapy. As of August 31, 2018, ONIVYDE was approved in 38 countries.
On August 31, 2018, Shire sold its oncology franchise, including the above products, to Servier for
$2.4 billion. As a result of this transaction, ONCASPAR, ONIVYDE and other oncology-related products
marketed by Shire no longer comprise part of its business.
In ophthalmics, Shire’s principal product is:
•
XIIDRA (Lifitegrast ophthalmic solution 5%), an integrin antagonist
reduces chronic
inflammation associated with dry eye disease. It was approved by the FDA in July 2016 as the first
and only prescription eye drop indicated for the treatment of the signs and symptoms of dry eye
disease. XIIDRA is currently approved and marketed in the U.S. XIIDRA was approved in Canada
in December 2017 and further expansion plans are underway, with filings submitted in international
markets.
that
Shire also receives royalties from the following products:
•
•
•
•
Shire receives royalties arising from collaborations with Amgen. Amgen markets Cinacalcet HCI, a
treatment for secondary hyperparathyroidismas, as Sensipar in the U.S. and as Mimpara in the EU.
Shire is entitled to royalties from the relevant net sales of these in or through 2018 for all other
territories.
Shire receives royalties on antiviral products licensed to GlaxoSmithKline; 3TC for HIV and Zeffix
Hepatitis B virus. Royalty terms expired in most territories outside of the U.S. during 2012. In the
U.S., remaining royalty terms expire in 2018.
Shire licensed the rights to FOSRENOL in Japan to Bayer in December 2003. Bayer launched
FOSRENOL in Japan in March 2009. Shire receives royalties from Bayer’s sales of FOSRENOL in
Japan. Shire has also received milestone payments from Bayer based on the achievement of certain
sales thresholds and may receive further milestone payments in the future if certain sales thresholds
are achieved.
Shire currently receives royalties from the sales of the generic version of ADDERALL XR
(“AXR”) from Impax Laboratories, Inc. and Teva Pharmaceuticals Industries, Ltd. Shire also
receives royalties from Prasco, LLC (Prasco) and Sandoz Inc. from sales of the authorized generic
version of AXR supplied by Shire. Royalty amounts for authorized generic sales are reported as
part of Shire’s net product sales. In 2016, Teva Pharmaceuticals Industries, Ltd. began selling a
generic version of AXR under an ANDA acquired from Allergan plc.
65
The table below lists Shire’s products in clinical development and registration as of September 30, 2018,
by stage of development indicating the most advanced development status reached in major markets and Shire’s
territorial rights in respect of each product candidate. If these product candidates are ultimately approved and
marketed, they may benefit from patent and/or other forms of exclusivity. However, as these product candidates
remain in development and are subject to change as development progresses, the patents listed may not
necessarily be representative of the scope of patent protection that may ultimately be available if each product
candidate is approved and marketed.
Product
SHP489
(VYVANSE) . . . . . . .
Disease area
ADHD in children and
adolescents
SHP606 (XIIDRA) . . . . Dry Eye Disease
. . . . . . . . . . . . . . . . . . . .
SHP643
(TAKHZYRO) . . . . . HAE prophylaxis
SHP555 . . . . . . . . . . . . . Chronic idiopathic
SHP616 (CINRYZE)
constipation in adults
. . Prophylaxis and acute
treatment of angioedema
Development status
as of September 30,
2018
Shire’s
territorial
rights
Modality
Registration in Japan Global(1)
Small Molecule
Registration in EU
Global
Small Molecule
Registration(2)
Global
Antibody
Registration(2)
U.S. and EU Small Molecule
Phase 3 in Japan
Global
SHP616 (CINRYZE)
. . Antibody Mediated Rejection Phase 3
Global
SHP616 (CINRYZE)
. . Subcutaneous formulation for
Phase 3
Global
HAE prophylaxis
SHP620* . . . . . . . . . . . . Treatment of cytomegalovirus
infection in transplant patients
SHP621 . . . . . . . . . . . . . Treatment of adolescents and
Phase 3
Phase 3
SHP633
(REVESTIVE) . . . . .
adults with Eosinophilic
Esophagitis (EoE)
Treatment of adults with SBS Phase 3 in Japan
SHP633 (GATTEX/
REVESTIVE) . . . . . .
Treatment of pediatric patients
with SBS
Phase 3
SHP640* . . . . . . . . . . . . Treatment of infectious
Phase 3
Global(3)
U.S.
Small Molecule
Global
Peptide
Global
Peptide
Global
Small Molecule
SHP647* . . . . . . . . . . . . Ulcerative Colitis
conjunctivitis
SHP647* . . . . . . . . . . . . Crohn’s Disease
SHP609* . . . . . . . . . . . . Neurocognitive Decline
Associated with Hunter
Syndrome
Phase 3
Phase 3
Phase 2/3
Global(4)
Global(4)
Global(5)
SHP655* . . . . . . . . . . . . Congenital Thrombotic
Phase 3
Global(6)
Thrombocytopenic Purpura
Monoclonal
Antibody
Monoclonal
Antibody
Enzyme
Replacement
Therapy
Protein
SHP671 (HYQVIA) . . . Chronic Inflammatory
Phase 3
Global
Antibody
Demyelinating
Polyradiculoneuropathy
(CIDP)
66
Protein
Replacement
Therapy
Protein
Replacement
Therapy
Protein
Replacement
Therapy
Antiviral
Product
Disease area
Development status
as of September 30,
2018
Shire’s
territorial
rights
Modality
SHP671 (HYQVIA) . . . Primary Immunodeficiency in
Phase 3
Global
Antibody
SHP607* . . . . . . . . . . . . Chronic Lung Disease
Phase 2
Global
pediatric patients
SHP615
Convulsive Seizures
Phase 3 in Japan
Global
(BUCCOLAM) . . . . .
Enzyme
Replacement
Therapy
Small Molecule
SHP615
Convulsive Seizures
Phase 2 in U.S.
Global
Small Molecule
(BUCCOLAM) . . . . .
SHP672 (OBIZUR) . . . . Congenital Hemophilia A with
Phase 3
Global
Biologic
Inhibitors (CHAWI) surgery
SHP625*(7)
SHP625*(7)
. . . . . . . . . . Alagille Syndrome
. . . . . . . . . . Progressive Familial
Phase 2
Phase 2
Global
Global
Small Molecule
Small Molecule
SHP652 . . . . . . . . . . . . . Systemic Lupus
Erythematosus
Phase 2 (on clinical
hold)
Intrahepatic Cholestasis
SHP659* . . . . . . . . . . . . Dry Eye Disease
SHP611* . . . . . . . . . . . . Metachromatic
Phase 2
Phase 1
Leukodystrophy
U.S., EU, JP,
select APAC
and LATAM
countries
Global
Global
SHP631* . . . . . . . . . . . . Treatment of both the Central
Phase 1
Global
nervous system and somatic
manifestations in patients with
MPS II
SHP634
Phase 1 in Japan
Global(8)
(NATPARA) . . . . . . . Hypoparathyroidism
SHP639* . . . . . . . . . . . . Glaucoma
SHP654* . . . . . . . . . . . . Hemophilia A
SHP680* . . . . . . . . . . . . Neurological Conditions
Phase 1
Phase 1
Phase 1
Global
Global
Global
Protein
Small Molecule
Enzyme
Replacement
Therapy
Enzyme
Replacement
Therapy/Fusion
Protein
Peptide
Peptide
Gene Therapy
Small Molecule
Denotes NME
*
Notes:
(1) Under co-development with Shionogi in Japan under a license and collaboration agreement.
(2) Marketed in the EU.
(3) Global Rights, with the exception of Japan.
(4) On October 26, 2018, Takeda announced that it was in discussions with the European Commission, the EU
antitrust regulator, in relation to the future potential overlap in the area of IBD between its marketed product
ENTYVIO and Shire’s pipeline compound SHP647, which is currently in Phase III clinical trials, and that it
had proposed an antitrust remedy of a potential divestment of SHP647 and certain associated rights. On
November 20, 2018, the European Commission granted a Phase I conditional clearance for the Shire
Acquisition, subject to Takeda and Shire entering into commitments to divest SHP647 and certain other
associated rights.
(5) Under license, Genzyme has rights to manage marketing and distribution in Asia Pacific, Japan and
South Africa.
(6) Global rights, with the exception of Japan (where the licensor, Kaketsuken, has retained rights).
(7) Divested as of November 7, 2018.
(8) Global rights, with the exception of Israel.
67
Availability of Raw Materials
Shire purchases, in the ordinary course of business, raw materials and supplies essential to its operations
from numerous suppliers around the world, including in the U.S. While efforts are made to diversify Shire’s
sources of components and materials, in certain instances Shire acquires components and materials from a sole
supplier. Human plasma is a critical raw material in Shire’s business. Shire believes that its ability to internally
and externally source plasma represents a distinctive and flexible infrastructure, which provides Shire a unique
capability with respect to the consistent delivery of high quality plasma-based products. Shire owns and operates
plasma collection facilities in the U.S. and Austria through its wholly owned subsidiary BioLife Plasma Services
L.P. (“BioLife”). BioLife operates and maintains more than 90 plasma collection facilities in 24 states throughout
the U.S. and at seven locations in Austria. Shire also maintains relationships with other plasma suppliers to
ensure that it retains the flexibility to meet market demand for its plasma based therapies.
Material Customers
Shire’s three largest trade customers are AmerisourceBergen Corporation, McKesson Corp and Cardinal
Health, Inc., which are based in the U.S. In 2017, these wholesale customers accounted for approximately 10%,
9% and 7% of product sales, respectively.
Intellectual Property
The following table shows the patent numbers that are listed in the Patent and Exclusivity Information
Addendum of the FDA’s publication, Approved Drug Products with Therapeutic Equivalence Evaluations (the
“Orange Book”), for some of Shire’s more significant, revenue-generating products approved via an NDA or an
NDA under Section 505(b)(2) under the U.S. Federal Food, Drug, and Cosmetic Act that references a previously
approved drug, which are owned by or licensed to Shire and relevant to an understanding of Shire’s business
taken as a whole. There may be other patents related to these products, methods of manufacturing, or use of the
products in the treatment of particular diseases or conditions that are not listed in the Orange Book. Some of
Shire’s other products are biologics which are protected by patents and forms of unpatented confidential
information, including manufacturing trade secrets and proprietary know-how, that are not listed in the Orange
Book. In addition, expiration dates set forth below do not necessarily reflect possible changes to the patent term
afforded by, among other things, patent term extensions in the U.S. or other territories or changes that may result
as a consequence of the outcome of litigation or other proceedings. Shire also holds patents in other jurisdictions,
such as the EU, Canada and Japan, and has patent applications pending in such jurisdictions, as well as in the
U.S.
Product
Orange Book listed U.S. patent
Expiration date
ADDERALL XR . . . . . . . . . . . . . . . . US 6322819
US RE41148
US 6605300
US RE42096
FIRAZYR . . . . . . . . . . . . . . . . . . . . . US 5648333
LIALDA/MEZAVANT . . . . . . . . . . . US 6773720
VYVANSE . . . . . . . . . . . . . . . . . . . . US 7105486
US 7223735
US 7655630
US 7659253
US 7659254
US 7662787
US 7662788
US 7671030
US 7671031
68
April 21, 2019
April 21, 2019
April 21, 2019
April 21, 2019
July 15, 2019
June 8, 2020
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
Product
Orange Book listed U.S. patent
Expiration date
US 7674774
US 7678770
US 7678771
US 7687466
US 7687467
US 7700561
US 7713936
US 7718619
US 7723305
GATTEX/REVESTIVE . . . . . . . . . . US 5789379
US 7056886
US 7847061
US 9060992
US 9539310
US 9545434
US 9545435
US 9555079
US 9572867
US 9592273
US 9592274
US 9968655
US 9968656
US 9968658
US 9974835
US 9974837
US 9981014
US 9981016
US 9987334
US 9987335
US 9993528
XIIDRA . . . . . . . . . . . . . . . . . . . . . . . US 7314938
US 7745460
US 7790743
US 7928122
US 8084047
US 8168655
US 8367701
US 8592450
US 8927574
US 9085553
US 9216174
US 9353088
US 9447077
US 9890141
MYDAYIS . . . . . . . . . . . . . . . . . . . . . US 6913768
US 8846100
US 9173857
Item 4A. Unresolved Staff Comments
Not applicable.
69
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
April 14, 2020
September 18, 2022
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
November 1, 2025
March 10, 2025
November 5, 2024
November 5, 2024
November 5, 2024
May 17, 2026
May 9, 2029
April 15, 2029
May 17, 2026
November 12, 2030
July 25, 2033
November 5, 2024
October 21, 2030
April 15, 2029
October 21, 2030
May 24, 2023
August 24, 2029
May 12, 2026
Item 5. Operating and Financial Review and Prospects
A.
Operating Results.
You should read the following discussion of our operating and financial review and prospects together
with our consolidated financial statements included elsewhere in this registration statement. Our consolidated
financial statements are prepared in accordance with IFRS, as issued by the IASB. The term IFRS also includes
International Accounting Standards (“IASs”) and the related interpretations of the committees (SIC and IFRIC).
For more information on the basis of presentation, see Note 2 to our audited consolidated financial statements
included in this registration statement.
This discussion and analysis contains forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements
as a result of factors, including, but not limited to, those under Item 3. D “Risk Factors” and elsewhere in this
registration statement.
Overview
We are a global pharmaceutical company with an innovative portfolio, engaged primarily in the
research, development, production and marketing of prescription drugs. We have a geographically diversified
global business base operating in more than 70 countries, and our prescription drugs are marketed in
approximately 100 countries and are recognized brands in major countries worldwide. We develop and market
pharmaceutical products including prescription drug products to treat a broad range of medical conditions
including GI diseases, cancer, neurological and psychiatric diseases and other medical conditions, including
diabetes and hypertension, as well as vaccines. We also produce and sell vaccines as well as consumer healthcare
products.
We have recently taken significant steps to refocus and enhance our business. For example:
•
•
•
•
In July 2016, we announced a fundamental reorganization of our research and development
activities to focus on our three core therapeutic areas, GI, oncology and neuroscience, plus
vaccines, to optimize our pipeline and enhance operational efficiency;
In February 2017, we acquired ARIAD, a commercial-stage biotechnology company headquartered
in Cambridge, Massachusetts to enhance our global oncology portfolio by expanding our
prescription drug portfolio and research and development pipeline for the treatment of solid tumors
and acquiring its capabilities in hematological oncology; and
In the fiscal year ended March 31, 2018, we entered into more than 50 collaborations with third
parties to help strengthen our pipeline; and
In July 2018, we acquired TiGenix NV, an advanced biopharmaceutical company developing novel
stem cell therapies for serious medical conditions, with the aim to bring new treatment options to
patients with gastrointestinal disorders.
We have also divested a number of businesses in non-core areas. For example:
•
•
•
In April 2016, we completed the sale of our respiratory business to AstraZeneca;
In April 2016, we transferred certain long-listed products in Japan to Teva Takeda Yakuhin Ltd., a
wholly-owned subsidiary of Teva Takeda Pharma Ltd., a joint venture we formed with Teva
Pharmaceutical Industries Ltd. in which we hold a 49% interest, and subsequently sold seven
additional long-listed products to Teva Takeda Yakuhin Ltd. in May 2017; and
In April 2017, we completed the sale of our shares in Wako Pure Chemical to FUJIFILM
Corporation;
70
•
•
In August 2018, we sold and divested all our shares and assets in Guangdong Techpool Bio-Pharma
Co., Ltd. to Shanghai Pharmaceutical Holding Co. Ltd.; and
For the six months ended September 30, 2018, we recorded ¥38.2 billion in proceeds from sales of
other shareholdings.
As the next step in our ongoing process to strengthen our business, we are pursuing the Shire
Acquisition, which we expect will help us become a global leader in the pharmaceutical industry, reinforcing our
strengths in GI and neuroscience, while adding new capabilities in rare diseases and plasma-derived therapies
that complement our capabilities in oncology and vaccines. See “—Financial Impact of the Shire Acquisition.”
Operating Segments and Geographic Information
We organize our business as a single operating segment, reflecting the presentation of information to
our management for the purposes of allocating resources, measuring performance and forecasting future periods.
Our operations are global in scope, and we generate revenue from selling our products across various
regions. While our operations in Japan have historically contributed the largest portion of our revenues, we have
continued to expand our operations in the United States, Europe, Canada and Emerging Markets (which consists
of Russia/CIS, Latin America, Asia excluding Japan and others). Reflecting this expansion, the United States
accounted for more revenue than Japan for the first time in the fiscal year ended March 31, 2018.
Our total revenue by geographic region for the fiscal years ended March 31, 2016, 2017 and 2018 is set
forth in the following table:
For the fiscal year ended March 31,
2016
2017
2018
(billions of yen, except for percentages)
Revenue:
Japan . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . .
Europe and Canada . . . . . . . . . . .
Russia/CIS . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . .
Asia (excluding Japan) . . . . . . . .
Other(1) . . . . . . . . . . . . . . . . . . . . .
¥ 688.1
514.4
309.3
61.8
68.4
126.0
39.4
38.1% ¥ 655.3
520.2
28.5
279.7
17.1
57.5
3.4
72.5
3.8
112.8
7.0
34.0
2.2
37.8% ¥ 580.3
598.3
30.0
313.7
16.1
68.2
3.3
75.7
4.2
104.0
6.5
30.2
2.0
32.8%
33.8
17.7
3.9
4.3
5.9
1.7
Total
. . . . . . . . . . . . . . . . . . . . . .
¥1,807.4
100.0% ¥1,732.1
100.0% ¥1,770.5
100.0%
Note:
(1) Other region includes Middle East, Oceania and Africa.
We refer to Russia/CIS, Latin America, Asia (excluding Japan) and Other collectively as “Emerging
Markets”.
Operating Environment
We believe that global demand for healthcare continues to increase across markets, driven by increased
access to healthcare, particularly in low-income and middle-income countries. The global pharmaceutical
industry also faces a number of challenges, such as stagnation in creating breakthrough novel drugs due to the
difficulties of translating new innovations into products in the marketplace, as well as increasingly stringent
criteria for the approval of new drugs in many countries. Drastic changes in the healthcare and reimbursement
systems in many countries have also impacted the pharmaceutical industry.
71
In particular, global efforts toward health care cost containment continue to exert pressure on product
pricing and market access. Given the growth of overall healthcare costs as a percentage of gross domestic
product in many countries, some governments and payers including the U.S., Japanese, European, Canadian and
other governments, have introduced price reductions and/or rebate increases for patented and generic medicines,
as well as other healthcare products and services. For further discussion of government policies on price
reductions and impact on our revenue, see “—Factors Affecting Our Results of Operations—Revenue—Pricing
and Government Regulation” and “Item 4. Information on the Company—B. Business Overview—Regulation.”
We also continue to be affected by overall economic conditions and financial markets. Economic
growth continues to be stagnant in many major developed countries, while the pace of growth in many emerging
economies has declined. Recently, developments such as Brexit,
the transition to a new presidential
administration in 2017 and uncertainty around upcoming mid-term elections in 2018 in the United States,
continued instability in the Middle East and North Korea and tensions over trade, including tariff regimes, have
increased political and economic uncertainty. Moreover, the volatility of the Japanese yen against the U.S. dollar
and the euro in recent years has impacted our consolidated results, as sales in such currencies are translated into
Japanese yen.
Financial Impact of the Shire Acquisition
On May 8, 2018, the boards of Takeda and Shire reached agreement on the terms of a recommended
offer pursuant to which Takeda will acquire the entire issued and to be issued ordinary share capital of Shire,
which we refer to as the Shire Acquisition. See “Item 4. Information on the Company—A. History and
Development of the Company—Shire Acquisition.” Under the proposed terms of the Shire Acquisition, each
Shire shareholder will be entitled to receive $30.33 in cash and either 0.839 newly issued shares of our common
stock or 1.678 of our ADSs, each representing 0.5 shares of our common stock. This offer represents an
estimated aggregate consideration of approximately £46 billion, or approximately ¥6.96 trillion. The final
aggregate value of the consideration to be reflected in our consolidated financial statements for the fiscal year in
which the Shire Acquisition is completed will depend on the closing price of our shares, the last trading price of
Shire shares and number of issued shares of Shire and the exchange rates between the pound sterling and
Japanese yen and between the U.S. dollar and the Japanese yen at the time of the closing of the acquisition. We
expect to incur significant indebtedness to finance the cash portion of the consideration, which will result in a
significant increase in interest costs in future periods. See “—B. Liquidity and Capital Resources—Financing
Arrangements for the Shire Acquisition.”
We will account for the Shire Acquisition as a business combination and will record the net assets
acquired at fair value. We expect to record a significant amount of inventory, intangible assets, primarily
intellectual property and other proprietary rights of Shire related to its products, in connection with the Shire
Acquisition, which will result in significant amortization expense in future periods. We also expect to record a
significant amount of goodwill in connection with the acquisition reflecting the sum, by which the aggregate fair
value of consideration for the Shire Acquisition exceeds the fair value of the identifiable assets acquired and
liabilities assumed as of the Shire Acquisition date. Such intangible assets and goodwill will be presented on our
balance sheet as of the end of the fiscal period in which the Shire Acquisition is completed.
As described under “—Critical Accounting Policies—Impairment of Goodwill and Intangible Assets,”
goodwill and other intangible assets recorded in connection with the Shire Acquisition will be held on our
consolidated balance sheet at the recorded value (or amortized value, in the case of intangible assets other than
goodwill), less any accumulated impairment losses. If circumstances arise indicating that goodwill or intangible
assets recorded in connection with the acquisition may be impaired, such as if we are unable to successfully
realize the expected benefits of the acquisition and the carrying amount of goodwill or other intangible assets
therefore exceeds their recoverable amount, we may be required to record an impairment loss up to the full value
of such goodwill or other intangible assets shown on our consolidated balance sheet.
72
Following the completion of the Shire Acquisition and the integration of Shire’s business into ours, we
expect to be able to achieve significant, recurring pre-tax synergies of at least $1.4 billion annually by the end of
the third fiscal year following the completion of the Shire Acquisition, originating from efficiencies in the
combined company’s sales, marketing and administrative functions, research and development efforts and
product manufacturing and supply. We believe that the realization of these synergies will require an aggregate of
approximately $2.4 billion, of non-recurring cash costs relating to the integration of Shire into our business
during the first three fiscal years following the completion of the Shire Acquisition. This amount does not include
costs relating to the completion of the acquisition, such as advisory, legal or other fees. In the six months ended
September 30, 2018, we recorded ¥7.9 billion of acquisition-related costs, such as advisory fees, as a component
of selling, general and administrative expenses, ¥3.2 billion of restructuring expense in other expenses and
¥8.8 billion of finance expense relating to the arrangement of commitments to finance the Shire Acquisition, and
we expect to incur further costs in future periods. We expect that the costs related to the Shire Acquisition to be
incurred in the fiscal year ending March 31, 2019 will be between ¥40.0 billion and ¥60.0 billion. This estimate
does not include integration costs, interest on indebtedness and other financial expenses, as the amount of those
expenses is dependent on the timing of the completion of the Shire Acquisition. Costs related to the Shire
Acquisition, including execution, integration and other costs, will be expensed when they are incurred.
Our unaudited pro forma condensed combined balance sheet and statement of income as of and for the
fiscal year ended March 31, 2018, presented in accordance with the requirements of Article 11 of Regulation S-X
and Form 20-F, are included in this registration statement.
Financial Impact of the ARIAD Acquisition
On February 16, 2017, we acquired ARIAD Pharmaceuticals,
Inc. for a net consideration of
¥583.1 billion. Headquartered in Cambridge, Massachusetts in the United States, ARIAD is a commercial-stage
biotechnology company focusing on discovering, developing and commercializing precision therapies for
patients with rare forms of chronic and acute leukemia, lung cancer and other rare cancers.
We believe that the acquisition of ARIAD has strengthened and will continue to significantly strengthen
our global oncology platform by expanding our solid tumors portfolio and pipeline and reinforcing our existing
strength in hematology treatments. In particular, ARIAD has developed ALUNBRIG (brigatinib), a small
molecule ALK inhibitor for NSCLC, which was granted accelerated approval in the United States in April 2017.
We believe that ALUNBRIG has the potential to be a leading ALK inhibitor due to its manageable safety profile,
its potential ability to address mutations of ALK resistant to crizotinib, another ALK inhibitor anti-cancer
treatment, and its activity in patients with brain metastases. As a result, we believe that ALUNBRIG has the
potential to develop into a significant revenue driver in the future. In addition, ARIAD has developed and
commercialized ICLUSIG, a treatment for chronic myeloid leukemia and Philadelphia chromosome positive
acute lymphoblastic leukemia. Due to the contribution of these two innovative therapies, we believe that our
acquisition of ARIAD will have a significant impact on revenue and will support our growth over the longer
term. The expected contribution of these two therapies to revenues is described under “—Factors Affecting Our
Results of Operations—Revenue—Principal Products.”
As a result of the acquisition of ARIAD, we recorded ¥273.6 billion in goodwill and ¥433.0 billion in
intangible assets. The remaining estimated useful life for products, based on the remaining exclusivity period,
acquired as part of the acquisition of ARIAD ranges from 9 to 13 years as of March 31, 2018. Our consolidated
results for the fiscal year ended March 31, 2018 included the results of ARIAD for the full fiscal year for the first
time, which contributed to increases in revenue and operating profit, as well as the increased importance of the
U.S. market to our overall results. We also expensed ¥3.2 billion of costs related to the acquisition of ARIAD,
including agency and legal fees, in selling, general and administrative expenses for the fiscal year ended
March 31, 2017.
73
Factors Affecting Our Results of Operations
Revenue
Principal products
We rely on our principal products to generate a significant portion of our revenue. In particular, our
ability to maintain and grow our revenue is dependent in part on our ability to generate additional revenue from
our “growth drivers,” which we define as the core therapeutic areas of GI, oncology and neuroscience, as well as
emerging markets. For descriptions of our principal products, see “Item 4. Information on the Company—B.
Business Overview.”
Specifically, we currently depend on NINLARO as a key growth driver in oncology, and expect
ICLUSIG and ALUNBRIG, both of which were added to our product portfolio when we acquired ARIAD, to be
growth drivers in the future. In GI, ENTYVIO, our overall highest selling product, and TAKECAB are our main
growth drivers. In neuroscience, TRINTELLIX is our key growth driver, and we expect future contributions from
AZILECT, which we in-licensed from Teva Pharmaceutical Industries Ltd. and which received approval for use
in Japan in March 2018. In emerging markets, ADCETRIS and ENTYVIO are our key growth drivers.
In particular, revenue from ENTYVIO, which is currently approved in more than 60 countries, grew from
¥86.2 billion in the fiscal year ended March 31, 2016 to ¥201.4 billion in the fiscal year ended March 31, 2018,
and ENTYVIO has been our highest selling product since the fiscal year ended March 31, 2017. Revenue from
TAKECAB sold in Japan grew from ¥8.4 billion on a gross basis in the fiscal year ended March 31, 2016 to
¥48.5 billion on a net basis (or ¥55.1 billion on a gross basis) in the fiscal year ended March 31, 2018. NINLARO,
which had a strong launch in the United States and was newly approved in countries including the EU in the last
quarter in 2016 and Japan in 2017, demonstrated a revenue growth from ¥4.1 billion in the fiscal year ended
March 31, 2016 to ¥46.4 billion in the fiscal year ended March 31, 2018. ICLUSIG recorded ¥2.9 billion and
¥23.1 billion in revenue, respectively, for the period from February 16, 2017 (the date of the ARIAD acquisition)
to March 31, 2017, and for the fiscal year ended March 31, 2018. ALUNBRIG, which was also obtained through
the acquisition of ARIAD, was launched in the United States in May 2017, and recorded ¥2.8 billion of sales in
the fiscal year ended March 31, 2018.
One significant factor affecting revenue of our principal products is the timing of the expiration of the
exclusivity period for such products, as well as the timing and success of the sale of newly launched products.
For example, following the expiration of patent protection over bortezomib, the active ingredient in VELCADE,
one of our largest selling products in the United States, a competing bortezomib-containing product has been
introduced. This has led to a decrease in sales of VELCADE, and further entry of competing products could result
in substantial additional declines. Such decreases may accelerate following the scheduled expiration of patent
protection over the formulation of VELCADE in 2022, or earlier if a competitor is able to develop a way to
formulate VELCADE in a manner that does not infringe on the relevant patent or by succeeding in having the
formulation patent invalidated. In addition, as patent protection has expired for PANTOPRAZOLE in many major
markets including the United States and the EU, sales of PANTOPRAZOLE have continued to decline in those
markets. The following table shows revenue,
including royalty income and service income, for our key
prescription drug products by geographic region for the three most recent fiscal years:
For the fiscal year ended March 31,
2016
2017
2018
(billions of yen)
ENTYVIO
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and Canada . . . . . . . . . . . . . . . . . . . . . . .
Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 63.1
21.9
1.3
¥ 86.2
¥ 99.6
39.5
4.0
¥143.2
¥133.6
60.2
7.5
¥201.4
74
For the fiscal year ended March 31,
2016
2017
2018
(billions of yen)
NINLARO
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and Canada . . . . . . . . . . . . . . . . . . . . . . .
Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VELCADE
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other than United States . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADCETRIS
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . .
—
4.0
—
0.0
4.1
¥
¥
¥131.6
30.4
¥162.0
¥
3.1
17.4
7.2
—
¥ 29.1
0.2
0.1
¥ 29.4
¥112.9
24.7
¥137.6
¥
3.3
17.5
9.3
¥
2.5
39.4
4.0
0.6
¥ 46.4
¥113.7
23.6
¥137.3
¥
3.8
20.1
14.3
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 27.6
¥ 30.1
¥ 38.5
TAKECAB
Japan(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TRINTELLIX(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEUPRORELIN
Japan (product name: LEUPLIN)(1) . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and Canada . . . . . . . . . . . . . . . . . . . . . . .
Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DEXILANT
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and Canada . . . . . . . . . . . . . . . . . . . . . . .
Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AZILVA
Japan(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ALOGLIPTIN
Japan (product name: NESINA)(1)
. . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and Canada . . . . . . . . . . . . . . . . . . . . . . .
Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ULORIC
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and Canada . . . . . . . . . . . . . . . . . . . . . . .
Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75
¥
¥
8.4
8.4
¥ 24.5
¥ 24.5
¥ 53.8
17.3
35.3
18.0
¥124.4
¥ 64.0
5.4
5.7
¥ 75.1
¥ 59.0
¥ 59.0
¥ 36.9
5.3
3.5
3.3
¥ 48.9
¥ 41.8
0.7
—
¥ 42.5
¥ 34.1
¥ 34.1
¥ 31.9
¥ 31.9
¥ 48.6
18.3
31.1
16.3
¥114.2
¥ 49.7
5.7
7.3
¥ 62.6
¥ 66.9
¥ 66.9
¥ 32.9
5.2
6.1
4.9
¥ 49.1
¥ 41.4
0.7
0.1
¥ 42.2
¥ 48.5
¥ 48.5
¥ 48.4
¥ 48.4
¥ 41.2
19.7
34.5
12.7
¥108.1
¥ 49.5
6.4
9.9
¥ 65.7
¥ 64.0
¥ 64.0
¥ 26.6
6.0
9.0
8.6
¥ 50.2
¥ 45.8
0.8
0.3
¥ 46.8
For the fiscal year ended March 31,
2016
2017
2018
(billions of yen)
COLCRYS
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AMITIZA
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and Canada . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PANTOPRAZOLE
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and Canada . . . . . . . . . . . . . . . . . . . . . . .
Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LANSOPRAZOLE
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan(1)(3)
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and Canada . . . . . . . . . . . . . . . . . . . . . . .
Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CANDESARTAN
Japan(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and Canada . . . . . . . . . . . . . . . . . . . . . . .
Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 46.5
¥ 46.5
¥ 37.2
0.1
¥ 37.3
¥ 13.6
43.4
43.7
¥100.8
¥ 41.3
27.5
10.5
10.2
¥ 89.5
¥ 58.5
1.3
12.5
12.4
¥ 84.8
¥ 38.9
¥ 38.9
¥ 33.7
0.1
¥ 33.8
¥ 10.1
30.5
33.7
¥ 74.2
¥
8.1
20.0
7.1
9.2
¥ 40.3
¥ 40.3
¥ 33.7
0.1
¥ 33.8
¥
7.2
30.6
28.0
¥ 65.8
¥
4.6
15.2
7.2
9.7
¥ 44.4
¥ 36.8
¥ 14.8
0.6
9.3
9.5
¥ 34.2
¥
2.6
0.7
9.5
9.2
¥ 22.0
Notes:
(1) Beginning from the fiscal year ending March 31, 2019, sales of certain products in Japan are disclosed on a
net basis, deducting items such as discounts and rebates, in alignment with the global managerial approach
applied to individual product sales for the fiscal year ended March 31, 2018. Sales of individual products
have been revised retroactively on a net basis to enable year-on-year comparisons. This reclassification has
no impact on Takeda’s financial statements and does not represent a correction of figures from the prior
fiscal periods. Figures for the fiscal years ended March 31, 2016 and 2017 have not been reclassified
retroactively.
(2) TRINTELLIX is the brand name used since June 2016 for the product previously marketed as BRINTELLIX
in the United States. The formulations, indication and dosages of TRINTELLIX remain the same as that of
BRINTELLIX.
(3) Products excluding fixed dose combinations were transferred to Teva Takeda Yakuhin Ltd., a wholly-owned
subsidiary of Teva Takeda Pharma Ltd., a joint venture in Japan we formed with Teva Pharmaceutical
Industries Ltd., in April 2016. Fixed dose combinations were sold to Teva Takeda Yakuhin Ltd. in May
2017. Amounts presented above represent supply sales to Teva Takeda Yakuhin Ltd., following such
transfers.
For a discussion of our principal products and the conditions they treat, see “Item 4. Information on the
Company—B. Business Overview.”
76
Pricing and government regulation
Although we consider domestic and international competitive conditions, such as the price of competing
products, in setting and revising the price of our pharmaceutical products, government regulation also has a
significant effect in determining the price of pharmaceutical products in many of the countries in which we
operate. Government policy in many countries has emphasized, and large customers continue to seek, discounts
on pharmaceutical products.
The U.S. Healthcare Legislation, enacted in March 2010, has increased the amount of rebates paid by
pharmaceutical companies and has negatively impacted operating income of pharmaceutical companies, although
these effects may be offset in part in the medium to long term by the effects of an increase in individuals covered
by health care programs. While there are currently legislative proposals in the United States to amend or repeal
the U.S. Healthcare Legislation or to introduce other regulatory changes, the potential impact of any new
legislation is uncertain. Regulatory and legislative debates are particularly driven by public concern over access
to and affordability of pharmaceuticals. These policy and political issues increase the risk that taxes, fees, rebates
or other federal and state measures that could affect the pricing of pharmaceuticals may be enacted. These may
include a reduction in biologic data exclusivity, modifications to Medicare Parts B and D, language that would
allow the Department of Health and Human Services to negotiate prices for biologics and drugs in Medicare,
proposals that would require biopharmaceutical manufacturers to disclose proprietary drug pricing information
and state-level proposals related to prescription drug prices and reducing the cost of pharmaceuticals purchased
by government health care programs. The Bipartisan Budget Act, enacted in February 2018 and scheduled to take
effect in 2019, will require manufacturers of brand-name drugs, biologics and biosimilars to pay a 70 percent
discount in the Medicare Part D Coverage Gap, up from the current 50 percent discount.
In Japan, the government has the authority to set retail prices for prescription drugs, especially in the
context of sales reimbursed by national health insurance programs. Pharmaceutical companies in Japan,
including us, are required to list new pharmaceutical products on the NHI price list published by the MHLW in
connection with public medical insurance programs. Prices of pharmaceutical products so listed are determined
by comparison to comparable products, with necessary adjustments for innovativeness, usefulness and/or size of
the markets, or in the absence of comparable products, by the cost calculation method. Prior to 2018, prices on
the NHI price list were subject to revision, generally once every two years, on the basis of the actual prices at
which the pharmaceutical products are purchased by medical institutions after discounts and rebates off the listed
price. Prices on the NHI price list declined by an average of 5.64%, or 2.65% after excluding the 3%
consumption tax increase, in 2014, 5.57% in 2016, and 7.48% in 2018, in each case taking into account price
revisions on long-listed products. As part of health reform initiatives by the Japanese government aimed at
sustaining the universal coverage of the National Health Insurance program, in December 2016, the Japanese
government announced its basic reform principles for fundamental reforms of the drug pricing system in 2018.
These include an increase in the frequency of price revisions from every other year to annually, with annual price
revisions scheduled to begin with the fiscal year ending March 31, 2022.
Governments in Europe and many emerging countries also have national health programs with similar
price control systems. In Europe, drug prices continue to be subject to downward pressure due to measures
implemented in many countries to control drug costs, and prices continue to experience pressure due to parallel
imports, generic competition, increasing use of health technology assessment based upon cost-effectiveness and
other factors. While the United States does not have a general national health insurance system, there has been
increasing pricing pressure from managed care groups and institutional and governmental purchasers. The
pharmaceutical industry has also experienced significant pricing pressures in certain emerging countries.
Patent protection and generic competition
Legal protections and remedies for intellectual property are significant factors in determining the
competitiveness of and demand for, as well as the prices of, our pharmaceutical products. Many of our products
77
are protected by substance patents and may also have secondary patents. Secondary patents can include
additional patents, such as patents for the processes for making the compound or additional indications or uses.
During the patent period, we benefit from the restrictions on competition afforded by the patent. Once patent
protection and regulatory data protection expires, however, other pharmaceutical manufacturers may produce
generic versions of the products and sell them at lower prices.
In the United States, as well as in many other countries, including in Europe, the introduction of a
generic or biosimilar version of a pharmaceutical product often leads to a swift and substantial decline in the
sales of the original. Increased pricing pressure, both from governmental regulation and from the healthcare
providers in the private sector, means that the market participants with the decision-making authority over
pharmaceutical products are quick to adopt generic or biosimilar products once they become available. We may
also be subject to competition from generic drug manufacturers prior to the expiration of such patents if the
manufacturer successfully challenges the validity of the patents, or if the manufacturer decides that the benefits
of prematurely launching “at risk” the generic drug outweigh the costs of defending infringement litigation.
Moreover, even our products that still enjoy the benefit of patent exclusivity must compete with the products of
other pharmaceutical manufacturers based not only on efficacy or lack of adverse reactions, but also potentially
on price, especially where the parties paying for the treatment, which may be health plans, pharmaceutical
benefit managers, wholesalers or other parties, maintain formularies or otherwise choose the pharmaceutical
products that will be available to patients.
In Japan, the government is implementing various measures to restrain drug costs, including by
encouraging medical practitioners to use and prescribe generic drugs, and has recently announced its intention to
raise generic drug penetration to 80% by volume by September 2020 with respect to products for which market
exclusivity has expired. Market penetration for such products was 65.8% as of September 2017. We are not
currently able to quantify the impact that these measures will have on our products. However, we attempt to limit
the impact of generic competition by highlighting the proven track record and credibility of our products, as well
as making certain price revisions as appropriate. We also try to gain further patent protection through incremental
improvements and the addition of new indications related to our products. In addition, in order to mitigate our
exposure to the increased use of generics, in April 2016, we transferred certain long-listed products, consisting of
products for which patent protection and regulatory data protection have expired, to Teva Takeda Yakuhin Ltd., a
wholly-owned subsidiary of Teva Takeda Pharma Ltd., a joint venture we formed with Teva Pharmaceutical
Industries Ltd. of Israel. In May 2017, we sold additional long-listed products to Teva Takeda Yakuhin Ltd. The
objective of the joint venture is to mitigate the competition in Japan from generics while allowing us to generate
revenue from providing distribution services and contract manufacturing services to the joint venture. See
“—Other Factors Affecting Our Results of Operations—(a) Acquisitions and Divestures.”
Introduction of new products
While prescription drugs are generally protected by substance patents and regulatory data protection
periods, patents are typically limited to a certain number of years depending on the jurisdiction and the type of
patents. Notwithstanding such protection, new therapeutic drugs with potentially higher efficacy, a more
favorable side-effect profile or a more convenient mechanism of delivery are constantly being developed and
introduced by our competitors even during the patent protected period. Therefore, sales of a given product
typically decrease upon the expiration of patent protection and the regulatory data protection period and in some
cases earlier if superior products have been introduced to the market. In order to ensure sustained revenue
growth, pharmaceutical companies must be able to develop or otherwise acquire the rights to develop or market
innovative new products. See “Item 4. Information on the Company—B. Business Overview” for information
regarding our research and development activities, including our clinical development pipeline.
78
Costs and Expenses
(a) Cost of sales
Cost of sales consists primarily of the cost of raw materials and active ingredients, labor and other
overhead costs relating to our manufacturing activities as well as sales-based royalty payments to third parties, if
any. We believe the ratio of cost of sales to revenue is low in the pharmaceutical industry compared to many
other industries due to pricing policies that reflect the need to recoup significant research and development costs
necessary to develop and market new pharmaceutical products.
Cost of sales were ¥535.2 billion, ¥558.8 billion and ¥495.9 billion, or 29.6%, 32.3% and 28.0%,
respectively, of consolidated revenues, in the fiscal years ended March 31, 2016, 2017 and 2018. The relative
proportion of cost of sales to revenue is affected significantly by our product mix, as certain products are
comparatively less expensive to produce. For example, products with specialty capabilities developed and
manufactured in-house, such as ENTYVIO and NINLARO, tend to have lower cost of sales than other products
which are sourced from or manufactured with third party partners. In addition, we have implemented measures to
optimize our source network and achieve procurement savings. Whether we achieve our objective of increasing
our profitability will depend in part on our ability to decrease the relative proportion of cost of sales to revenue
through such initiatives.
(b) Selling, general and administrative expenses
Our selling, general and administrative costs include advertising and sales promotion expenses, salaries,
long-term incentive payments, bonuses and post-employment benefit costs, among others. Beginning in 2016, we
have implemented a global operational expenditure initiative to further rationalize expenditures and enhance our
profitability and sustainability. Such initiatives include rolling out a new procurement policy, applying discipline
to spending, benchmarking general and administrative functions to drive effectiveness and efficiency and
reducing our salesforce in the United States to align our sales capabilities with our core therapeutic areas. Our
selling, general and administrative expenses were ¥650.8 billion, ¥619.1 billion and ¥628.1 billion in the fiscal
years ended March 31, 2016, 2017 and 2018, or 36.0%, 35.7% and 35.5%, respectively, of consolidated revenue.
(c) Research and development expenses
Research and development of new pharmaceutical products is essential to continued positive operating
results. Our research and development efforts are centralized, with the allocation of resources made on a global
basis. See “—C. Research and Development, Patents, Licenses, etc.” for a description of our key research and
development policies. Our research and development expenses, which include expenses related to basic research
as well as pre-clinical and clinical development, have been significant historically and will continue to be
significant. While we expect to achieve greater cost efficiency as a result of our efforts to fundamentally
reorganize our research and development activities, we plan to reinvest cost savings attributable to such
efficiency improvements in additional research and development in our core therapeutic areas. Research and
development expenses are recorded as expenses as they are incurred, and are generally not capitalized until the
criteria for recognizing an asset are met, usually when a regulatory filing has been made in a major market and
approval is considered highly probable for a given product. In the fiscal years ended March 31, 2016, 2017 and
2018, research and development expenses were ¥335.8 billion, ¥312.3 billion and ¥325.4 billion, or 18.6%,
18.0% and 18.4% of total revenue, respectively. Research and development expenses could increase due to
anticipated clinical trials for existing and new late stage pipeline products, including in-licensed products.
(d) Amortization and impairment losses on intangible assets associated with products
Intangible assets associated with products primarily include intangible assets associated with specific
products acquired through acquisitions. We amortize intangible assets associated with products over their
estimated useful life ranging from 3 to 20 years (generally reflecting the expected length of patent or regulatory
79
data protection for such product) using the straight-line method. Intangible assets associated with products are
also subject to impairment, and are held net of accumulated impairment losses and any reversals thereof.
Amortization and impairment losses on intangible assets associated with products therefore tend to increase as
the total balance of intangible assets associated with products increases, subject to any impairment losses or
reversals thereof. In the fiscal year ended March 31, 2016, amortization, impairment and reversal of impairment
were ¥121.8 billion, ¥18.6 billion and ¥8.6 billion, respectively. In the fiscal year ended March 31, 2017,
amortization, and impairment were ¥112.5 billion and ¥44.6 billion (which includes ¥0.4 billion of impairment
included in restructuring expense, which is a component of other operating expenses), respectively. In the fiscal
year ended March 31, 2018, amortization, impairment and reversal of impairment were ¥126.1 billion, ¥19.1
billion and ¥23.1 billion, respectively. As of March 31, 2018, intangible assets associated with specific products
totaled ¥970.0 billion.
Other Factors Affecting Our Results of Operations
(a) Acquisitions and Divestitures
As part of our business strategy, we regularly engage in acquisitions and divestitures. We may acquire
research and development capabilities (including expanding into new
new businesses to expand our
methodologies) and to acquire new products (whether in the development pipeline or at the marketing stage) or
other strategic regions. Similarly, we regularly divest businesses and product lines to maintain our focus on our
key growth drivers and to manage our portfolio. As a result of these acquisitions and divestitures, our product
portfolio, particularly outside of our key growth drivers, fluctuates from year to year, and our results of
operations for a given fiscal year may not be directly comparable to results from prior or future fiscal years. For a
description of the expected effect of the Shire Acquisition on our financial condition and results of operations,
see “—Financial Impact of the Shire Acquisition.” For a description of the effect of the acquisition of ARIAD in
2017 on our financial condition and results of operations, see “—Financial Impact of the ARIAD Acquisition.”
We also have recorded substantial goodwill and intangible assets in connection with past acquisitions
and had a total goodwill of ¥1,029.2 billion and intangible assets of ¥1,014.3 billion as of March 31, 2018.
Intangible assets associated with products are amortized over their estimated useful life over a period of 3 to 20
years. Goodwill and indefinite-lived intangible assets are subject to impairment under certain conditions, as
discussed under “—Critical Accounting Policies—Impairment of Goodwill and Intangible Assets.”
In April 2016, we transferred certain long-listed products in Japan to Teva Takeda Yakuhin Ltd., a
wholly-owned subsidiary of Teva Takeda Pharma Ltd., a joint venture we formed with Teva Pharmaceutical
Industries Ltd. in which we hold a 49% interest, representing shares of Teva Takeda Pharma Ltd. received as
consideration for the transfer. At the time of the transfer, we recognized a gain for the difference between the fair
value consideration received (shares of Teva Takeda Pharma Ltd.) and the carrying value of the business to the
extent we disposed of the business. The remainder of the gain was deferred and will be amortized over a period
of 15 years from the date of the transfer, representing the estimated useful life of the intangible assets associated
with the products transferred. In the fiscal year ended March 31, 2017, we recognized a gain related to this
transfer of ¥115.4 billion. ¥102.9 billion of such amount was the amount of the gain recognized at the time of
disposal. The remainder represents the amount of the deferred gain amortized during such fiscal year. We receive
income from the joint venture in the form of a supply and distribution fee, in addition to a 49% share of the joint
venture’s income or losses. See Note 14 to our audited consolidated financial statements included in this
registration statement for a detailed discussion of the results of Teva Takeda Pharma Ltd.
In April 2017, we completed the sale of our shares in Wako Pure Chemical to FUJIFILM Corporation
for a sale price of ¥198.5 billion, for which we recognized a gain of ¥106.3 billion in the fiscal year ended
March 31, 2018. Wako Pure Chemical generated revenue of ¥76.6 billion and ¥79.1 billion for the fiscal years
ended March 31, 2016 and 2017, respectively.
80
(b) Foreign exchange fluctuations
In the fiscal year ended March 31, 2018, 67.2% of our revenue was from outside of Japan, and we
expect that in the future an even more significant portion of our revenue will be generated in foreign currencies
from sources outside of Japan due to the expansion of sales outside Japan. Changes in foreign exchange rates,
particularly for the U.S. dollar and the euro, relative to the yen, which is our reporting currency, will impact our
revenues and expenses. When the yen weakens against other currencies, our revenues attributable to such other
currencies increase, having a positive impact on our results of operations, which may be offset by increased
expenses denominated in such currencies. Conversely, when the yen strengthens against other currencies, our
revenues attributable to such currencies decrease, having a negative impact on our results of operations, which
may be offset by decreased expenses denominated in such currencies. We utilize certain hedging measures with
respect to some of our significant foreign currency transactions, primarily forward exchange contracts, currency
swaps and currency options for individually significant foreign currency transactions. See Note 27 to our
consolidated financial statements included in this registration statement.
(c) Periodic trends
Our revenues, operating profit and net income were lower in the fourth quarter of each of the fiscal
years ended March 31, 2016, 2017 and 2018, due mainly to fluctuations in sales in Japan. As pricing revisions in
Japan generally take effect as of April 1 of the relevant year, Japanese pharmaceutical product wholesalers
postpone purchases during the quarter prior to such pricing revisions, causing decreased revenue. Furthermore,
Japanese pharmaceutical product wholesalers generally control their inventory more tightly towards their fiscal
year ends, typically March 31, which also causes decreased revenue in the fourth fiscal quarter. Japanese
pharmaceutical product wholesalers also tend to increase purchases ahead of the New Year holidays, causing a
concentration of sales in our third fiscal quarter, from October 1 to December 31. Moreover, the commencement
of clinical trials and other research and development activities increases in our fourth fiscal quarter, leading to
increased research and development expense compared to other quarters.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with IFRS. The preparation of
our consolidated financial statements requires management to make estimates and assumptions that affect the
reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reported period. On an
ongoing basis, management evaluates its estimates and assumptions. Management bases its estimates and
assumptions on historical experience and on various other factors that it believes to be reasonable at the time the
estimates and assumptions are made. Actual outcomes may differ from those estimates and assumptions.
We believe the following critical accounting policies are affected by management’s estimates and
assumptions, changes to which could have a significant impact on our consolidated financial statements.
Revenue Recognition
Our revenue is primarily related to the sale of pharmaceutical products and is generally recognized at
the time product is shipped to the customer. Our gross sales are subject to various deductions, which are
primarily composed of rebates and discounts to retail customers, government agencies, wholesalers, health
insurance companies and managed healthcare organizations. These deductions represent estimates of the related
obligations, requiring the use of judgement when estimating the effect of these sales deductions on gross sales for
a reporting period. These adjustments are deducted from gross sales to arrive at net sales. The U.S. market has
the most complex arrangements related to revenue deductions.
The following summarizes the nature of the most significant adjustments to revenue:
•
U.S. Medicare and Medicaid: The U.S. Medicaid Drug Rebate Program is administered by state
governments using state and federal funds to provide assistance to certain vulnerable and needy
81
individuals and families. Calculating the rebates to be paid related to this program involves
interpreting relevant regulations, which are subject to challenge or change in interpretative guidance
by government authorities. Provisions for Medicaid rebates are calculated using a combination of
historical experience, product and population growth, product pricing and the mix of contracts and
specific terms in the individual state agreements. The U.S. Federal Medicare Program, which funds
healthcare benefits to individuals age 65 or older and certain disabilities, provides prescription drug
benefits under Part D section of the program. This benefit is provided and administrated through
private prescription drug plans. Provisions for Medicare Part D rebates are calculated based on the
terms of individual plan agreements, product sales and population growth, product pricing and the
mix of contracts. There is often a time lag of several months between us recording the revenue
deductions and our final accounting for Medicare and Medicaid rebates.
•
Customer rebates: Offer rebates to purchasing organizations and other direct and indirect customers
to sustain and increase market share, and to ensure patient access to our products. Since rebates are
contractually agreed upon, the related provisions are estimated based on the terms of the individual
agreements, historical experience, and projected product growth rates.
• Wholesaler chargebacks: We have arrangements with certain indirect customers whereby the
customer is able to buy products from wholesalers at reduced prices. A chargeback represents the
difference between the invoice price to the wholesaler and the indirect customer’s contractual
discounted price. Provisions for estimating chargebacks are calculated based on the terms of each
agreement, historical experience and product growth rates
•
Return reserves: When we sell a product providing a customer the right to return it, we record a
provision for estimated sales returns based on our sales return policy and historical return rates.
Because the amounts are estimated, they may not fully reflect the final outcome, and the amounts are
subject to change dependent upon, amongst other things, the type of purchasing organization, end consumer, and
product sales mix.
Historically, our adjustments of estimates, to reflect actual results or updated expectations, have not
been material to our overall business. Product-specific rebates, however, can have a significant impact on year-
over-year individual product growth trends. If any of our ratios, factors, assessments, experiences or judgments
are not indicative or accurate predictors of our future experience, our results could be materially affected. The
sensitivity of our estimates can vary by program, type of customer and geographic location.
Impairment of Goodwill and Intangible Assets
We review long-lived intangible assets for impairment whenever events or changes in circumstance
indicate that the asset’s balance sheet carrying amount may not be recoverable. Goodwill and other currently not
amortized intangible assets are reviewed for impairment at least annually.
Assets are generally considered impaired when their balance sheet carrying amount exceeds their
estimated recoverable amount. The recoverable amount is estimated for each individual asset or at the larger
cash-generating unit level when cash is generated in combination with other assets. Goodwill is allocated to cash-
generating units based on expected synergies as determined and the recoverable amount is estimated at the cash-
generating unit level. Our cash generating units are identified base on the smallest identifiable group of assets
that generate independent cash inflows and are represented by the regions where we sell our products. The
estimation of recoverable value requires us to make a number of assumptions including:
•
•
•
amount and timing of projected future cash flows;
behavior of competitors (launch of competing products, marketing initiatives, etc.);
probability of obtaining regulatory approvals;
82
•
•
•
future tax rates;
terminal growth rate; and
discount rate.
Due to changes in these assumptions in subsequent periods we have recognized impairments and
reversal of impairments during the periods presented. See Notes 11 and 12 to our consolidated financial
statements.
As of March 31, 2018 we have ¥1,029.2 billion of goodwill and ¥1,014.3 billion of intangible assets
which in aggregate represent 49.8% of our total assets. A change in the estimates used to calculate recoverable
value could have a material impact on our consolidated financial statements.
Retirement and Other Post-employment Benefit Plans
We sponsor pension and other post-employment benefit plans that cover a significant portion of our
employees. We are required to make significant assumptions and estimates about future events in calculating the
expense and the present value of the liability related to these plans. These include assumptions about the interest
rates we apply to estimate future defined benefit obligations and net periodic pension expense, as well as rates of
future pension increases. In addition, our actuarial consultants provide our management with historical statistical
information such as withdrawal and mortality rates in connection with these estimates.
Assumptions and estimates used by us may differ materially from the actual results we experience due
to changing market and economic conditions, higher or lower withdrawal rates, and longer or shorter life spans of
participants among other factors. See Note 22 to our consolidated financial statements for sensitivity information
related to the most significant assumptions.
A significant change in the assumption in future periods could have a material
impact on our
consolidated financial statements.
Contingent Liabilities
We are involved in various legal proceedings primarily related to product liability and commercial
liability arising in the normal course of our business. These contingencies are described in detail in Note 32 to
our consolidated financial statements.
These and other contingencies are, by their nature, uncertain and based upon complex judgments and
probabilities. The factors we consider in developing our provision for litigation and other contingent liability
amounts include the merits and jurisdiction of the litigation, the nature and the number of other similar current
and past litigation cases, the nature of the product and the current assessment of the science subject to the
litigation, and the likelihood of settlement and current state of settlement discussions, if any. In addition, we
record a provision for product liability claims incurred, but not filed, to the extent we can formulate a reasonable
estimate of their costs based primarily on historical claims experience and data regarding product usage. We also
consider the insurance coverage we have to diminish the exposure for periods covered by insurance. In assessing
our insurance coverage, we consider the policy coverage limits and exclusions, the potential for denial of
coverage by the insurance company, the financial condition of the insurers, and the possibility of and length of
time for collection. Any provision and the related estimated insurance recoverable have been reflected on a gross
basis as liabilities and assets, respectively, on our consolidated balance sheets.
At March 31, 2018, we have a provision of ¥23.2 billion for outstanding legal cases and other disputes.
A change in our assessment related to the factors used to estimate the provision (as described above) could have
a material impact on our financial statements in future periods.
83
Income Taxes
We prepare and file our tax returns based on an interpretation of tax laws and regulations, and we record
estimates based on these judgments and interpretations. In the normal course of business, our tax returns are
subject to examination by various taxing authorities, which may result in additional tax, interest or penalty
assessment by these authorities. Inherent uncertainties exist in estimates of many tax positions due to changes in
tax law resulting from legislation, regulation, and/or as concluded through the various jurisdictions’ tax court
systems. When we conclude that it is not probable that a taxing authority will accept an uncertain tax position,
we recognize the best estimate of the expenditure required to settle a tax uncertainty. The amount of
unrecognized tax benefits is adjusted for changes in facts and circumstances. For example, adjustments could
result from significant amendments to existing tax law, the issuance of regulations or interpretations by the
taxing authorities, new information obtained during a tax examination, or resolution of a tax examination. We
believe our estimates for uncertain tax positions are appropriate and sufficient based on currently known facts
and circumstances.
We also assess our deferred tax assets to determine the realizable amount at the end of each period. In
assessing the recoverability of deferred tax assets, we consider the scheduled reversal of taxable temporary
differences, projected future taxable profits, and tax planning strategies. Based on the level of historical taxable
profits and projected future taxable profits during the periods in which the temporary differences become
deductible, we determine the amount the tax benefits we believe are realizable. At March 31, 2018, we had
unrecognized deferred tax benefits of ¥19.7 billion. A change in our assumptions in future periods could have a
significant impact on our income tax provision.
Our income tax expense is also impacted by any change in the tax rate applied to our deferred tax assets
and liabilities. During the year ended March 31, 2018, our effective tax rate was reduced by 12.6% due to change
in tax rates including the impact of the tax reform in the United States.
Business Combination
Accounting for a business combination requires us to estimate the fair value of the assets and liabilities
acquired and the value of any contingent consideration. The estimate of fair value requires us to make a number
of assumptions including estimated future cash flows, discount rates, development and approval milestones,
expected market performance and for contingent consideration the likelihood of payment.
Contingent consideration is recorded at fair value at the end of each period. The changes in the fair
value based on time value of money are recognized in “Finance expenses” while other changes are recognized in
“Other operating income” or “Other operating expenses” on the consolidated statement of income. During the
year ended March 31, 2018, the change in fair value of contingent consideration resulted in the recording of an
additional ¥12.8 billion to be paid by us.
84
Results of Operations
The following table provides selected consolidated statements of income information for the years
ended March 31, 2016, 2017 and 2018.
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . .
Research and development expenses . . . . . . . . . . . . . . .
Amortization and impairment losses on intangible
assets associated with products . . . . . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . .
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share of profit (loss) of investments accounted for using
the equity method . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the fiscal year ended March 31,
2016
2017
2018
¥1,807.4
(535.2)
(650.8)
(335.8)
(Billions of yen)
¥1,732.1
(558.8)
(619.1)
(312.3)
¥1,770.5
(495.9)
(628.1)
(325.4)
(131.8)
21.3
(44.4)
130.8
21.6
(31.9)
(0.0)
120.5
(37.1)
83.5
(156.7)
143.5
(72.9)
155.9
12.3
(23.2)
(1.5)
143.3
(27.8)
115.5
(122.1)
169.4
(126.6)
241.8
39.5
(31.9)
(32.2)
217.2
(30.5)
186.7
Fiscal Year Ended March 31, 2018 compared with the Fiscal Year Ended March 31, 2017
Revenue. Revenue increased ¥38.5 billion, or 2.2%, from ¥1,732.1 billion for the fiscal year ended
March 31, 2017 to ¥1,770.5 billion for the fiscal year ended March 31, 2018. During the fiscal year ended
March 31, 2018, our revenue decreased by ¥94.3 billion as a result of divestitures, which primarily consisted of
¥79.1 billion attributable to the divestiture of Wako Pure Chemical in April 2017 and ¥11.1 billion attributable to
the termination of the commercialization agreement for CONTRAVE in the U.S. in August 2016. Excluding the
impact of divestitures, our revenues increased by ¥132.8 billion primarily due to growth in our core therapeutic
areas of GI, oncology and neuroscience, which includes the favorable impact of the strengthening of the
U.S. dollar and Euro against the yen as compared to the prior year.
Change in revenue in our three key therapeutic areas of GI, oncology and neuroscience was primarily
attributable to the following products:
•
•
GI. In the therapeutic area of GI, revenue grew 23.5% compared to the previous fiscal year.
Revenue attributable to ENTYVIO was ¥201.4 billion in the fiscal year ended March 31, 2018, an
increase of ¥58.2 billion, or 40.6%, compared to the previous fiscal year as a result of increase in
sales volume, making ENTYVIO our top-selling product. Revenue attributable to TAKECAB was
¥48.5 billion (or ¥55.1 billion on a gross basis) in the fiscal year ended March 31, 2018, compared
to ¥34.1 billion on a gross basis in the previous fiscal year, with prescriptions in Japan as a result of
a higher overall volume due to TAKECAB’s efficacy in reflux esophagitis and the prevention of
recurrence of gastric ulcers during low-dose aspirin administration.
Oncology. In the therapeutic area of oncology, revenue grew 14.6% compared to the previous fiscal
year. Revenue attributable to NINLARO was ¥46.4 billion, an increase of ¥17.1 billion, or 58.1%
compared to the previous fiscal year, reflecting market penetration across several regions,
particularly in the United States. Revenue attributable to ICLUSIG, which was obtained through the
85
acquisition of ARIAD in February 2017, was ¥23.1 billion, its first full-year contribution to our
revenue growth in this key therapeutic area. ALUNBRIG, also obtained through the acquisition of
ARIAD, was launched in the United States in May 2017, and revenue attributable to it in the fiscal
year ended March 31, 2018 was ¥2.8 billion. Revenue attributable to VELCADE decreased slightly
to ¥137.3 billion in the fiscal year ended March 31, 2018 from ¥137.6 billion in the previous fiscal
year.
•
Neuroscience. In the therapeutic area of neuroscience, revenue grew 24.5% compared to the
previous fiscal year. Revenue attributable to TRINTELLIX was ¥48.4 billion, an increase of
¥16.5 billion, or 51.6%, versus the previous year, reflecting higher volumes as a result of expansion
of market share in the U.S. branded antidepressant market, driven by our patient engagement
initiatives.
Cost of sales. Cost of sales decreased ¥62.8 billion, or 11.2%, from ¥558.8 billion for the fiscal year
ended March 31, 2017 to ¥495.9 billion for the fiscal year ended March 31, 2018. Cost of sales as a percentage of
revenue decreased from 32.3% in the fiscal year ended March 31, 2017 to 28.0% in the fiscal year ended
March 31, 2018. The decreases in cost of sales, both overall and relative to revenues, was primarily due to the
disposition of Wako Pure Chemical in April 2017, which generally had lower-margin products, as well as the
effect of other changes to our product mix due to the faster growth of higher margin products, such as ENTYVIO
and NINLARO, relative to other products.
Selling, general and administrative expenses. Selling, general and administrative expenses increased
¥9.0 billion, or 1.5%, from ¥619.1 billion for the fiscal year ended March 31, 2017 to ¥628.1 billion for the fiscal
year ended March 31, 2018, mainly due to increased long-term incentive payments to management, higher
co-promotion expenses related to increased sales of TAKECAB in Japan and higher compensation costs, which
contributed ¥2.6 billion, ¥4.8 billion and ¥3.8 billion, respectively. However, selling, general and administrative
expenses increased at a lower rate than revenue, reflecting our overall cost reduction efforts.
Research and development expenses. Research and development expenses increased ¥13.1 billion, or
4.2%, from ¥312.3 billion for the fiscal year ended March 31, 2017 to ¥325.4 billion for the fiscal year ended
March 31, 2018, mainly due to our pursuit of increased research and development projects and the effect of a
weaker Japanese yen.
Amortization and impairment losses on intangible assets associated with products. Amortization and
losses on intangible assets associated with products decreased ¥34.6 billion, or 22.1%, from
impairment
¥156.7 billion for the fiscal year ended March 31, 2017 to ¥122.1 billion for the fiscal year ended March 31,
2018. This was primarily driven by a decrease of impairment losses on intangible assets of ¥48.2 billion,
including a ¥22.6 billion reversal of the previous impairment related to COLCRYS, reflecting updated estimates
about the amount of impairment due to better-than-expected sales performance. This was offset in part by
increased amortization of intangible assets of ¥13.6 billion, resulting from the inclusion of amortization of
intangible assets acquired in the ARIAD acquisition.
Other operating income. Other operating income increased by ¥25.9 billion, or 18.0%,
from
¥143.5 billion for the fiscal year ended March 31, 2017 to ¥169.4 billion for the fiscal year ended March 31,
2018, driven mainly by ¥106.3 billion representing a gain on the sale of Wako Pure Chemical in April 2017,
¥27.5 billion representing a gain on divestments to Teva Takeda Yakuhin Ltd. and ¥18.8 billion representing a
gain on sales of property, plant and equipment and investment property. Other operating income in the previous
fiscal year was primarily driven by a ¥115.4 billion gain on divestments to Teva Takeda Yakuhin Ltd and a
¥12.0 billion gain from the reversal of contingent consideration liability reflecting decreased expected sales of
COLCRYS.
Other operating expenses. Other operating expenses increased ¥53.7 billion, or 73.6%, to ¥126.6 billion
for the fiscal year ended March 31, 2018, as compared to ¥72.9 billion for the fiscal year ended March 31, 2017.
86
This was driven by a loss on liquidation of a foreign subsidiary of ¥41.5 billion primarily reflecting the
recognition of cumulative translation losses and an increase in fair value of contingent consideration of
¥10.5 billion driven by an increase in projected sales primarily for COLCRYS.
Operating profit. As a result of the above factors, operating profit increased ¥85.9 billion, or 55.1%,
from ¥155.9 billion for the fiscal year ended March 31, 2017 to ¥241.8 billion for the fiscal year ended March 31,
2018.
Profit before tax. As a result of the above factors, profit before tax increased ¥73.9 billion, or 51.5%,
from ¥143.3 billion for the fiscal year ended March 31, 2017 to ¥217.2 billion for the fiscal year ended March 31,
2018.
Income tax (expenses). Income tax expenses increased ¥2.7 billion, or 9.6%, from ¥27.8 billion for the
fiscal year ended March 31, 2017 to ¥30.5 billion for the fiscal year ended March 31, 2018. This increase was
mainly due to the tax impact of ¥22.8 billion resulting from the increase in profit before tax compared to the
previous fiscal year, as well as the effect of additional tax benefits recognized for the year ended March 31, 2017,
resulting from reduction of share capital of a subsidiary, which was responsible for an increase of ¥8.9 billion.
These increases were offset in part by the positive impact of the enactment of U.S. tax reforms, principally
related to the revaluation of net deferred tax liability at a lower enacted tax rate and improved recoverability of
deferred tax assets, which resulted in a decrease of ¥27.5 billion.
Net profit for the year. As a result of the above factors, net profit for the year increased ¥71.2 billion, or
61.6%, from ¥115.5 billion for the fiscal year ended March 31, 2017 to ¥186.7 billion for the fiscal year ended
March 31, 2018.
Fiscal Year Ended March 31, 2017 compared with the Fiscal Year Ended March 31, 2016
Revenue decreased ¥75.3 billion, or 4.2%, from ¥1,807.4 billion for the fiscal year ended March 31,
2016 to ¥1,732.1 billion for the fiscal year ended March 31, 2017. ¥69.3 billion of this decrease in revenue
resulted from divestitures, including the sale of our respiratory portfolio to AstraZeneca and the transfer of long-
listed products in Japan to Teva Takeda Yakuhin Ltd. The unfavorable impact of changes in foreign exchange
rates, primarily a 10% strengthening of Japanese yen compared to U.S. dollar, contributed an additional
¥125.4 billion to the decrease in revenue. These decreases were partially offset by sales growth in our product
portfolio, excluding the effect of foreign exchange rates and divestures, of ¥119.4 billion, which was
concentrated in our core therapeutic areas of GI, oncology and neuroscience.
The main drivers for the increase in revenue in our three key therapeutic areas of GI, oncology and
neuroscience (including the effect of foreign exchange rate fluctuations) were as follows:
•
•
GI. In the therapeutic area of GI, revenue attributable to ENTYVIO was ¥143.2 billion in the fiscal
year ended March 31, 2017, an increase of ¥57.0 billion, or 66.2%, compared to the previous fiscal
year, making ENTYVIO our
top-selling product. Revenue attributable to TAKECAB was
¥34.1 billion in the fiscal year ended March 31, 2017, an increase of ¥25.7 billion, reflecting its
rapid penetration into the Japanese market following the expiration of regulatory limitations on
continued use in Japan. This increase was partially offset by a decline in sales of ¥12.5 billion for
DEXILANT.
Oncology. In the therapeutic area of oncology, revenue attributable to NINLARO was ¥29.4 billion,
an increase of ¥25.3 billion, reflecting strong adoption in the United States. Revenue attributable to
ICLUSIG, which was obtained through the acquisition of ARIAD in February 2017, was
¥2.9 billion. Revenue attributable to VELCADE decreased by ¥24.5 billion, or 15.1%,
to
¥137.6 billion in the fiscal year ended March 31, 2017, reflecting the negative effect of foreign
exchange rate fluctuation and decrease in sales volume during the fiscal year ended March 31,
2017.
87
•
Neuroscience. In the therapeutic area of neuroscience, revenue attributable to TRINTELLIX was
¥31.9 billion, an increase of ¥7.4 billion, or 30.1%, versus the previous year, reflecting expanded
share of the U.S. branded antidepressant market.
Cost of sales. Cost of sales increased ¥23.6 billion, or 4.4%, from ¥535.2 billion for the fiscal year
ended March 31, 2016 to ¥558.8 billion for the fiscal year ended March 31, 2017. Cost of sales as a percentage of
revenue increased from 29.6% in the fiscal year ended March 31, 2016 to 32.3% in the fiscal year ended
March 31, 2017. The increase in cost of sales was primarily driven by changes in our product mix reflecting the
sale of certain long-listed high-margin products to Teva Takeda Yakuhin Ltd.
Selling, general and administrative expenses. Selling, general and administrative expenses decreased
¥31.7 billion, or 4.9%, from ¥650.8 billion for the fiscal year ended March 31, 2016 to ¥619.1 billion for the
fiscal year ended March 31, 2017. However, selling, general and administrative expenses as a percentage of sales
remained consistent during the fiscal year ended March 31, 2018 compared to the fiscal year ended March 31,
2017.
Research and development expenses. Research and development expenses decreased ¥23.5 billion, or
7.0%, from ¥335.8 billion for the fiscal year ended March 31, 2016 to ¥312.3 billion for the fiscal year ended
March 31, 2017, due mainly to the favorable impact of a stronger yen.
Amortization and impairment losses on intangible assets associated with products. Amortization and
losses on intangible assets associated with products increased ¥24.9 billion, or 18.9%, from
impairment
¥131.8 billion for the fiscal year ended March 31, 2016 to ¥156.7 billion for the fiscal year ended March 31,
2017, mainly due to a ¥16.0 billion impairment loss related to COLCRYS recognized due to a decline in sales and
a ¥7.9 billion impairment loss related to TAK-117 due to the project’s termination.
Other operating income. Other operating income increased by ¥122.2 billion from ¥21.3 billion for the
fiscal year ended March 31, 2016 to ¥143.5 billion for the fiscal year ended March 31, 2017, mainly due to a
¥102.9 billion gain relating to the transfer of certain long-listed products in Japan to Teva Takeda Yakuhin Ltd.
and a ¥12.0 billion gain from the reversal of contingent consideration liability reflecting decreased expected sales
of COLCRYS.
Other operating expenses. Other operating expenses increased ¥28.5 billion, or 64.2%, to ¥72.9 billion
for the fiscal year ended March 31, 2017, as compared to ¥44.4 billion for the fiscal year ended March 31, 2016,
mainly due to an increase of ¥28.8 billion in restructuring expenses, including expenses incurred as a result of
our research and development transformation initiative described under “—C. Research and Development,
Patents and Licenses, etc.”
Operating profit. As a result of the above factors, operating profit increased ¥25.0 billion, or 19.1%,
from ¥130.8 billion for the fiscal year ended March 31, 2016 to ¥155.9 billion for the fiscal year ended
March 31, 2017.
Profit before tax. As a result of the above factors, profit before tax increased ¥22.8 billion, or 18.9%,
from ¥120.5 billion for the fiscal year ended March 31, 2016 to ¥143.3 billion for the fiscal year ended March 31,
2017.
Income tax (expenses). Income tax expenses decreased ¥9.2 billion, or 24.9%, from ¥37.1 billion for the
fiscal year ended March 31, 2016 to ¥27.8 billion for the fiscal year ended March 31, 2017. The decrease was
mainly due to a lower Japanese statutory tax rate and favorable geographical mix of earnings as well as a tax
provision during the previous fiscal year related to the revaluation of net deferred tax assets in Japan at a lower
enacted rate. These decreases, which totaled ¥29 billion, were partially offset by an increase of ¥13.7 billion due
to lower tax credits and ¥5.6 billion due to lower tax benefits from deduction of share capital basis in the current
fiscal year.
88
Net profit for the year. As a result of the above factors, net profit for the year increased ¥32.0 billion, or
38.4%, from ¥83.5 billion for the fiscal year ended March 31, 2016 to ¥115.5 billion for the fiscal year ended
March 31, 2017.
Certain Non-IFRS Performance Measures
In addition to our reported financial results prepared under IFRS, we also prepare and disclose EBITDA
and Adjusted EBITDA, which are measures not prepared in accordance with IFRS. We present EBITDA and
Adjusted EBITDA because we believe that these measures are useful to investors as they are frequently used by
securities analysts, investors and other interested parties in the evaluation of companies in our industry. We
further believe that Adjusted EBITDA is helpful to investors in identifying trends in our business that could
otherwise be obscured by certain items unrelated to ongoing operations because they are highly variable, difficult
to predict, may substantially impact our results of operations and may limit
the ability to evaluate our
performance from one period to another on a consistent basis.
The usefulness of EBITDA and Adjusted EBITDA to investors has limitations including, but not limited
to, (i) they may not be comparable to similarly titled measures used by other companies, including those in our
industry, (ii) they exclude financial information and events, such as the effects of an acquisition or amortization
of intangible assets, that some may consider important in evaluating our performance, value or prospects for the
future, (iii) they exclude items or types of items that may continue to occur from period to period in the future
and (iv) they may not exclude all items, which could increase or decrease these measures, which investors may
consider to be unrelated to our long-term operations, such as the results of businesses divested during a period.
These non-IFRS measures should not be considered in isolation and are not, and should not be viewed as,
substitutes for income, net profit for the year or any other measure of performances presented in accordance with
IFRS. We encourage investors to review our historical financial statements in their entirety and caution investors
to use IFRS measures as the primary means of evaluating our performance, value and prospects for the future,
and EBITDA and Adjusted EBITDA as supplemental measures.
EBITDA and Adjusted EBITDA
We define EBITDA as net profit before income tax expenses, depreciation and amortization and net
interest expense. We define Adjusted EBITDA as EBITDA further adjusted to exclude impairment losses, other
operating expenses and income (excluding depreciation and amortization), finance expenses and income
(excluding net interest expense), our share of loss from investments accounted for under the equity method and
other items that management believes are unrelated to our core operations such as purchase accounting effects
and transaction related costs.
The following table provides a reconciliation from net profit to EBITDA and Adjusted EBITDA for the
fiscal years ended March 31, 2016, 2017 and 2018.
Net profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expense (income), net, excluding depreciation
For the fiscal year ended March 31,
2016
2017
2018
¥ 83.5
37.1
182.2
3.0
¥305.8
15.2
(billions of yen)
¥115.5
27.8
171.4
5.5
¥320.2
51.4
¥186.7
30.5
182.1
6.8
¥406.1
13.5
and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.0
(78.3)
(61.1)
Finance expense (income), net, excluding interest income and
expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.3
5.4
(14.4)
89
Share of loss on investments accounted for under the equity
method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other adjustments: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on deconsolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs related to the acquisition of ARIAD . . . . .
Impact on profit related to fair value step up of inventory in
For the fiscal year ended March 31,
2016
2017
2018
(billions of yen)
0.0
6.3
—
1.5
—
—
3.2
32.2
—
—
—
ARIAD acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
¥351.6
—
¥303.4
1.4
¥377.7
B.
Liquidity and Capital Resources.
Cash Requirements
Our cash and capital requirements are related mainly to our operating cash requirements, capital
expenditures, contractual obligations, repayment of indebtedness and payment of interest and dividends.
We intend to fund the cash portion of the consideration for the Shire Acquisition through the incurrence
of new indebtedness. See “—Financing Arrangements for the Shire Acquisition.”
Operating Cash Requirements
We require cash on an ongoing basis to finance our regular operations. Our cash outlays mainly include
research and development expenses, milestone payments, sales and marketing expenses, personnel and other
general and administrative costs and raw material costs. Income tax payments also require significant cash
outlays as well as working capital financing.
Capital Expenditures
Our capital expenditures for tangible assets meeting new regulatory requirements consist primarily of
enhancing and streamlining our production facilities, replacing fully depreciated items, and promoting efficiency
of our operations. Our capital expenditures for intangible assets represent mainly licensed products, where such
assets have been acquired from third-party partners, as well as software development expenditures. Our capital
expenditures (consisting of the additions to property, plant and equipment and intangible assets recorded on our
consolidated balance sheet) for the fiscal years ended March 31, 2016, 2017 and 2018 were ¥125.8 billion,
¥148.1 billion and ¥124.1 billion, respectively.
For the fiscal year ended
March 31,
2016
2017
2018
Tangible assets(1)
Intangible assets(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 94.0
31.8
(billions of yen)
¥ 72.4
75.7
¥ 74.5
49.5
Total(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥125.8
¥148.1
¥124.1
Note:
(1) Excludes acquisitions through business combinations.
As of March 31, 2018, we had contractual commitments for the acquisition of property, plant and
equipment of ¥14.1 billion. We intend to fund such commitments with cash on hand.
90
Financing Obligations
We have outstanding indebtedness of ¥1,038.8 billion as of March 31, 2018 and our total interest
expense for the fiscal years ended March 31, 2016, 2017 and 2018 was ¥5.3 billion, ¥7.6 billion and
¥10.0 billion, respectively.
Our long-term loans included above include the following covenants:
•
•
Our profit before tax must not be a negative number for two consecutive years; and
Our total equity (excluding foreign currency translation adjustments) on a quarterly basis must be at
least 75% of our total equity (excluding foreign currency translation adjustments) reflected in our
balance sheet for two consecutive quarters.
Other than as described above or under “—Financing Arrangements for the Shire Acquisition” below,
our outstanding loans, bonds and finance lease obligations do not contain any financial covenants or restrictions
on the payment of dividends, the incurrence of indebtedness (other than limited negative pledges), or the issuance
or repurchase of our securities. As of March 31, 2018, none of our outstanding indebtedness is secured by any of
our property.
If the Shire Acquisition is completed successfully, we expect the balance of our debt to increase
significantly due to the effect of both of our financing arrangements for the Shire Acquisition and the inclusion of
the indebtedness of Shire into our consolidated balance sheet. We plan to de-lever following the Shire
Acquisition, with a target rate of net debt to Adjusted EBITDA of 2.0x or less within three to five years
following completion of the Shire Acquisition, and are considering selected disposals of non-core assets to
increase the pace of deleveraging. We expect that interest expense would increase significantly in future fiscal
years until we achieve this deleveraging.
Financing Arrangements for the Shire Acquisition
Bridge Credit Agreement
On May 8, 2018, we entered into the Bridge Credit Agreement, with aggregate commitments of
$30.85 billion with, among others, JPMorgan Chase Bank N.A., Sumitomo Mitsui Banking Corporation and
MUFG Bank, Ltd. The commitments under the Bridge Credit Agreement were reduced by the amount of
commitments under the Term Loan Credit Agreement described below of $7.5 billion, further reduced by
$4.5 billion upon the signing of the ¥500.0 billion SSTL, further reduced in reference to the net aggregate
principal amount of the 2018 Notes and further reduced by $3.7 billion following the signing of the JBIC Loan.
We do not expect to further refinance the commitments under the Bridge Credit Agreement prior to the
completion of the Shire Acquisition, and do not currently intend to draw upon the Bridge Credit Agreement,
although we retain the ability to do so.
The Bridge Credit Agreement includes mandatory prepayment and cancellation provisions, which would
be triggered by such financing options, as well as by asset sales and equity issuances (in each case subject to
customary exceptions). The proceeds of the Bridge Credit Agreement, if drawn upon, will be used primarily to
fund the cash portion of the consideration payable to Shire shareholders in connection with the Shire Acquisition,
as well as to pay a portion of related expenses and to refinance a portion of the existing indebtedness of Shire and
its subsidiaries. The Bridge Credit Agreement is unsecured. The remaining commitments under the Bridge Credit
Agreement, if drawn upon, have a maturity of 90 days from the date, following the day after completion of the
Shire Acquisition, when all conditions precedent to drawing under the Bridge Credit Agreement are satisfied or
waived in accordance with the terms of the Bridge Credit Agreement. The Bridge Credit Agreement is filed as an
exhibit to this registration statement.
As long as any loans are drawn or commitments are outstanding under the Bridge Credit Agreement, we
will be subject to certain covenants, including customary covenants regarding compliance with law, payment of
91
taxes, bookkeeping and reporting, as well as covenants to complete the Shire Acquisition as planned. We will
also be subject to the following covenants:
•
•
a “negative pledge,” under which we and our consolidated subsidiaries (including, after the
completion of the Shire Acquisition, Shire), will not incur or suffer to be incurred liens over our
properties to secure any indebtedness, subject to certain exceptions, such that the total amount of
indebtedness secured by such liens exceeds $2.5 billion at the time of incurrence; and
as of March 31 and September 30 of each year (or June 30 and December 31 of each year, if we
change our fiscal year end to December 31), beginning on September 30, 2019 at the earliest (or
June 30, 2019 at the earliest, in the case of a December 31 fiscal year end) to not allow our ratio of
Consolidated Net Debt (as defined in the Bridge Credit Agreement) to Consolidated EBITDA (as
defined in the Bridge Credit Agreement) for the previous twelve-month period to surpass the
following levels:
•
September 30, 2019 (or June 30, 2019 and December 31, 2019, in the case of a December 31
fiscal year end): 5.95 to 1.00; and
• March 31, 2020 (or June 30, 2020, in the case of a December 31 fiscal year end) and thereafter:
5.35 to 1.00.
Term Loan Credit Agreement
On June 8, 2018, we entered into the Term Loan Credit Agreement for an aggregate principal amount of
$7.5 billion with, among others, JPMorgan Chase Bank N.A., Sumitomo Mitsui Banking Corporation, MUFG
Bank, Ltd. and Mizuho Bank, Ltd. The commitments under the Bridge Credit Agreement were reduced by the
$7.5 billion amount of commitments under the Term Loan Credit Agreement. The proceeds of the Term Loan
Credit Agreement will be used to fund a portion of the cash consideration payable to Shire shareholders in
connection with the Shire Acquisition. The Term Loan Credit Agreement is unsecured and will have a maturity
of five years from the date following the day after completion of the Shire Acquisition, when all conditions
precedent to drawing under the Term Loan Credit Agreement are satisfied or waived in accordance with its
terms. Upon the signing of the Term Loan Credit Agreement, we also entered into Amendment No. 1 to the
Bridge Credit Agreement, described above, to make certain technical and conforming changes thereto. The Term
Loan Credit Agreement and Amendment No. 1 to the Bridge Credit Agreement are filed as an exhibit to this
registration statement.
For as long as any loans are drawn or commitments are outstanding under the Term Loan Credit
Agreement, we will be subject to certain covenants, including customary covenants regarding compliance with
law, payment of taxes, bookkeeping and reporting, as well as covenants to complete the Shire Acquisition as
planned. We will also be subject to the following financial covenants:
•
•
a “negative pledge,” substantially similar to that under the Bridge Credit Agreement; and
as of March 31 and September 30 of each year (or June 30 and December 31 of each year, if we
change our fiscal year end to December 31), beginning on September 30, 2019 at the earliest (or
June 30, 2019 at the earliest, in the case of a December 31 fiscal year end), to not allow our ratio of
Consolidated Net Debt (as defined in the Term Loan Credit Agreement) to Consolidated EBITDA
(as defined in the Term Loan Credit Agreement) for the previous twelve-month period to surpass
the following levels:
•
September 30, 2019 (or June 30, 2019 and December 31, 2019, in the case of a December 31
fiscal year end): 5.95 to 1.00;
• March 31, 2020 and September 30, 2020 (or June 30, 2020 and December 31, 2020, in the case
of a December 31 fiscal year end): 5.35 to 1.00;
92
• March 31, 2021 and September 30, 2021 (or June 30, 2021 and December 31, 2021, in the case
of a December 31 fiscal year end): 4.30 to 1.00; and
• March 31, 2022 (or June 30, 2022, in the case of a December 31 fiscal year end) and thereafter:
4.00 to 1.00.
Senior Short Term Facility Agreement
On October 26, 2018, we entered into the SSTL, with an aggregate commitment of ¥500.0 billion, with
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd., Mizuho Bank, Ltd., The Norinchukin Bank and
Sumitomo Mitsui Trust Bank, Limited. The commitments under the Bridge Credit Agreement were reduced by
$4.5 billion. The proceeds of the loan under the SSTL will be used to fund a portion of the cash consideration
payable to Shire shareholders in connection with the Shire Acquisition. The SSTL is unsecured and will mature
one month, two months, three months or six months from the date of drawdown (at our option). Upon the signing
of the SSTL, we also entered into Amendment No. 2 to the Bridge Credit Agreement, described above, to make
certain technical changes thereto. The SSTL and Amendment No. 2 to the Bridge Credit Agreement have been
filed as an exhibit to this registration statement.
For as long as any loans are drawn or commitments are outstanding under the SSTL, we will be subject
to certain covenants,
including customary covenants regarding compliance with law, payment of taxes,
bookkeeping and reporting, as well as covenants to complete the Shire Acquisition as planned. We will also be
subject to a “negative pledge,” substantially similar to that under the Bridge Credit Agreement.
Subordinated Loan Agreement
On October 26, 2018, we entered into the Subordinated Loan Agreement, with aggregate commitments
of ¥500.0 billion, with Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd., Mizuho Bank, Ltd., The
Norinchukin Bank and Sumitomo Mitsui Trust Bank, Limited. The proceeds of the loan under the Subordinated
Loan Agreement (the “Subordinated Loan”), if drawn upon, will be used to refinance all or a part of any
indebtedness incurred pursuant to the SSTL described above. We may choose not to drawdown all or a part of
the Subordinated Loan if we obtain alternative financing. The Subordinated Loan is unsecured and will have a
maturity of 60 years from its drawdown date (the “Subordinated Closing Date”). Under the Subordinated Loan
Agreement, we may make an early repayment of all or part of the principal of the Subordinated Loan on any
interest payment date on or after the sixth anniversary of the Subordinated Closing Date.
Under the Subordinated Loan Agreement, interest is payable at the end of each six-month interest period
at a rate per annum equal to the sum of:
•
•
the published Japanese Yen TIBOR rate for a period equal in length to such interest period (or, if
such rate cannot be ascertained, certain customary fallback rates), plus
a percentage per annum determined by reference to periods from the Subordinated Closing Date as
set out below:
•
•
•
From the Subordinated Closing Date to the 10th anniversary of the Subordinated Closing Date,
2.00%;
From the 10th anniversary of the Subordinated Closing Date to the 26th anniversary of the
Subordinated Closing Date, 2.25%; and
After the 26th anniversary of the Subordinated Closing Date, 3.00%.
Under the Subordinated Loan Agreement, we may, at our discretion, defer all or a part of the payment of
interest on the Subordinated Loan, subject to certain mandatory payment clauses. As long as the Subordinated
Loan or commitments under the Subordinated Loan Agreement are outstanding, we will be subject to certain
93
covenants, including customary covenants regarding compliance with law, payment of taxes, bookkeeping and
reporting. The Subordinated Loan is unsecured and we have agreed not to provide any liens over our properties
(including providing options to set any liens over their properties) to secure any indebtedness under the
Subordinated Loan Agreement.
2018 Notes
On November 21, 2018, we issued Euro-denominated senior notes in the following series:
•
•
•
•
•
•
€1,250,000,000 aggregate principal amount of 0.375% Senior Notes due November 21, 2020,
€1,000,000,000 aggregate principal amount of the Senior Floating Rate Notes due November 21,
2020,
€1,500,000,000 aggregate principal amount of 1.125% Senior Notes due November 21, 2022,
€750,000,000 aggregate principal amount of the Senior Floating Rate Notes due November 21,
2022,
€1,500,000,000 aggregate principal amount of 2.250% Senior Notes due November 21, 2026, and
€1,500,000,000 aggregate principal amount of 3.000% Senior Notes due November 21, 2030.
Subsequently, on November 26, 2018, we issued dollar-denominated senior notes in the following
series:
•
•
•
•
$1,000,000,000 aggregate principal amount of 3.800% Senior Notes due November 26, 2020,
$1,250,000,000 aggregate principal amount of 4.000% Senior Notes due November 26, 2021,
$1,500,000,000 aggregate principal amount of 4.400% Senior Notes due November 26, 2023, and
$1,750,000,000 aggregate principal amount of 5.000% Senior Notes due November 26, 2028.
The 2018 Notes were issued in private placements in reliance on exemptions from registration under the
U.S. Securities Act of 1933 (the “Securities Act”). Interest on the series of 2018 Notes which are subject to fixed
rates is payable annually (in the case of the Euro-denominated 2018 Notes) or semi-annually (in the case of the
dollar-denominated 2018 Notes) in arrears. Interest on the series of 2018 Notes which are subject to floating rates
is determined by reference to three-month EURIBOR plus an applicable spread, reset quarterly, and is payable
quarterly in arrears. The proceeds of the 2018 Notes offerings will be used to fund part of the cash portion of the
consideration payable to Shire shareholders in connection with the Shire Acquisition. The commitments under
the Bridge Credit Agreement were reduced by reference to the amount of the proceeds of the Notes offerings.
to a Fiscal Agency Agreement, dated as of
The Euro-denominated 2018 Notes were issued pursuant
November 21, 2018, which is included as an exhibit hereto. The dollar-denominated 2018 Notes were issued
pursuant to an Indenture, dated as of November 26, 2018, which is included as an exhibit hereto.
Furthermore, the dollar-denominated 2018 Notes (but not the Euro-denominated 2018 Notes) are subject
to a Registration Rights Agreement, dated as of November 26, 2018, which is included as an exhibit hereto, and
under which we have agreed to file with the SEC and use commercially reasonable efforts to cause to become
effective a registration statement with respect to an offer to exchange the dollar-denominated 2018 Notes for
substantially identical notes (other than with respect to restrictions on transfer) that are registered under the
Securities Act pursuant to the terms of the Registration Rights Agreement. Under specified circumstances, we
have also agreed to use commercially reasonable efforts to cause to become effective a shelf registration
statement relating to resales of the dollar-denominated 2018 Notes. We will be obligated to pay additional
interest if we fail to comply with our obligations to register the dollar-denominated 2018 Notes within the
specified time periods.
94
The 2018 Notes are subject to special mandatory redemption at a redemption price equal to 101% of the
aggregate principal amount of the notes plus accrued and unpaid interest, if any, to, but excluding, the special
mandatory redemption date if: (i) the Shire Acquisition has not been consummated on or prior to the Long Stop
Date (as defined in the terms of the 2018 Notes); or (ii) if we otherwise publicly announce that the Shire
Acquisition will not be consummated.
Certain series of the fixed-rate 2018 Notes include our option to redeem them, in whole or in part, by a
make-whole call at the treasury rate plus a spread, up to a specified par call date, after which such notes may be
called at par. Notes which do not include such optional redemption feature will not be callable prior to the
specified par call date.
No security was offered in favor of the 2018 Notes. The 2018 Notes are subject to a “negative pledge”
under which we may not offer security over certain capital markets indebtedness of us or our principal
subsidiaries, as defined in the terms of the 2018 Notes.
JBIC Loan
On December 3, 2018, we entered into the JBIC Loan with the Japan Bank for International Cooperation
for an aggregate principal amount of up to $3.7 billion. The commitments under the Bridge Credit Agreement
were reduced by the $3.7 billion amount of commitments under the JBIC Loan. The proceeds of the JBIC Loan
will be used to fund a portion of the cash consideration payable to Shire shareholders in connection with the
Shire Acquisition and related fees, costs and expenses incurred by us. The JBIC Loan is unsecured and will
mature on December 11, 2025. The JBIC Loan is filed as an exhibit to this registration statement.
For as long as any loans are drawn or commitments are outstanding under the JBIC Loan, we will be
subject to certain covenants, including customary covenants regarding compliance with law, payment of taxes,
bookkeeping and reporting, as well as covenants to complete the Shire Acquisition as planned. We will also be
subject to the following financial covenants:
•
•
•
•
a “negative pledge,” substantially similar to that under the Bridge Credit Agreement;
as of March 31 and September 30 of each year (or June 30 and December 31 of each year, if we
change our fiscal year end to December 31), beginning on September 30, 2019 at the earliest (or
June 30, 2019 at the earliest, in the case of a December 31 fiscal year end), to not allow our ratio of
Consolidated Net Debt (as defined in the JBIC Loan) to Consolidated EBITDA (as defined in the
JBIC Loan) for the previous twelve-month period to surpass the following levels:
•
September 30, 2019: 5.95 to 1.00;
• March 31, 2020 and September 30, 2020: 5.35 to 1.00;
• March 31, 2021 and September 30, 2021: 4.30 to 1.00;
• March 31, 2022, September 30, 2022, March 31, 2023 and September 30, 2023: 4.00 to 1.00;
• March 31, 2024 and September 30, 2024: 3.75 to 1.00 (if the Term Loan Credit Agreement has
not matured, 4.00 to 1.00); and
• March 31, 2025 and thereafter: 3.50 to 1.00 (if the Term Loan Credit Agreement has not
matured, 4.00 to 1.00);
our total equity (excluding foreign currency translation adjustments) reflected on our balance sheet
as of the last day of our most recent fiscal year must be at least 75% of our total equity (excluding
foreign currency translation adjustments) reflected on our balance sheet as of the last day of the
second quarter of such fiscal year;
our total equity (excluding foreign currency translation adjustments) reflected on our balance sheet
as of the last day of the second quarter of our most recent fiscal year must be at least 75% of our
95
total equity (excluding foreign currency translation adjustments) reflected on our balance sheet as
of the last day of the preceding fiscal year; and
•
our profit before tax must not be negative for two consecutive years.
Capital Resources
In each of the fiscal years ended March 31, 2016, 2017 and 2018, cash flow generated by our operating
activities was sufficient to supply our working capital. We may also utilize the incurrence of short-term or long-
term indebtedness or sales of assets to generate capital.
Cash and cash equivalents was ¥319.5 billion as of March 31, 2017 and ¥294.5 billion as of March 31,
2018.
We believe that our sources of liquidity and capital resources are adequate for our present requirements
and business operations. We are seeking to ensure that our level of liquidity and access to capital resources
continue to be maintained in order for us to successfully conduct our future operations.
Dividend Policy
Our capital resource management is based on the four following focus areas:
•
•
•
•
investments in our internal research and development pipeline, foundational technology and ability
to develop and bring to market new products;
dividends as an important tool for returning capital to shareholders, while emphasizing capital gains
for shareholders through increased corporate value;
the maintenance of an investment-grade credit rating; and
disciplined alliances and acquisitions in order to strengthen our business around our key therapeutic
areas.
As noted above, the return of capital to shareholders is one focus area for our management, and we
believe our dividend policy is an important tool for accomplishing our goals. We have declared dividends of
¥180 per share, consisting of interim and fiscal year-end dividends of ¥90 per share each, in respect of each of
the fiscal years ended March 31, 2016, 2017 and 2018. Dividends are generally paid semi-annually, in the fiscal
quarter following the date on which they are declared. Dividends paid in the fiscal years ended March 31, 2016,
2017 and 2018 were ¥141.5 billion, ¥141.7 billion and ¥141.9 billion, respectively.
Consolidated Cash Flows
The following table shows information about our cash flows during the fiscal years ended March 31,
2016, 2017 and 2018:
Net cash from (used in) operating activities . . . . . . . . . . . . . . . . . . . .
Net cash from (used in) investing activities . . . . . . . . . . . . . . . . . . . . .
Net cash from (used in) financing activities . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . .
Cash and cash equivalents at the beginning of the year . . . . . . . . . . . .
Effects of exchange rate changes on cash and cash equivalents . . . . .
Net increase (decrease) in cash and cash equivalents resulting from a
transfer to assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at the end of the year . . . . . . . . . . . . . . . . .
96
For the fiscal year ended March 31,
2016
2017
2018
¥ 25.5
(71.2)
(124.8)
¥(170.6)
652.1
(33.3)
(billions of yen)
¥ 261.4
(655.7)
289.9
¥(104.4)
451.4
(5.7)
¥ 377.9
(93.3)
(326.2)
¥ (41.7)
319.5
(4.6)
3.1
451.4
(21.8)
319.5
21.3
294.5
Fiscal Year Ended March 31, 2018 compared with the Fiscal Year Ended March 31, 2017
Net cash from operating activities increased by ¥116.5 billion from ¥261.4 billion in the fiscal year
ended March 31, 2017 to ¥377.9 billion in the fiscal year ended March 31, 2018, primarily due to the impact of a
higher net profit of ¥71.2 billion and the effect of certain favorable non-cash expenses and other adjustments,
including a gain on divestment of a business of ¥87.9 billion, a loss on liquidation of foreign operations of ¥41.5
billion as well as a ¥30.7 billion loss relating to the share of loss of associates. Additional sources of operating
cash flow were a ¥9.8 billion decrease in inventories as a result of management effort to reduce inventory levels
during the fiscal year ended March 31, 2018. These sources of cash were partially offset by a higher impairment
loss of ¥37.8 billion in fiscal year ended March 31, 2017 and a gain on sale of a business of ¥106.6 billion during
the fiscal year ended March 31, 2018.
Net cash used in investing activities was ¥93.3 billion for the fiscal year ended March 31, 2018,
compared to ¥655.7 billion for the fiscal year ended March 31, 2017. This decrease was primarily attributable to
¥583.1 billion of net consideration paid for the acquisition of ARIAD in the fiscal year ended March 31, 2017.
The decrease also reflects the effect of a payment of ¥71.8 billion into a restricted cash account in the fiscal year
ended March 31, 2018 in preparation for the acquisition of TiGenix NV. This was offset by ¥84.5 billion
proceeds from the divestment of Wako Pure Chemical in the same fiscal year.
Net cash used in financing activities was ¥326.2 billion for the fiscal year ended March 31, 2018,
compared to net cash from financing activities of ¥289.9 billion for the fiscal year ended March 31, 2017. This
was primarily the result of repayments of ¥403.9 billion of short-term bridge loans, ¥337.2 billion of proceeds
from long-term loans related mainly to the refinancing of the bridge loan for the ARIAD acquisition, and
repayments of other long-term loans of ¥80.0 billion in the fiscal year ended March 31, 2018, compared to
¥407.0 billion of proceeds primarily from such short-term bridge loans in the previous fiscal year.
Fiscal Year Ended March 31, 2017 compared with the Fiscal Year Ended March 31, 2016
Net cash from operating activities increased by ¥235.9 billion to ¥261.4 billion in the fiscal year ended
March 31, 2017 compared to ¥25.5 billion in the fiscal year ended March 31, 2016. The increase was primarily
due to the impact of a higher net profit of ¥32.0 billion as well as the favorable effect of a non-cash impairment
loss of ¥36.2 billion. Cash generated by operating activities was also favorably affected by the payment of
¥289.1 billion settlement for the ACTOS litigation during fiscal year ended March 31, 2016, favorable changes in
working capital, including a decrease of inventory of ¥10.7 billion as a result of management effort to reduce
inventory levels, as well as an increase of accounts payable of ¥24.6 billion due to extended vendor payment
terms. These favorable changes were partially offset by an increase in accounts receivable of ¥49.7 billion,
mainly driven by higher sales during the fiscal year ended March 31, 2017, as well as the effect of a gain of
¥115.4 billion on divestment of a business.
Net cash used in investing activities was ¥655.7 billion for the fiscal year ended March 31, 2017,
compared to ¥71.2 billion for the fiscal year ended March 31, 2016. This increase was primarily attributable to
¥583.1 billion of net consideration paid for the acquisition of ARIAD.
Net cash from financing activities amounted to ¥289.9 billion for the fiscal year ended March 31, 2017,
compared to net cash used in financing activities of ¥124.8 billion for the fiscal year ended March 31, 2016. This
was primarily the result of an increase in short-term bridge loans of ¥407.0 billion related to the ARIAD
acquisition.
97
Credit Ratings
Our credit ratings, which reflect each rating agency’s opinion of our financial strength, operating
performance and ability to meet our obligations, as of the date of this registration statement are as follows:
Rating Agency
Category
S&P Global Ratings . . . . . . . . . . .
Issuer credit rating/foreign
currency long-term and local
currency long-term
Rating
A-
Rating Structure
Third highest of 11 rating
categories and third within the
category based on modifiers
(e.g. A+, A and A- are within the
same category).
Issuer credit rating (short-term) A-2
Moody’s . . . . . . . . . . . . . . . . . . . . Long-term issuer rating and
Long-term senior unsecured
rating
A2
Second highest of six rating
categories
Third highest of nine rating
categories and second highest
within the category based on
modifiers (e.g. A1, A2 and A3
are within the same category).
The ratings are not a recommendation to buy, sell or hold securities. The ratings are subject to revision
or withdrawal at any time by the assigning rating agency. Each of the financial strength ratings should be
evaluated independently.
In May 2018, Moody’s lowered our long-term issuer rating from A1 to A2, reflected in the table above,
reflecting their expectations for our overall levels of leverage in the future, even in the absence of the Shire
Acquisition. Furthermore, in May 2018, S&P Global Ratings announced that it was reviewing our credit ratings
with a view to a potential downgrade due to our decision to acquire Shire. S&P Global Ratings also stated that it
expects to take any potential ratings action after we complete the required legal procedures and close the
acquisition, and all related financing is in place. Any future downgrades of our credit ratings may negatively
affect our ability to refinance our existing debt or incur new borrowings on terms that we would consider to be
commercially reasonable.
C.
Research and Development, Patents and Licenses, etc.
Our research and development expenses totaled ¥335.8 billion, ¥312.3 billion and ¥325.4 billion for the
fiscal years ended March 31, 2016, 2017 and 2018, respectively. Research and development of pharmaceutical
products is a lengthy and expensive process that can span more than 10 years. Only a small fraction of
compounds that we research result in commercially viable products. The process includes evaluations of the new
drug’s efficacy and safety, application for approval, and investigation and approval by regulatory authorities. In
research and development for the pharmaceutical industry, the first two to three years of the process are generally
spent for discovery of a lead compound, followed by optimization of various aspects of the compound, including
toxicity and efficacy. The subsequent three to five years are spent investigating in detail the compound’s
efficacy, safety and pharmaceutical properties. Only a small number of compounds pass such detailed
investigation and are used to commence clinical
there is ongoing research and
development support for marketed products, including medical affairs and other investments.
trials. Once approved,
Clinical trials, which comply with regional and international regulatory guidelines, generally take five to
seven years or longer and require substantial expenditures. Furthermore, it has become increasingly important to
conduct clinical trials with a globally acceptable protocol to satisfy increased governmental safety requirements.
As a result, only a small fraction of compounds that enter the clinical trials results in commercially viable
products. In general, clinical trials are performed in accordance with the guidelines set by the International
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Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use.
The relevant regulatory authorities are the MHLW for Japan, the FDA for the United States and the EMA for the
EU.
The three phases of human clinical trials, which may overlap with each other, are as follows:
Phase I clinical trials
Phase II clinical trials
Phase III clinical trials
Conducted using a small group of healthy adult volunteers in order to evaluate
safety and absorption, distribution, metabolism and excretion of the drug.
Conducted using a small group of patient volunteers in order to evaluate safety,
efficacy, dosage and administration methods.
Conducted using a large number of patient volunteers in order to evaluate safety
and efficacy in comparison to other medications already available or placebo.
Of these three phases, Phase III requires the largest expenditures, and thus the decision to proceed with
Phase III testing is a critical business decision in the drug development process. For those drug candidates that
pass Phase III clinical trials, an NDA or a Marketing Authorization Application (“MAA”) is submitted to the
relevant governmental authorities for approval and subsequent launch of the drug. The preparation of an NDA or
MAA involves considerable data collection, verification, analysis and expense. In addition, while the review
process generally takes about 11 months in the United States for an NDA, about 14 months in the EU for an
MAA and generally 10 months in Japan for an NDA, there can be no assurance that approval from the relevant
health authority will be granted in a timely manner as the authorities may require additional information. Even
after the launch of the product, health authorities require post-marketing surveillance of adverse events, and they
may request a post-marketing study to provide additional information regarding the risks and benefits of the
product.
We are committed to transparency in conducting clinical trials and regularly publish information about
our clinical trials to benefit patients and to foster scientific discovery in a way that maintains patient privacy and
preserves the integrity of our research. Our transparency policies meet or exceed pharmaceutical industry’s
guidelines and best practices relating to clinical trial registration and results disclosure, including guidelines
issued by the International Federation of Pharmaceutical Manufacturers & Associations, the European Federation
of Pharmaceutical Industries and Associations (“EFPIA”), the Japan Pharmaceutical Manufacturers Association
and the Pharmaceutical Research and Manufacturers of America (“PhRMA”). Additionally, our policies meet or
exceed the transparency principles set out in the Principles for Responsible Clinical Trial Data Sharing that were
issued by EFPIA and PhRMA in July 2013. These five principles call for a broader sharing of clinical trial data in
ways that safeguard patient privacy, respect regulatory processes and oversight, and maintain incentives to invest
in biomedical research.
In July 2016, we announced our plans to transform our research and development organization by
refocusing our efforts on our key therapeutic areas (GI, oncology and neuroscience), plus vaccines.
As part of the refocusing of our research and development operations, we have concentrated our
in-house research and development operations in Japan and the United States. We believe that this transformation
in providing us with the necessary organizational and financial flexibility to drive
initiative was critical
innovation, enhance partnerships and improve our research and development productivity to provide long-term,
stable growth. An integral part of this transformation initiative is a concentrated effort to develop talent and
research capabilities internally, while creating a research and development operating model that will enable us to
access technological and other research breakthroughs from outside of Takeda or through collaborations with
third-party partners in academia, the private sector, the public sector or elsewhere. Focus areas for key capability
building include:
•
diversifying therapeutic modalities;
• moving beyond small molecules;
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bioinformatics and genomic research; and
translational medicine.
Our key in-house research and development facilities include:
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Shonan Research Center: Located in Fujisawa and Kamakura in Kanagawa Prefecture in Japan, the
Shonan Research Center was established in 2011 to be the center of our global research and
development network. The layout of the facility encourages communication and collaboration
across formal organizational boundaries in order to encourage the sharing of knowledge and to
stimulate innovation. In July 2017, we transferred part of our research operations located at the
Shonan Research Center to Axcelead Drug Discovery Partners, Inc. (“Axcelead”), a newly
established wholly-owned subsidiary. The operations transferred included some portion of our
molecular screening, chemistry, biology, drug metabolism and pharmacokinetics and nonclinical
safety research. We believe this reorganization will enable us to optimize organizational efficiency
with the aim of generating innovation. The newly established company will provide integrated
research support including drug discovery consulting for a broad range of diseases. The support will
range from exploratory research and optimizing candidate compounds, to bridging clinical research
not only internally, but also for external research institutions and bio-venture companies. In August
2018, we entered into an agreement with Whiz Partners, Inc. to create a joint investment fund called
Drug Discovery Gateway Investment Limited Partnership (“DDG Fund”), aimed at promoting a
drug discovery ecosystem in Japan. Under the terms of the agreement, Whiz Partners, Inc. has
established the DDG Fund and assumed the responsibilities of the general partner. We plan to
invest Axcelead in kind into the DDG Fund in return for limited partner shares. In April 2018, at the
Shonan Research Center, we opened a new research site and renamed it Shonan Health Innovation
Park (“Shonan iPark”). Shonan iPark aims to gather 3,000 researchers by the year 2020 and become
a place where experts from the pharmaceutical industry, including venture start-ups, government
and academia, can gather and incubate and accelerate research initiatives to create health solutions.
Boston Research and Development Base: Our Boston research and development base is located in
Cambridge, Massachusetts in the United States, the former site of Millennium, our wholly-owned
subsidiary that was rebranded as our Global Oncology business unit in 2014. Our Boston site is the
center of our oncology research and development and also supports research and development in
other areas including GI, neuroscience and vaccines, and research in immunomodulation and
biologics.
San Diego Research and Development Site: Our research and development base located in San
Diego, California in the United States supports research and development of specialized
technologies in the GI and neuroscience areas.
In addition to our concentrated efforts to increase our in-house research and development capabilities,
external partnerships with third-party partners are a key component of our strategy for enhancing our research
and development pipeline. In the fiscal year ended March 31, 2018, we entered into more than 50 such new
partnerships. We do not rely on any single partnership. Instead, our strategy is to expand and diversify our
external partnerships to allow ourselves to take part in research into a wide variety of new products, increasing
the chances that we will be able to take part in a major research-related breakthrough. Our research and
development collaborations as of June 30, 2018 include, but are not limited to, the following:
Oncology
•
Adimab, LLC (U.S.): We have entered into an agreement for the discovery, development and
commercialization of three monoclonal antibodies and three CD3 Bi-Specific antibodies for
oncology indications.
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Centre d’Immunologie de Marseille-Luminy (France): We have entered into an agreement to bring
together expertise of Bernard Malissen group in innate biology with Takeda’s BacTrap capabilities
to identify novel targets and pathways in myeloid cells.
Crescendo Biologics Ltd. (U.K.): We have entered into a collaboration and license agreement with
Crescendo Biologics Limited for the discovery, development and commercialization of therapeutics
for cancer indications based on Crescendo’s Humabody® technology. Humabodies® are a novel
class of extremely small in size, robust and potent protein therapeutics based on fully human VH
domain building blocks. The Humabody® platform can be used to develop cancer therapeutics
based on Humabody® Drug Conjugates and multi-specific Immuno-Oncology modulators.
Exelixis, Inc. (U.S.): We have entered into an exclusive licensing agreement with Exelixis, Inc. for
the commercialization and further clinical development in Japan of cabozantinib. We receive
exclusive commercial rights for all potential future cabozantinib indications in Japan, including
advanced renal cell carcinoma, for which cabozantinib is marketed in the U.S. and EU as
CABOMETYXTM tablets.
GammaDelta Therapeutics Ltd. (U.K.): We have entered into a collaboration agreement with
GammaDelta Therapeutics Ltd. (“GammaDelta”) to develop GammaDelta’s novel T cell platform,
which is based on the unique properties of gamma delta T cells derived from human tissues. The
companies intend to use this novel platform to discover and develop new immunotherapies, with
the aim of treating a broad range of cancers, including solid tumors, and autoinflammatory diseases.
Haemalogix (Australia): We have entered into a research collaboration and licensing agreement for
the development of new therapeutics to novel antigens in multiple myeloma.
Heidelberg Pharma GmbH (Germany): We have entered into an antibody-drug-conjugate research
collaboration on two targets and licensing agreement (α-amanitin payload and proprietary linker).
ImmunoGen, Inc. (U.S.): We have entered into a licensing agreement with ImmunoGen Inc.
(“Immunogen”) for exclusive rights to use ImmunoGen’s ADC technology to develop and
commercialize targeted anticancer therapeutics for up to two undisclosed targets.
• Maverick Therapeutics Inc. (U.S.): We have entered into an agreement with Maverick Therapeutics
Inc. (“Maverick”) to collaborate on the development of Maverick’s T-cell engagement platform
created specifically to improve the utility of T-cell redirection therapy for the treatment of cancer.
Under the agreement, we have the exclusive right to purchase Maverick after five years.
• Memorial Sloan Kettering Cancer Center (U.S.): We have entered into an alliance to discover and
develop novel chimeric antigen receptor T (“CAR-T”) cell products for the potential treatment of
hematological malignancies and solid tumors. This partnership pursues the development of
therapies that redirect T cell immunity against liquid or solid tumors.
• Mersana (U.S.): We have entered into agreements with Mersana relating to our collaboration to
develop cancer treatments based on Mersana’s ADC technology. Pursuant to this collaboration, we
and Mersana are developing cancer treatment based on Fleximer, Mersana’s ADC platform that
supports custom design an ADC. In 2016, we expanded our collaboration with Mersana and
obtained rights outside the United States and Canada to XMT-1522, an ADC therapy that targets
HER2-expressing tumors, including breast, gastric and NSCLC. Mersana is currently leading Phase
I trials for XMT-1522.
• Molecular Templates, Inc. (U.S.): We have entered into a collaboration agreement with Molecular
Templates, Inc. (“MTEM”) for oncology drug discovery programs. The collaboration will apply
MTEM’s engineered toxin bodies technology platform to potential
In
September 2018, this collaboration was expanded for the joint development and commercialization
of CD38-targeted engineered toxin bodies for the treatment of patients with diseases such as
multiple myeloma.
therapeutic targets.
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Nektar Therapeutics (U.S.): We have entered into a collaboration agreement with Nektar
Therapeutics (“Nektar”) to explore the combination of Nektar’s lead immuno-oncology candidate,
the CD122-biased agonist NKTR-214, with five oncology compounds from Takeda’s cancer
portfolio.
Noile-Immune Biotech Inc. (Japan): We have entered into a collaboration agreement with Noile-
Immune Biotech Inc. (“Noile-Immune”) to develop next generation CAR-T cell therapy. We will
have exclusive options to obtain licensing rights for the development and commercialization of
Noile-Immune’s pipeline and products resulting from this partnership.
Seattle Genetics, Inc. (U.S.): We entered into a licensing agreement with Seattle Genetics, Inc.
regarding ADCETRIS (brentuximab vedotin), an HL treatment. We jointly develop ADCETRIS with
Seattle Genetics, Inc. and have commercialization rights in countries outside the United States and
Canada. ADCETRIS was launched in the EU in 2012 and has been approved in 67 countries.
Clinical trials are currently being conducted for additional indications of ADCETRIS.
to explore and develop checkpoint
Shattuck Labs Inc. (U.S.): We have entered into a collaboration agreement with Shattuck Labs Inc.
(“Shattuck”)
fusion proteins using Shattuck’s Agonist
Redirected Checkpoint platform that have the potential to become highly differentiated, next-
generation immunotherapies. We will hold options for exclusive global development and
commercialization rights for up to four molecules resulting from the collaboration.
Tesaro, Inc. (U.S.): We have entered into an exclusive licensing agreement with Tesaro, Inc. for the
commercialization and clinical development of Niraparib, a novel poly ADP-ribose polymerase
inhibitor. The collaboration agreement grants us the right
to develop and commercialize all
indications in Japan and all indications, except prostate cancer, in South Korea, Taiwan, Russia and
Australia.
Industries Ltd.
Teva Pharmaceutical
(Israel): We entered into a multi-target discovery
collaboration with Teva Pharmaceutical Industries Ltd. (“Teva”) for access to Teva’s attenukine
platform including a license to TEV-48573, a CD38 targeted antibody fused with attenuated
interferon alpha for the treatment of MM.
Altos Therapeutics LLC (U.S.): We entered into a definitive agreement with Altos Therapeutics
LLC (“Altos”) to further the development of Altos’s proprietary compound ATC-1906. The
agreement includes an exclusive option for Takeda to acquire Altos beginning on the date of the
agreement and continuing for a period of time following the completion of ongoing Phase 1 studies
of ATC-1906. The parties envision future development of ATC-1906 for the treatment of GP and
its symptoms. We exercised the option in January 2017 and Altos is now a wholly-owned
subsidiary of Takeda.
Ambys Medicines (U.S.): We have entered into a partnership with Ambys Medicines (“Ambys”) to
collaborate on transformative therapies for the treatment of serious liver diseases. Ambys is
the
applying novel modalities, cell and gene therapy to restore liver function and prevent
progression to liver failure for diseases that are untreatable or poorly treated today. Under the terms
of the agreement, Takeda receives an option to ex-U.S. commercialization rights for the first four
products that reach an investigational NDA.
Arcturus Therapeutics, Inc. (U.S.): We have entered into an agreement with Arcturus Therapeutics,
Inc. to develop RNA-based therapeutics for the treatment of nonalcoholic steatohepatitis and other
gastrointestinal related disorders.
Beacon Discovery Inc. (U.S.): We have entered into a multi-year drug discovery collaboration with
Beacon Discovery Inc. (“Beacon”) on a number of G-protein coupled receptors (GPCRs) that play
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GI
an important role in the pathology of gastrointestinal disorders. Through the collaboration, Beacon
will leverage its GPCR drug discovery expertise to identify drug candidates for a range of GI
diseases with significant unmet medical need. The agreement grants Takeda worldwide rights to
develop, manufacture and commercialize products resulting from the collaboration.
Cour Pharmaceutical Development Company, Inc. (U.S.): We have entered into an agreement with
Cour Pharmaceutical Development Company, Inc. (“Cour”) to research and develop novel immune
modulating therapies for the potential treatment of celiac disease using nanotechnologies based on
Cour’s TIMP platform.
Emulate, Inc. (U.S.): We have entered into a collaboration for drug discovery for IBD using organ-
on-chip micro-engineered cell models.
Enterome Bioscience SA (France): We have entered into an agreement with Enterome Bioscience
SA for a strategic drug discovery collaboration to research and develop potential new therapeutics
directed at microbiome targets thought to play crucial roles in gastrointestinal disorders, including
IBDs such as ulcerative colitis and motility disorders such as irritable bowel syndrome.
Finch Therapeutics Group, Inc. (U.S.): We have entered into a global collaboration agreement with
Finch Therapeutics Group, Inc. (“Finch”), a microbiome engineering company, to jointly develop
FIN-524. FIN-524 is a live biotherapeutic product in pre-clinical research. It is composed of
cultured bacterial strains that have been linked to favorable clinical outcomes in studies of
microbiota transplantations in IBD. Under the terms of the agreement, we obtain the exclusive
worldwide rights to develop and commercialize FIN-524 and rights to follow-on products in IBD.
We and Finch may elect to extend this collaboration to additional and related indications on similar
terms.
Hemoshear Therapeutics, LLC (U.S.): We have entered into a partnership with Hemoshear
Therapeutics, LLC (“Hemoshear”) to discover and develop novel therapeutics for liver diseases,
including nonalcoholic steatohepatitis
to
HemoShear’s proprietary disease modeling platform to discover and develop best-in-class
therapeutics for specific liver diseases.
receive exclusive access
(NASH). Takeda will
Karolinska Institutet & Structural Genomics Consortium (Sweden): We have entered into a
proprietary collaboration to discover and validate new potential intervention points for the treatment
of IBD.
NuBiyota LLC (Canada): We have entered into an agreement with NuBiyota LLC (“NuBiyota”) for
the development of Microbial Ecosystem Therapeutic products for GI indications with a high unmet
medical need. Under this agreement, we and NuBiyota will collaborate to advance oral microbial
consortia products developed by using NuBiyota’s microbiome platform for GI indications.
PvP Biologics, Inc. (U.S.): We entered into a global agreement with PvP Biologics, Inc. (“PvP”) for
the development of KumaMax, a novel enzyme designed to break down the immune-reactive parts
of gluten in the stomach, thereby avoiding the painful symptoms and damage done in the small
intestine from accidental gluten ingestion. Under the terms of the development agreement, we will
provide financing for PvP to conduct research and development through Phase I proof-of-principle
studies and obtain an exclusive option to acquire PvP following receipt of a pre-defined data
package.
Samsung Bioepis Co., Ltd. (South Korea): We entered into an agreement to jointly fund and co-
develop multiple novel biologic therapies in unmet disease areas. The two companies immediately
began working on the program’s first therapeutic candidate, TAK-671, which is intended to treat
severe acute pancreatitis.
Theravance Biopharma Inc. (Ireland): We have entered into a global license, development and
commercialization agreement with Theravance Biopharma Inc. (“Theravance”) for TD-8954, a
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selective 5-HT4 receptor agonist being investigated for potential use in the treatment of
gastrointestinal motility disorders, including enteral feeding intolerance (“EFI”). TD-8954 is being
developed for the short-term use with EFI to achieve early nutritional adequacy in critically ill
patients at high nutritional risk, an indication for which the compound received the FDA Fast Track
Designation. Theravance has most recently completed a study evaluating the safety, tolerability and
pharmacodynamics of a single dose of the compound administered intravenously compared to
metoclopramide in critically ill patients with EFI.
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TiGenix NV (Belgium): Acquisition of an advanced biopharmaceutical company developing novel
stem cell therapies for serious medical conditions. The acquisition is a natural extension of an
existing partnership agreement between Takeda and TiGenix NV, which aims to bring new
treatment options to patients with gastrointestinal disorders. We completed acquisition of
TiGenix NV on July 31, 2018.
Neuroscience
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Affilogic (France): We have entered into an agreement with Affilogic regarding research
collaboration to explore using Affilogic’s proprietary Nanofitins® platform in therapies targeting
the central nervous system. Nanofitins® are potent antibody-mimetics, exhibiting high affinity and
specificity for capture, targeting and interaction with biomolecules. Under the agreement, we will
be entitled to commercialize worldwide products incorporating Affilogic Nanofitins® resulting
from the collaboration.
AstraZeneca (U.K.): We have entered into a collaboration to jointly develop and commercialize
MEDI-1341, an alpha-synuclein antibody currently in development as a potential treatment for
Parkinson’s disease with AstraZeneca. MEDI-1341 is an antibody that is differentiated by its high
affinity, high selectivity and reduced effector function (lower interaction with the immune system),
which has the potential to achieve a better efficacy and safety profile than other alpha-synuclein
antibodies. Under the terms of the agreement, AstraZeneca will lead Phase I development while
Takeda will lead future clinical development activities. The companies will share equally future
development and commercialization costs for MEDI-1341, as well as any future revenues.
Cerevance (U.S., U.K.): In December 2016, we and Lightstone Ventures established Cerevance, a
neuroscience company focused on discovering and developing novel therapeutics for neurological
and psychiatric disorders. We provided Cerevance with a 25-person neuroscience research team
from our Cambridge, United Kingdom site, fully equipped laboratory space and licenses to a
portfolio of preclinical and clinical stage drug programs.
Denali Therapeutics Inc. (U.S.): We have entered into a strategic option and collaboration
agreement to develop and commercialize up to three specified therapeutic product candidates for
neurodegenerative diseases with Denali Therapeutics, Inc. (“Denali”). Each program is directed to a
genetically validated target for neurodegenerative disorders, including Alzheimer’s disease and
other indications, and incorporates Denali’s antibody transport vehicle platform for increased
exposure of biotherapeutic products in the brain.
H. Lundbeck A/S (Denmark): We are in collaboration with H. Lundbeck A/S to develop and
commercialize vortioxetine.
• Mindstrong Health (U.S.): We have entered into a collaboration with Mindstrong Health to explore
development of digital biomarkers for selected mental health conditions, in particular schizophrenia
and treatment-resistant depression.
•
Ovid Therapeutics Inc. (U.S.): We have entered into an agreement with Ovid Therapeutics Inc.
rare
(“Ovid”), a privately-held biopharmaceutical company that develops medicines
the formation of a global collaboration focused on the clinical
neurological diseases,
for
for
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development and commercialization of TAK-935, a novel, potent and highly selective CH24H
inhibitor, in rare pediatric epilepsies. Under the terms of the agreement, we received equity in Ovid
and may be eligible to receive certain milestone payments based on the advancement of TAK-935.
We and Ovid will share the development and commercialization costs and, if successful, any profits
lead commercialization in Japan, and have the option to lead
on a 50/50 basis. We will
commercialization in Asia and other selected geographies. Ovid will lead clinical development
activities and commercialization of TAK-935 in the United States, Europe, Canada and Israel. The
collaboration will be based on a “One Team” concept, an integrated and interdisciplinary team from
both companies devoted to the project.
•
Teva Pharmaceutical Industries Ltd. (Israel): We are in collaboration with Teva Pharmaceutical
Industries Ltd. to develop and commercialize rasagiline.
• Wave Life Sciences Ltd. (Singapore): We have entered into a research, development and
commercial collaboration and multi-program option agreement with Wave Life Sciences Ltd. to
develop antisense oligonucleotides
for genetically-defined neurological diseases. The first
component of the collaboration will focus on programs targeting Huntington’s disease, amyotrophic
lateral sclerosis, frontotemporal dementia and spinocerebellar ataxia type 3. The second component
of the collaboration provides Takeda with the rights to exclusively license multiple preclinical
programs targeting other neurological disorders including Alzheimer’s disease and Parkinson’s
disease.
Vaccines
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Bill & Melinda Gates Foundation (U.S.): We have entered into an agreement with the Bill &
Melinda Gates Foundation for a partnership to support polio eradication in developing countries.
Under the agreement, we will develop, license and supply at least 50 million doses per year of
Sabin-strain inactivated poliovirus vaccine (TAK-195, our vaccine candidate) to more than 70
developing countries. Under the terms of the agreement, the Bill & Melinda Gates Foundation will
provide a $38 million grant to us.
U.S. Government—Biomedical Advanced Research and Development Authority (U.S.): We have
been selected by the Biomedical Advanced Research and Development Authority (“BARDA”), a
division of the Office of the Assistant Secretary for Preparedness and Response (“ASPR”), within
the U.S. Department of Health and Human Services, to develop a Zika vaccine (TAK-426, our Zika
vaccination candidate) to support the Zika response in the United States and affected regions around
the world. Initial funding from BARDA is for $19.8 million to cover the vaccine development
through Phase I, with potential funding of up to $312 million if ASPR/BARDA exercises all
options to take the vaccine through Phase III trials and filing of the Biologics License Application
(“BLA”) in the United States.
Zydus Cadila (India): We have entered into an agreement with Zydus Cadila for a partnership to
address the global threat of chikungunya and develop a chikungunya vaccine (TAK-507, our
chikungunya vaccine candidate). Chikungunya is an emerging infectious disease in Africa, Asia and
the Indian subcontinent. In recent decades, mosquito vectors of chikungunya have spread to Europe
and the Americas as well. According to the Centers for Disease Control and Prevention in the United
States, there is currently no vaccine to prevent or medicine to treat chikungunya virus infection.
Other or Multiple Therapeutic Areas
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Arcellx, Inc. (U.S.): We have made an investment in Arcellx, Inc., which is a company that
develops format for T cell-mediated anti-tumor therapy.
ArmaGen, Inc. (U.S.): We have made an investment
in ArmaGen, Inc., whose proprietary
technology platform takes advantage of the body’s natural system to deliver therapeutics to the
brain in a non-invasive manner.
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Arix Biosciences plc (U.K.): We have established a relationship with Arix Biosciences plc (“Arix”)
to bring together the unique combination of entrepreneurial business building,
investing and
industry operating skills at Arix with our deep industry experience, to the mutual benefit of both
businesses. Arix will provide access to deal flow and a specialist team across its activities to create
and incubate companies, guided by a joint advisory committee.
Atlas Ventures Fund XI (U.S.): We invested as a corporate strategic partner in Atlas Venture
Fund XI, a $350 million investment vehicle focused exclusively on early stage biotech investing.
BioMotiv, LLC (U.S.): We have entered into an agreement with BioMotiv, LLC, the therapeutic
accelerator company associated with The Harrington Project for Discovery & Development, to
identify and develop pioneering medical
innovations specifically in the therapeutic areas of
immunology and inflammation and cardio-metabolic diseases.
Biosurfaces, Inc. (U.S.): We have entered into an agreement with Biosurfaces, Inc. to develop
innovative medical devices to treat patients with GI diseases using BioSurfaces, Inc.’s proprietary
nanomaterial technology.
BiomX Ltd. (Israel): We have made an investment in BiomX Ltd., which is a company that
discovered and validated proprietary bacterial targets, and develops rationally designed phage
therapies that seek and destroy harmful bacteria in microbiome-related diseases such as IBD and
cancer.
Bridge Medicines (U.S.): We partnered with Tri-Institutional Therapeutics Discovery Institute, Bay
City Capital and Deerfield Management in the establishment of Bridge Medicines. Research
projects accepted into the Tri-Institutional Therapeutics Discovery Institute will be able to graduate
to Bridge Medicines, where they will be given financial, operational and managerial support to
move seamlessly from validating proof-of-concept studies to clinical trials.
Center for iPS Cell Research and Application, Kyoto University (Japan): We have entered into a
10-year collaboration and established a joint research program with the Center for iPS Cell
Research and Application, at Kyoto University to develop clinical applications of induced
pluripotent stem cells in therapeutic areas including cancer, heart failure, diabetes mellitus, neuro-
degenerative disorders and intractable muscle diseases.
Cortexyme, Inc. (U.S.): We have made an investment in Cortexyme, Inc., a company that is
developing therapeutics based on data supporting a new theory of the cause of Alzheimer’s and
other degenerative disorders.
Dementia Discovery Fund (Global): The Dementia Discovery Fund is a global investment fund to
support discovery and development of novel dementia treatments. We are an investor in the
Dementia Discovery Fund and also hold a seat on the Scientific Advisory Board.
Emendobio Inc. (Israel): We have made an investment in Emendobio Inc., a company that is at the
forefront of cutting-edge genetic medicine and is developing genome editing technology that can
repair and eliminate genetic mutations in living cells that cause serious diseases or disorders.
FUJIFILM Corporation (Japan): We have entered into a collaboration to develop regenerative
medicine therapies using cardiomyocytes derived from induced Pluripotent Stem Cell (“iPSC”) for
the treatment of heart failure. Takeda obtained Right of First Negotiation to collaboratively and
globally commercialize such regenerative medicine products using cardiomyocytes derived from
iPSC, currently under development by FUJIFILM Corporation’s affiliate company, Cellular
Dynamics International, Inc. Under this contract, Takeda will make a one-time payment
to
FUJIFILM Corporation and both companies will evaluate the safety and efficacy of resulting
regenerative medicine therapies.
FutuRx (Israel): We partnered with Johnson & Johnson Innovation Fund and OrbiMed Israel
Partners to team with the Office of the Israeli Innovation Authority of the Ministry of Economy in
106
to transform breakthrough discoveries into novel medicines by applying a unique structure of
equally balanced partnership among the three founding organizations. FutuRx envisions its role as a
catalyst for drug development by bridging the gap between concept and proof-of-concept through
its dedicated system and unique structure.
Harrington Discovery Institute at University Hospitals in Cleveland, Ohio (U.S.): We have entered
into a collaboration with Harrington Discovery Institute at University Hospitals in Cleveland, Ohio
for the advancement of medicines for rare diseases.
HitGen Ltd. (China): HitGen Ltd. will apply its advanced technology platform, based on DNA-
encoded library design, synthesis and screening, to discover novel leads, which will be licensed
exclusively to Takeda.
HiFiBiO Inc. (U.S.): We have entered into a collaboration for functional
therapeutics high-
throughput antibody discovery platform that enables identification of antibodies for rare events, for
discovery of therapeutic antibodies for GI and Oncology.
Hookipa Pharma Inc. (Austria): We have made an investment in Hookipa Pharma Inc. for value
creation through venture and biotech partnerships investment.
Isogenica Ltd. (U.K.): We have entered into an agreement with Isogenica Limited for access to a
sdAb (single-domain antibody) platform to generate a toolbox of VHH (Variable domain of Heavy
chain of Heavy chain antibody) for various immune cells, and we are targeting pathway validation
and pipeline development across our GI and Oncology portfolio.
National Cancer Center of Japan (Japan): We have entered into a partnership agreement with the
National Cancer Center of Japan to discover and develop anticancer agents. Through this
partnership, we and the National Cancer Center will share information and hold regular discussions
in order to collaborate and transition findings from basic research to clinical research and
development activities.
Numerate, Inc. (U.S.): We have entered into an agreement for joint-discovery programs aimed at
identifying clinical candidates for use in Takeda’s core therapeutic areas, namely GI. Oncology and
Neuroscience. Numerate, Inc. will use its AI-driven platform, from hit finding and expansion
through lead design/optimization and Absorption, Distribution, Metabolism and Excretion
(“ADME”)/toxicity modeling.
OrphoMed, Inc. (U.S.): We have made an investment
in OrphoMed Inc., a clinical-stage
biotechnology company with a proprietary dimer therapeutics platform. OrphoMed Inc. is focused
on developing best-in-class treatments for patients with gastrointestinal disorders.
Obsidian Therapeutics, Inc. (U.S.): We have made an investment in Obsidian Therapeutics, Inc., a
company that is developing next-generation cell and gene therapies with pharmacologic operating
systems.
Portal Instruments, Inc. (U.S.): We have entered into a collaboration with Portal Instruments, Inc.
(“Portal”) to develop and commercialize Portal’s needle-free drug delivery device for potential use
with our investigational or approved biologic medicines. The first development program to
potentially utilize this device will be for investigational use with ENTYVIO, which is currently
administered through intravenous infusion.
Presage Biosciences, Inc. (U.S.): We have made an investment in Presage Biosciences, Inc., a
company that uses CIVO®, a platform that enables simultaneous and direct assessment of multiple
early stage agents in the context of human patients.
Recursion Pharmaceuticals, Inc. (U.S.): We have entered into an agreement to provide pre-clinical
candidates for Takeda’s TAK-celerator™ development pipeline.
•
•
•
•
•
•
•
•
•
•
•
•
107
•
•
•
•
•
•
•
•
•
•
Ribon Therapeutics, Inc. (U.S.): We have made an investment in Ribon Therapeutics, Inc., a
company that is pioneering the discovery and development of monoPARP (mono ADP-ribose
polymerase) inhibitors to block cancer cells’ fundamental ability to survive under stress.
Schro¨dinger, LLC (U.S.): We have entered into a multi-target research collaboration combining
Schro¨dinger, LLC’s in silico platform-driven drug discovery capabilities with Takeda’s deep
therapeutic area knowledge and expertise in structural biology.
Seattle Collaboration (U.S.): We have formed a research alliance, Seattle Partnership for Research
on Innovative Therapies (“SPRInT”), aiming to accelerate the translation of Fred Hutchinson
Cancer Research Center’s and University of Washington’s cutting-edge discoveries into treatments
for human disease, with a focus on GI, Oncology and Neuroscience.
Stanford University (U.S.): We have entered into a collaboration with Stanford University to form
the Stanford Alliance for Innovative Medicines (“Stanford AIM”) to develop innovative treatments
and therapies in a more effective manner.
StrideBio, Inc. (U.S.): We have made an investment in StrideBio, Inc., a company that develops
engineered viral vectors for gene therapy for the treatment of rare diseases. StrideBio Inc.’s
technology engine utilizes structure-inspired design to engineer Adeno Associated Virus (“AAV”)
vectors that can escape pre-existing neutralizing antibodies.
Tri-Institutional Therapeutics Discovery Institute,
(U.S.): We partnered with the Tri-
Institutional Therapeutics Discovery Institute, which was formed by the three institutions, the
Memorial Sloan Kettering Cancer Center, The Rockefeller University and Weill Cornell Medicine,
in 2013, with the goal of expediting early-stage drug discovery of innovative new therapies. The
partnership between us and the Tri-Institutional Therapeutics Discovery Institute was expanded in
2016 from the realm of small molecule discovery into the new research area of antibody drug
discovery.
Inc.
Univercells SA (Belgium): We have made an investment
in Univercells SA, a technology
company delivering novel biomanufacturing platforms, aiming at making biologics available and
affordable to all.
Ultragenyx Pharmaceutical Inc. (U.S.): We have entered into an agreement with Ultragenyx
Pharmaceutical Inc. (“Ultragenyx”), to partner in the development and commercialization of therapies
to treat rare genetic diseases. Ultragenyx will receive an exclusive license to one of our preclinical
product candidates in a pre-determined field of use, and will have an exclusive option to co-develop
and co-commercialize the product candidate in additional therapeutic areas. We and Ultragenyx have
also established a five-year research collaboration under which Ultragenyx will have the option to
license up to five additional of our product candidates for rare diseases. We receive an exclusive
option to commercialize any licensed products resulting from the collaboration in Asia, including
Japan. And an option to exclusively license one Ultragenyx pipeline product in Japan.
VelosBio, Inc. (U.S.): We have made an investment in VelosBio Inc., a preclinical stage company
developing antibody drug conjugates.
VHsquared Ltd. (U.K.): We have made an investment in VHsquared Ltd., a clinical stage company
developing transformational therapies (VorabodiesTM, which are oral domain antibodies) for IBD.
D.
Trend Information.
The information required by this item is set forth in Item 5. A of this registration statement.
108
E.
Off-Balance Sheet Arrangements.
Milestone Payments
Under the terms of our collaborations with third parties for the development of new products, we may
be required to make payments for the achievement of certain milestones related to the development of pipeline
products and the launch and subsequent marketing of new products. As of March 31, 2017 and 2018, the
contractual amount of potential milestone payments totaled ¥364.9 billion and ¥517.0 billion, respectively, in
each case excluding potential commercial milestone payments for pipeline products under development.
F.
Tabular Disclosure of Contractual Obligations.
The following table summarizes our contractual obligations as of March 31, 2018.
Total
contractual
amount(1)
Years to maturity
Less than
1 year
1 to 3
years
3 to 5
years
More than
5 years
(billions of yen)
Bonds and loans:(2)(3)
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations for property, plant and equipment . . . .
Finance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Contributions to defined benefit pension plans(4)
¥ 173.2
813.2
14.1
99.2
77.1
4.7
—
0.0
14.1
4.8
12.1
4.7
120.0
130.0
—
8.9
19.2
—
53.2
75.0
—
5.4
12.0
—
—
608.2
—
80.0
33.7
—
Total(5)(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,181.4
¥35.7
¥278.1
¥145.7
¥721.9
Notes:
(1) Obligations denominated in currencies other than yen have been translated into yen using period-end
exchange rates for the fiscal year ended March 31, 2018 and may fluctuate due to changes in exchange rates.
(2) Repayment obligations may be accelerated if we breach the relevant covenants under the relevant
instruments.
(3) Does not include interest payment obligations.
(4) Pension and post-retirement contributions cannot be determined beyond the fiscal year ending March 31,
2019.
(5) Does not include contractual obligations whose timing we are unable to estimate, including defined benefit
contribution obligations,
include
liabilities recorded at fair value as amounts will fluctuate based on any changes in fair value including
derivative liabilities and contingent consideration. Milestone payments that are dependent on the occurrence
of certain future events are not included.
litigation reserves and long-term income tax liability and does not
(6) Does not include purchase orders entered into for purchases made in the normal course of business.
G.
Safe harbor.
Statements in Item 5. E and Item 5. F of this registration statement on Form 20-F that are not statements
of historical fact, constitute “forward-looking statements.” See “Forward-Looking Statements” on page 2 of this
registration statement. The Company is relying on the safe harbor provided in Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Exchange Act, as amended, in making such forward-looking
statements.
109
Appendix: Operating and Financial Review and Prospects of Shire
The following discussion should be read in conjunction with the consolidated financial statements of
Shire contained in this registration statement.
The following table presents selected financial information for the years ended December 31, 2015,
2016 and 2017, which is derived from Shire’s consolidated financial statements. The following table also
presents selected financial information for the nine months ended September 30, 2017 and 2018, which is derived
from Shire’s unaudited consolidated financial statements as of and for the three and nine months ended
September 30, 2018. The selected consolidated financial data should be read in conjunction with the audited
consolidated financial statements and the unaudited consolidated financial statements of Shire included in this
registration statement.
For the fiscal year ended December 31,
For the nine months ended
September 30,
2015
2016
2017
2017
2018
(millions of dollars)
Statements of Operations:
Revenues:
Product sales . . . . . . . . . . . . . . . . . .
Royalties and other revenues . . . . . .
$6,099.9
316.8
$10,885.8
510.8
$14,448.9
711.7
$10,537.9
477.8
$11,198.5
358.4
Total revenues . . . . . . . . . . . . . . . . . . . . .
6,416.7
11,396.6
15,160.6
11,015.7
11,556.9
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . .
Research and development
. . . . . . .
Selling, general and
administrative . . . . . . . . . . . . . . .
Amortization of acquired intangible
assets . . . . . . . . . . . . . . . . . . . . . .
Integration and acquisition costs . . .
Reorganization costs . . . . . . . . . . . .
Gain on sale of Oncology and
969.0
1,564.0
3,816.5
1,439.8
4,700.8
1,763.3
3,437.3
1,324.5
3,398.3
1,240.0
1,842.5
3,015.2
3,530.9
2,647.7
2,549.3
498.7
39.8
97.9
1,173.4
883.9
121.4
1,768.4
894.5
47.9
1,280.5
696.7
24.5
1,375.3
512.0
268.9
product rights . . . . . . . . . . . . . . . .
(14.7)
(16.5)
(0.4)
(0.4)
(267.2)
Total operating expenses . . . . . . . . . . . . .
4997.2
10,433.7
12,705.4
9,410.8
9,076.6
Operating income from continuing
operations . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . .
Other (expense) / income, net . . . . . . . . .
1,419.5
4.2
(41.6)
3.7
Total other expense, net
. . . . . . . . .
(33.7)
962.9
18.4
(469.6)
(25.6)
(476.8)
2,455.2
9.7
(578.9)
7.4
1,604.9
5.7
(425.4)
6.8
2,480.3
4.8
(378.1)
(43.9)
(561.8)
(412.9)
(417.2)
Income from continuing operations
before income taxes and equity in
earnings of equity methods
investees . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings / (losses) of equity
1,358.8
(46.1)
486.1
126.1
1,893.4
2,357.6
1,192.0
(44.6)
2,063.1
(371.0)
method investees, net of taxes . . . . . . .
(2.2)
(8.7)
2.5
0.1
11.2
Income from continuing operations, net
of taxes . . . . . . . . . . . . . . . . . . . . . . . .
1,337.5
603.5
4,253.5
1,147.5
1,703.3
(Loss) / gain from discontinued
operations, net of taxes . . . . . . . . . . . .
(34.1)
(276.1)
18.0
18.6
—
Net income . . . . . . . . . . . . . . . . . . . . . . .
$1,303.4
$
327.4
$ 4,271.5
$ 1,166.1
$ 1,703.3
110
Shire has grown both organically and through acquisition, completing a series of major transactions that
have brought therapeutic, geographic and pipeline growth and diversification. Shire’s revenues, expenditures and
net assets are attributable to the R&D, manufacture, sale and distribution of pharmaceutical products within one
reportable segment. Shire also earns royalties and other revenues (where Shire has out-licensed products to third
parties) that are recorded as royalty and other revenues.
Revenues are derived primarily from two sources - sales of Shire’s own products and royalties and other
revenues:
•
•
2017: 95.3% (2016: 95.5%) of total revenues are derived from Product sales; and
2017: 4.7% (2016: 4.5%) of total revenues are derived from royalties and other revenues, including
upfront payments from out-license arrangements.
Shire’s current portfolio of approved products spans six key therapeutic areas:
Immunology,
Hematology, Neuroscience, Internal Medicine, Genetic Diseases and Ophthalmics. In 2017, the contribution of
each therapeutic area to overall product sales was as follows:
Immunology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hematology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Neuroscience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Internal Medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Genetic Diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oncology(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ophthalmics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product sales
Percentage
(millions of dollars, except
percentages)
$ 4,370.3
3,785.6
2,664.1
1,670.3
1,437.7
261.7
259.2
$14,448.9
30.2%
26.2%
18.4%
11.6%
10.0%
1.8%
1.8%
100.0%
(1) On August 31, 2018, Shire sold its oncology franchise to Servier for $2.4 billion.
Shire has grown in part through acquisition which has brought therapeutic, geographic and pipeline
growth and diversification. The acquisition of Baxalta in June 2016 added the Hematology, Immunology and
Oncology franchises and enabled Shire to become the global leader in rare diseases and highly specialized
conditions. The acquisition of Dyax in January 2016, with its lead pipeline product, TAKHZYRO, and marketed
product KALBITOR, expanded and extended Shire’s industry-leading HAE portfolio (FIRAZYR and
CINRYZE). In July 2016, Shire licensed the global rights to all indications for SHP647 from Pfizer Inc. SHP647
is an investigational biologic being evaluated for the treatment of moderate-to-severe inflammatory bowel
disease. In 2015, Shire acquired NPS Pharma, Meritage Pharma, Inc. (“Meritage Pharma”) and Foresight
Biotherapeutics Inc. (“Foresight”). The acquisition of NPS Pharma added global rights to an innovative product
portfolio with multiple growth catalysts, including GATTEX/REVESTIVE and NATPARA/NATPAR. The
acquisition of Meritage Pharma provided global rights to SHP621, a Phase 3 ready asset for the treatment of
adolescents and adults with EoE, a rare, chronic inflammatory GI disease. This builds upon Shire’s rare disease
and GI commercial infrastructure and expertise. With the acquisition of Foresight, Shire acquired the global
rights to SHP640 (topical ophthalmic drops combining 0.6% povidone iodine (PVP-I) and 0.1% dexamethasone),
a therapy in late-stage development for the treatment of infectious conjunctivitis, an ocular surface condition
commonly referred to as pink eye. This acquisition has a clear strategic fit with XIIDRA, which is approved in
the U.S. for the treatment of the signs and symptoms of dry eye disease, and further demonstrates Shire’s
commitment to building a leadership position in ophthalmics.
On February 20, 2018, Shire, Microsoft, and EURORDIS-Rare Diseases Europe announced a strategic
initiative to accelerate time to diagnosis for children with rare diseases. On March 26, 2018, Shire and
111
NanoMedSyn announced a collaboration to conduct pre-clinical research to evaluate a potential enzyme
replacement therapy using NanoMedSyn’s proprietary synthetic derivatives named AMFA. On May 8, 2018, the
Boards of Takeda and Shire announced that they had reached agreement on the terms of a recommended offer
pursuant to which Takeda will acquire the entire issued and to be issued ordinary share capital of Shire. The
acquisition is expected to close on or around January 8, 2019. On June 21, 2018, Shire announced that the FDA
had approved its submission for the production of GAMMAGARD LIQUID at its new plasma manufacturing
facility near Covington, Georgia. The facility will add approximately 30% capacity to Shire’s internal network
once fully operational. Commercial production began in January 2018 and shipments commenced shortly after
approval. On August 31, 2018, Shire sold its oncology franchise to Servier for $2.4 billion. In September 2018,
Shire acquired Sanaplasma AG, a source plasma collection company headquartered in Switzerland. Sanaplasma
AG adds 21 new centers in Europe to Shire’s European-based plasma collection network. On October 25, 2018,
Shire announced it had filed a second submission to the FDA for approval to manufacture albumin therapy at its
new plasma manufacturing facility near Covington, Georgia. On October 26, 2018, Takeda announced that it was
in discussions with the European Commission, the EU antitrust regulator, in relation to the future potential
overlap in the area of IBD between its marketed product ENTYVIO and Shire’s pipeline compound SHP647,
which is currently in Phase III clinical trials, and that it had proposed an antitrust remedy of a potential
divestment of SHP647 and certain associated rights. On November 20, 2018, the European Commission granted
a Phase I conditional clearance for the Shire Acquisition, subject to Takeda and Shire entering into commitments
to divest SHP647 and certain other associated rights.
In 2017, Shire derived 34% of Product sales from outside of
commercialization and late-stage development activities, which are expected to further supplement
diversification of revenues in the future, including the following:
the U.S. Shire has ongoing
the
•
•
•
•
•
•
•
the launch of MYDAYIS in the U.S.;
continued launch of INTUNIV, REVESTIVE and ONIVYDE (sold to Servier as part of the
oncology franchise) across Europe;
the approvals of NATPAR and ADYNOVI in the EU;
the approval of TAKHZYRO in the U.S. and recent approvals in the EU and Canada;
submission of CALPEG NDA for ALL in the U.S. (sold to Servier as part of the oncology
franchise);
the approval of VONVENDI Marketing Authorization Application (“MAA”) in Europe; and
geographic expansion of XIIDRA with the recent approval in Canada and submissions in other key
markets.
Geographic Information
Shire’s revenues based on the geographic location from which the sale originated for the fiscal
years ended December 31, 2015, 2016 and 2017 is set forth in the following table:
For the fiscal year ended December 31,
2015
2016
2017
(millions of dollars)
Revenue:
Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of the world . . . . . . . . . . . . . . . . . . . . . . . . .
$
14.1
4,659.2
1,743.4
$
41.6
7,666.9
3,688.1
$
55.5
9,642.1
5,463.0
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,416.7
$11,396.6
$15,160.6
112
Shire’s R&D
Shire’s R&D efforts are focused on core therapeutic areas including Immunology, Hematology,
Neuroscience, Internal Medicine, Genetic Diseases, Oncology (prior to the disposition of the Oncology business)
and Ophthalmics. Shire concentrates its resources on obtaining regulatory approval for later stage pipeline
products within these therapeutic areas and focuses its early stage research activities in rare diseases.
Evidence of the successful progression of the late stage pipeline can be seen in the granting of
approval and associated launches of Shire’s products over the last three years. In this time, several products have
received regulatory approval including: in the U.S., MYDAYIS in 2017, XIIDRA and CUVITRU in 2016,
NATPARA and VYVANSE for BED in 2015; in the EU, ONIVYDE (sold to Servier as part of the Oncology
franchise) and CUVITRU in 2016, ELVANSE/TYVENSE for adults, INTUNIV for children and adolescents in
2015.
Shire’s management reviews direct costs for all research and development projects by
development phase.
Shire’s R&D expenses in the fiscal years ended December 31, 2016 and 2017 include costs on
programs in all stages of development. The following table summarizes the Shire’s direct R&D spend
categorized by development stage, based upon the development stage of each program for the fiscal years ended
December 31, 2016 and 2017:
For the fiscal year
ended December 31,
2016
2017
(millions of dollars)
Early stage programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Late stage programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currently marketed products . . . . . . . . . . . . . . . . . . . . . . . . .
$325.7
291.1
238.1
$ 275.3
507.5
275.0
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$854.9
$1,057.8
Early stage programs also include pre-clinical and research programs. In addition to the above,
Shire recorded R&D employee costs of $506.9 million in the fiscal year ended December 31, 2017 (fiscal year
ended December 31, 2016: $431.9 million) and other indirect R&D costs of $198.6 million (2016: $153.0
million), comprising mainly of depreciation and up-front and milestone payments for in-licensed development
projects.
Shire’s Results of Operations for the Nine Months Ended September 30, 2018 and 2017
In the first quarter of 2018, Shire announced a change to its internal structure to create two distinct
business segments within Shire: a Rare Disease division and a Neuroscience division. The change was based on
the Shire Board’s conclusion that the Neuroscience business warranted additional focus and investment and that
there was a strong business rationale for creating the two divisions.
In the second quarter of 2018, Shire returned to a single segment approach to managing its business.
This decision was precipitated by the Shire Board’s acceptance of Takeda’s offer to acquire Shire and reflects
Shire’s focus on the performance of the entire business as it operates in this current environment. This step was
taken to more closely align with how the financial information is viewed by the Executive Committee (Shire’s
chief operating decision maker) for the purposes of making resource allocation decisions and assessing the
performance of the business. Additionally, in the second quarter of 2018, Shire introduced a new product
franchise called Established Brands to capture revenue for its non-promoted products that are facing or could
face generic competition, such as LIALDA and PENTASA. Comparative financial information for 2017 was
retrospectively restated herein.
113
In the nine months ended September 30, 2018, product sales increased 6% to $11,198.5 million (2017:
$10,537.9 million), driven by Immunology, up 11%, Neuroscience, up 10%, Genetic Diseases, up 4%, Internal
Medicine, up 35%, and Ophthalmics, up 48%, off-setting the impact of generic competition on Established
Brands.
The following table provides an analysis of Shire’s total revenues by source for the nine months ended
September 30, 2017 and 2018. In 2018, Immunology includes HAE from Genetic Diseases; prior year amounts
have been reclassified to conform with the current year presentation.
Nine months ended
September 30,
2017
2018
Product sales growth
(millions of dollars, except percentages)
Product sales by franchise
IMMUNOGLOBULIN THERAPIES . . . . . . . . . . . . . . . . . . . . . . . .
HEREDITARY ANGIOEDEMA . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BIO THERAPEUTICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,613.9
968.4
546.7
$ 1,825.9
1,063.0
583.7
Immunology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HEMOPHILIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INHIBITOR THERAPIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hematology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VYVANSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADDERALL XR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MYDAYIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Neuroscience(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Neuroscience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ELAPRASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REPLAGAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VPRIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,129.0
2,119.6
631.9
2,751.5
1,620.3
242.3
25.9
91.3
1,979.8
454.5
349.0
257.3
3,472.6
2,225.4
583.2
2,808.6
1,779.8
232.1
40.4
117.8
2,170.1
465.5
372.8
267.3
Genetic Diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.060.8
1,105.6
LIALDA/MEZAVANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PENTASA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Established Brands(3)
Established Brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GATTEX/REVESTIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NATPARA/NATPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Internal Medicine(4)
Internal Medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ophthalmics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oncology(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
469.6
224.5
122.3
816.4
229.2
103.3
105.2
437.7
173.4
189.3
287.0
215.6
105.9
608.5
326.8
160.8
101.3
588.9
255.8
188.4
Total Product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,537.9
11,198.5
Royalties and other revenues
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total royalties and other revenues . . . . . . . . . . . . . . . . . . . . .
329.7
148.1
477.8
175.4
183.0
358.4
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,015.7
$11,556.9
Notes:
(1) Other Neuroscience includes INTUNIV, EQUASYM, and BUCCOLAM.
114
13%
10%
7%
11%
5%
(8)%
2%
10%
(4)%
N/M(2)
29%
10%
2%
7%
4%
4%
(39)%
(4)%
(13)%
(25)%
43%
56%
(4)%
35%
48%
N/M(2)
6%
(47)%
24%
(25)%
5%
(2) N/M: Product sales growth as a percentage is not meaningful due to the sale of the franchise during the
quarter or due to product being launched during period.
(3) Other Established Brands includes FOSRENOL and CARBATROL.
(4) Other Internal Medicine includes AGRYLIN, PLENADREN, and RESOLOR.
(5) Results include the Oncology franchise until the date of its sale on August 31, 2018.
Immunology
Immunology product sales were $3,472.6 million in the nine months ended September 30, 2018.
Immunoglobulin therapies growth of 13% in the nine months ended September 30, 2018 was primarily driven by
increased demand for subcutaneous and intravenous brands and international sales growth. HAE product sales
increased 10% during the nine months ended September 30, 2018, primarily due to stocking for both CINRYZE
and FIRAZYR, and partially offset by a decline in CINRYZE demand due to a competitor launch, compared to
the corresponding period in 2017. HAE product sales during the nine months ended September 30, 2018 also
included $51.3 million of TAKHZYRO product sales for initial launch stocking. Bio therapeutics sales increased
7% in the nine months ended September 30, 2018 driven by volume demand.
Hematology
Hematology product sales were $2,808.6 million in the nine months ended September 30, 2018.
Hemophilia sales increased 5% in the nine months ended September 30, 2018, driven by volume demand,
primarily related to ADYNOVATE. Sales of inhibitor therapies decreased 8% in the nine months ended
September 30, 2018 due to new competition.
Neuroscience
Neuroscience product sales were $2,170.1 million in the nine months ended September 30, 2018.
VYVANSE product sales increased 10% in the nine months ended September 30, 2018, due to a U.S. price
increase and continued growth in Shire’s international markets.
Genetic Diseases
Genetic Diseases product sales were $1,105.6 million in the nine months ended September 30, 2018.
Genetic Diseases product sales increased 4% during the nine months ended September 30, 2018, primarily driven
by stocking and favorable foreign exchange, compared to the corresponding period in 2017.
Established Brands
Established Brands product sales were $608.5 million in the nine months ended September 30, 2018.
LIALDA/MEZAVANT product sales decreased 39% during the nine months ended September 30, 2018 was due
to generic competition which began in the second half of 2017.
Internal Medicine
Internal Medicine product sales were $588.9 million in the nine months ended September 30, 2018.
During the nine months ended September 30, 2018, GATTEX/REVESTIVE product sales increased 43% and
NATPARA/NATPAR product sales increased 56%, driven by demand growth, and to a lesser extent, the benefit
of price increases, compared to the corresponding period in 2017.
Ophthalmics
Ophthalmics product sales increased 48% to $255.8 million during the nine months ended September
30, 2018 due to XIIDRA demand growth.
115
Oncology
As a result of the sale of Shire’s Oncology franchise, completed on August 31, 2018, Oncology product
sales decreased to $188.4 million (2017: $189.3 million) in the nine months ended September 30, 2018.
Royalties and other revenues
Royalties and other revenues decreased 25% during the nine months ended September 30, 2018
compared to the corresponding period in 2017, primarily due to certain royalty expirations, the reclassification of
ADDERALL XR from royalty revenue to product sales, and other changes required under the new revenue
accounting standard.
Cost of sales
Cost of sales as a percentage of Total revenues decreased from 31% to 29% for the nine months ended
September 30, 2018 compared to the corresponding period in 2017, due to lower expense related to the unwind
of inventory fair value adjustments. For the nine months ended September 30, 2018, Cost of sales included
depreciation of $228.2 million, respectively (2017: $209.2 million).
R&D
In the nine months ended September 30, 2018, Research and development expenses decreased by $84.5
million, or down 6%, compared to the corresponding period in 2017. The decrease during the nine months ended
September 30, 2018 was primarily due to significant milestone and upfront payments associated with license
arrangements incurred in 2017 that did not recur in 2018. For the nine months ended September 30, 2018,
Research and development expenses included depreciation of $31.3 million (2017: $37.0 million).
SG&A
In the nine months ended September 30, 2018, Selling, general and administrative expenses decreased
by $98.4 million compared to the corresponding period in 2017, primarily due to the benefits of on-going cost
discipline and operating synergies partially offset by increased depreciation. For the nine months ended
September 30, 2018, Selling, general and administrative expenses included depreciation of $173.3 million (2017:
$117.3 million).
Amortization of acquired intangible assets
For the nine months ended September 30, 2018, Shire recorded Amortization of acquired Intangible
assets of $1,375.3 million compared to $1,280.5 million in the corresponding period in 2017. The increase for the
nine months ended September 2018 is primarily related to the acceleration of CINRYZE amortization and launch
of TAKHZYRO, offset by the sale of the Oncology franchise.
Integration and acquisition costs
In the nine months ended September 30, 2018, Shire recorded Integration and acquisition costs of
$512.0 million compared to $696.7 million in the corresponding period in 2017. These costs relate to the
continued integration of Baxalta, which was acquired in June 2016, Takeda’s proposed acquisition of Shire, and
the change in fair value of contingent consideration, primarily related to TAKHZYRO, which was acquired from
Dyax in 2016.
The costs associated with the integration of Baxalta include $151.4 million of asset impairments, $55.5
million of third-party professional fees, $19.2 million of expenses associated with facility consolidations, and
116
$20.7 million of employee severance and acceleration of stock compensation for the nine months ended
September 30, 2018. Shire expects the majority of these expenses, except for certain costs related to facility
consolidations, to be paid within 12 months from the date the related expenses were incurred. The integration of
Baxalta is estimated to be completed by mid to late 2019.
The costs associated with Takeda’s proposed acquisition include $72.0 million of
third-party
professional fees and $40.4 million of employee incentives for the nine months ended September 30, 2018. Shire
expects the majority of these expenses to be paid within 12 months from the date the related expenses were
incurred.
In the nine months ended September 30, 2018, $100.4 million are included in the Integration and
acquisition costs relating to the change in fair value of contingent consideration payable mainly related to
TAKHZYRO.
In the nine months ended September 30, 2017, Integration and acquisition costs included a charge of
$144.3 million relating to the change in fair value of contingent consideration payable. The Baxalta Integration
and acquisition costs include $177.4 million of employee severance and acceleration of stock compensation,
fees and $71.4 million of expenses associated with facility
$114.0 million of third-party professional
consolidations and $147.8 million of asset impairments for the nine months ended September 30, 2017.
Reorganization costs
For the nine months ended September 30, 2018, Shire recorded Reorganization costs of $268.9 million,
primarily related to expenses associated with certain office facility closures in Cambridge, MA. For the nine
months ended September 30, 2017, Shire recorded Reorganization costs of $24.5 million, primarily related to
office and manufacturing facility closures.
Other expense, net
For the nine months ended September 30, 2018, Shire recorded total other expense, net of $417.2
million compared to $412.9 million in the corresponding period in 2017. Other expense, net increased primarily
due to costs related to the cash tender offer for the repurchase of $2.3 billion of Shire’s outstanding senior notes.
Taxation
For the nine months ended September 30, 2018, the effective tax rate on income from continuing
operations was 18% (2017: 4%).
The effective tax rate for the nine months ended September 30, 2018 has been affected by certain
provisions of the U.S. Tax Cuts and Jobs Act (Tax Act) passed in December 2017, which reduces the U.S. federal
corporate income tax rate from 35% to 21% along with anti-deferral provisions related to non-U.S. operations,
new limitations on certain deductions required under the Tax Act, and reductions in the quantum of and tax
benefit associated with U.S. integration costs over the prior year.
Shire continued to assess the financial statement impact of the applicable provisions of the Tax Act
upon enactment during the nine months ended September 30, 2018 and based on these assessments, income tax
expense increased by $37.9 million during this period. The increase in tax expense recorded during the nine
months ended September 30, 2018 was due to i) an adjustment to the U.S. deferred tax balances recorded as of
December 31, 2017 related to the corporate income tax rate reduction of a $7.1 million tax benefit; and ii) an
increase to income tax expense of $45.0 million related to the repatriation toll charge. The change in the toll
charge was partially driven by an adjustment of $31.0 million related to the tax rates applied to certain drivers of
the provisional repatriation toll charge in 2017, as well as the finalization of inputs to the calculation of the
117
repatriation toll charge and the refinement of Shire’s computation for the various guidance and regulations issued
during 2018. The changes to its original tax reform impacts increased the effective tax rate for the nine months
ended September 30, 2018 by 2%.
It is expected that additional interpretive guidance will be issued during the measurement period that
may change how Shire has computed the provisional amounts for the year ended December 31, 2017. Shire will
continue to assess the impact of the Tax Act during the measurement period and will record any adjustments to
its provisional estimates as needed during the remainder of the measurement period and continues to assert that
all amounts recorded and disclosed to date remain provisional.
The effective tax rate for the nine months ended September 30, 2017 was affected by the combined
impact of the relative quantum of the profit before tax for the period by jurisdiction as well as significant
acquisition and integration costs. Additionally, certain discrete tax adjustments were recorded during the year,
which contributed to the low effective rate, including a tax benefit associated with the filing of the US tax returns
and reversal of prior period income tax reserves.
Shire’s Results of Operations for the Fiscal Years Ended December 31, 2017 and 2016
Shire’s product sales increased 33% to $14,448.9 million, primarily driven by the inclusion of a full year
of legacy Baxalta product sales, with strong sales from immunoglobulin therapies and bio therapeutics. Shire’s
royalties and other revenues increased 39% to $711.7 million (2016: $510.8 million), primarily due to the receipt
of an upfront license fee and a full year of contract manufacturing revenue acquired with Baxalta.
The following table provides an analysis of Shire’s total revenues by source for 2016 and 2017. In 2017,
Immunology includes HAE from Genetic Diseases; prior year amounts have been reclassified to conform with
the current year presentation.
Years ended December 31,
2016
2017
Product sales growth
(millions of dollars, except percentages)
$ 1,143.9
1,310.9
372.2
$ 2,236.6
1,429.6
704.1
Product sales by franchise
IMMUNOGLOBULIN THERAPIES . . . . . . . . . . . . . . . . . . .
HEREDITARY ANGIOEDEMA . . . . . . . . . . . . . . . . . . . . . .
BIO THERAPEUTICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Immunology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HEMOPHILIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INHIBITOR THERAPIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hematology(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VYVANSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADDERALL XR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MYDAYIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Neuroscience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Neuroscience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIALDA/MEZAVANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GATTEX/REVESTIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PENTASA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NATPARA/NATPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Internal Medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,827.0
1,789.0
451.8
2,240.8
2,013.9
363.8
—
112.8
2,490.5
792.1
219.4
309.4
85.3
349.3
Internal Medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,755.5
ELAPRASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REPLAGAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
589.0
452.4
118
4,370.3
2,957.3
828.3
3,785.6
2,161.1
348.0
21.6
133.4
2,664.1
569.4
335.5
313.2
147.4
304.8
1,670.3
615.7
472.1
N/M
9%
N/M
N/M
N/M
N/M
N/M
7%
(4)%
N/M
18%
7%
(28)%
53%
1%
73%
(13)%
(5)%
5%
4%
Years ended December 31,
2016
2017
Product sales growth
(millions of dollars, except percentages)
VPRIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
345.7
Genetic Diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,387.1
Oncology(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ophthalmics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130.5
54.4
349.9
1,437.7
261.7
259.2
Total Product sales . . . . . . . . . . . . . . . . . . . . . . . . .
10,885.8
14,448.9
Royalties and other revenues
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total royalties and other revenues . . . . . . . . . . . . . . . .
382.6
128.2
510.8
448.4
263.3
711.7
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,396.6
$15,160.6
1%
4%
N/M
N/M
33%
17%
105%
39%
33%
Notes:
(1) N/M: Consolidated results include Baxalta sales as of June 3, 2016, the date of acquisition, or partial year
product launches; therefore, Product sales growth as a percentage is not meaningful.
(2) Sales for ADVATE and ADYNOVATE for the fiscal year ended December 31, 2017 were $2.4 billion.
(3) On August 31, 2018, Shire sold its oncology franchise to Servier for $2.4 billion.
Immunology
Immunology product sales, which now include HAE product sales, were $4,370.3 million in 2017
compared to $2,827.0 million in 2016, primarily driven by the inclusion of a full year of immunoglobulin
therapies and bio therapeutics product sales following the acquisition of Baxalta in June 2016. Immunoglobulin
and bio therapeutics reported total product sales of $2,940.7 million. HAE product sales for the year ended
December 31, 2017 increased to $1,429.6 million or 9% from $1,310.9 million in 2016, primarily driven by
FIRAZYR, up 15% to $663.0 million and CINRYZE up 3% to $699.3 million. During the third quarter of 2017,
CINRYZE had a supply constraint caused by a manufacturing interruption at a third-party supplier. The issue
was addressed and production resumed in the fourth quarter of 2017. On January 24, 2018, FDA granted
approval for the technology transfer of CINRYZE drug product manufacturing process to the Vienna, Austria
manufacturing site.
Hematology
Hematology, acquired with Baxalta in June 2016, included sales of recombinant and plasma-derived
hemophilia products (primarily Factor VIII and Factor IX) and inhibitor therapies. Hematology product sales
were $3,785.6 million in 2017 compared to $2,240.8 million in 2016, primarily driven by the inclusion of a full
year of Hematology product sales following the acquisition of Baxalta.
Neuroscience
Neuroscience product sales for the year ended December 31, 2017 increased to $2,664.1 million, or 7%,
from $2,490.5 million in 2016, with growth primarily driven by VYVANSE and the inclusion of MYDAYIS.
VYVANSE product sales for the year ended December 31, 2017 increased to $2,161.1 million, or 7%, from
$2,013.9 million in 2016, due to the benefit of a price increase(1) taken since 2016, increased demand resulting
from growth in the U.S. ADHD market and strong performance in Shire’s international markets, partially offset
by lower U.S. stocking. MYDAYIS, which was made available to patients on August 28, 2017, contributed
$21.6 million of product sales in 2017.
119
Information about litigation related to MYDAYIS can be found in Note 25 to Shire’s consolidated
financial statements contained in this registration statement.
(1) The actual net effect of price increases on current period net sales compared to the comparative period is difficult to
quantify due to the various managed care rebates, Medicaid discounts, other discount programs in which the Company
participates and fee for service agreements with wholesale customers.
Internal Medicine
Internal Medicine product sales for the year ended December 31, 2017 decreased to $1,670.3 million, or
5%, from $1,755.5 million in 2016, primarily driven by the impact of LIALDA generic competition, partially
offset by growth from GATTEX/REVESTIVE and NATPARA. LIALDA/MEZAVANT product sales decreased
to $569.4 million, or 28%, for the year ended December 31, 2017 from $792.1 million in 2016, due to the impact
of generic competition in 2017. Information about litigation related to LIALDA can be found in Note 25 to
Shire’s consolidated financial statements contained in this registration statement.
GATTEX/REVESTIVE and NATPARA/NATPAR product sales increased to $335.5 million, or 53%,
and $147.4 million or 73%, respectively, for 2017, compared to product sales in 2016 primarily due to an
increase in the numbers of patients on therapy and to a lesser extent, the benefit of price increases taken since
2016.(1)
(1) The actual net effect of price increases on current period net sales compared to the comparative period is
difficult to quantify due to the various managed care rebates, Medicaid discounts, other discount programs
in which the Company participates and fee for service agreements with wholesale customers.
Genetic Diseases
Genetic Diseases product sales, which now excludes HAE product sales,
for the year ended
December 31, 2017 increased to $1,437.7 million, or 4%, from $1,387.1 million in 2016, primarily due to
ELAPRASE and REPLAGAL, as both products benefited from an increase in the number of patients on therapy.
Oncology
Oncology, acquired with Baxalta in June 2016, reported product sales of $261.7 million for the year
ended December 31, 2017 compared to $130.5 million for the year ended December 31, 2016. Oncology includes
sales of ONCASPAR and ONIVYDE. ONIVYDE was approved in the EU on October 18, 2016. As Shire sold its
oncology franchise to Servier on August 31, 2018, these products are no longer included in its business following
such sale.
Ophthalmics
Ophthalmic product sales relate to XIIDRA, which was made available to patients on August 29, 2016.
XIIDRA product sales were $259.2 million for the year ended December 31, 2017 compared to $54.4 million for
the year ended December 31, 2016.
Cost of sales
Cost of sales increased by $884.3 million to $4,700.8 million for the year ended December 31, 2017
(31% of Total revenues) from $3,816.5 million in 2016 (33% of Total revenues), due to the inclusion of a full
year of legacy Baxalta costs. The decrease in cost of sales as a percentage of Total revenues for the year ended
December 31, 2016 to December 31, 2017 is primarily due to the impact of lower expense related to the unwind
of inventory fair value adjustments, partially offset by the inclusion of a full year of lower margin product
120
franchises acquired with Baxalta. For the year ended December 31, 2017, cost of product sales included
additional depreciation totaling $276.1 million (2016: $160.8 million), primarily due to the acquisition of
Baxalta.
R&D
R&D expense increased by $323.5 million, or 22%,
the year ended
December 31, 2017 (12% of Total revenues) from $1,439.8 million in 2016 (13% of Total revenues), primarily
due to the inclusion of a full year of legacy Baxalta costs. R&D expense for the year ended December 31, 2017
included depreciation of $47.2 million (2016: $34.1 million).
to $1,763.3 million for
SG&A
SG&A expense increased by $515.7 million, or 17%,
to $3,530.9 million for the year ended
December 31, 2017 (23% of Total revenues) from $3,015.2 million in 2016 (26% of Total revenues), primarily
due to the inclusion of a full year of legacy Baxalta costs. For the year ended December 31, 2017, SG&A
expense included depreciation of $172.5 million.
Amortization of acquired intangible assets
For the year ended December 31, 2017, Shire recorded amortization of acquired intangible assets of
$1,768.4 million compared to $1,173.4 million in 2016. The increase of $595.0 million was primarily related to a
full year of amortization of intangible assets acquired with Baxalta and the acceleration of CINRYZE
amortization following positive TAKHZYRO Phase 3 results.
Integration and acquisition costs
For
the year ended December 31, 2017, Shire recorded integration and acquisition costs of
$894.5 million, primarily relating to the Baxalta acquisition. Costs included asset impairment charges, employee
severance and expenses associated with facility consolidations. For the year ended December 31, 2016, Shire
recorded integration and acquisition costs of $883.9 million, primarily relating to the Baxalta and Dyax
acquisitions. Costs included employee severance, acceleration of stock compensation, third-party professional
fees, contract terminations and other transaction-related fees.
Reorganization costs
For the year ended December 31, 2017, Shire recorded reorganization costs of $47.9 million, primarily
related to the closure of the Basingstoke, U.K. office. For the year ended December 31, 2016, Shire recorded
reorganization costs of $121.4 million, primarily related to the closure of a facility at the Los Angeles, U.S.
manufacturing site.
Other expense, net
Other expense, net increased by $85.0 million to $561.8 million for the year ended December 31, 2017
from $476.8 million in 2016, primarily due to a full year of interest expense incurred on borrowings used to fund
the acquisition of Baxalta, reduced by repayments of borrowings and partially offset by lower amortization of
one-time upfront borrowing costs for Baxalta and Dyax in 2017.
Taxation
The effective tax rate in 2017 was a tax credit of 125% (2016: tax credit of 26%). This was due to the
enactment of the U.S. Tax Cuts and Jobs Act (P.L. 115-97) (Tax Act), which was signed into law on
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December 22, 2017. Among the changes is a permanent reduction in the federal U.S. corporate income tax rate
from 35% to 21% effective January 1, 2018. As a result of the reduction in the U.S. corporate income tax rate,
Shire revalued its net deferred tax positions for the year-ending December 31, 2017. This resulted in a decrease
to the net deferred tax liability of approximately $2.5 billion, which was recorded as reduction to income tax
expense for the fourth quarter of 2017. In addition, Shire has estimated an income tax liability of $621.7 million
related to the transition tax which is applicable to certain non U.S. earnings previously untaxed in the U.S. Shire
recorded a $90.1 million income tax expense related to the transition tax and reclassified a deferred tax liability
which had been accrued for prior years’ unremitted earnings to income tax payable for the remaining amount.
Shire continues to analyze the Tax Act to determine the full effects the new law will have on its financial
statements and all amounts recorded in the 2017 financial statements are provisional in nature.
Discontinued operations
The gain from discontinued operations for the year ended December 31, 2017 was $18.0 million, net of
taxes, primarily the return of funds previously held in escrow related to the acquisition of the DERMAGRAFT
business. The loss from discontinued operations for the year ended December 31, 2016 was $276.1 million, net
of tax benefit of $98.9 million, primarily due to the establishment of legal contingencies related to the divested
DERMAGRAFT business.
Shire’s Results of Operations for the Fiscal Years Ended December 31, 2016 and 2015
Shire’s product sales increased by 78% to $10,885.8 million. This increase was primarily due to
including $3,887.4 million of Baxalta product sales following the acquisition, and double digit growth of existing
franchises, with Neuroscience up 13% and Internal Medicine up 17%. In addition, Shire launched XIIDRA in
August 2016 and the Ophthalmology franchise contributed sales of $54.4 million. Royalties and other revenues
increased by 61% to $510.8 million, as the second half of 2016 benefited from additional revenue following the
acquisition of Baxalta, primarily related to contract manufacturing activities.
The following table provides an analysis of Shire’s Total revenues by source for the fiscal years ended
December 31, 2015 and 2016. In 2017, Immunology includes HAE from Genetic Diseases; prior year amounts
have been reclassified to conform with the current year presentation.
Years ended December 31,
2015
2016
Product sales growth
(millions of dollars, except percentages)
Product sales by franchise
IMMUNOGLOBULIN THERAPIES . . . . . . . . . . . . . . . . . . . .
HEREDITARY ANGIOEDEMA . . . . . . . . . . . . . . . . . . . . . . .
BIO THERAPEUTICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
1,062.7
—
$ 1,143.9
1,310.9
372.2
Immunology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,062.7
HEMOPHILIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INHIBITOR THERAPIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hematology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
VYVANSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADDERALL XR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Neuroscience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,722.2
362.8
115.4
Neuroscience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,200.4
LIALDA/MEZAVANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GATTEX/REVESTIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PENTASA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NATPARA/NATPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
684.4
141.7
305.8
24.4
2,827.0
1,789.0
451.8
2,240.8
2,013.9
363.8
112.8
2,490.5
792.1
219.4
309.4
85.3
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N/M
23%
N/M
N/M
N/M
N/M
N/M
17%
— %
(2)%
13%
16%
55%
1%
250%
Years ended December 31,
2015
2016
Product sales growth
(millions of dollars, except percentages)
Other Internal Medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 344.3
$
349.3
Internal Medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,500.6
1,755.5
ELAPRASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REPLAGAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VPRIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
552.6
441.2
342.4
Genetic Diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,336.2
Oncology(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ophthalmics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
589.0
452.4
345.7
1,387.1
130.5
54.4
Total Product sales . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,099.9
10,885.8
Royalties and other revenues
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total royalties and other revenues . . . . . . . . . . . . . . . .
300.5
16.3
316.8
382.6
128.2
510.8
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,416.7
$11,396.6
1%
17%
7%
3%
1%
4%
N/M
N/M
78%
27%
687%
61%
78%
Notes:
(1) N/M: Consolidated results include Baxalta sales as of June 3, 2016, the date of acquisition, or partial year
product launches; therefore, Product sales growth as a percentage is not meaningful.
(2) On August 31, 2018, Shire sold its oncology franchise to Servier for $2.4 billion.
Immunology
Immunology product sales, which now include HAE product sales, were $2,827.0 million in 2016
compared to $1,062.7 million in 2015. Immunoglobulin therapies and bio therapeutics, acquired with Baxalta in
June 2016, reported total product sales of $1,516.1 million. HAE product sales for the year ended December 31,
2016 increased to $1,310.9 million or 23% from $1,062.7 million in 2015, primarily driven by increased demand
for FIRAZYR and CINRYZE. FIRAZYR product sales for the year ended December 31, 2016 increased to
$578.5 million or 30% from $445.0 million in 2015, primarily due to an increase in the number of patients on
therapy in both the U.S. and international markets. CINRYZE product sales for the year ended December 31,
2016 increased to $680.2 million or 10% from $617.7 million in 2015, as an increase in the number of patients on
therapy was partially offset by reduced utilization as a result of a U.S. supply constraint during the second half of
the year.
Hematology
Hematology, acquired with Baxalta in June 2016, included sales of recombinant and plasma-derived
hemophilia products (primarily Factor VIII and Factor IX) and inhibitor therapies. Product sales for the year
ended December 31, 2016 were $2,240.8 million.
Neuroscience
Neuroscience product sales for the year ended December 31, 2016 increased to $2,490.5 million, or
13%, from $2,200.4 million in 2015, with growth primarily driven by VYVANSE. VYVANSE product sales for
the year ended December 31, 2016 increased to $2,013.9 million, or 17%, from $1,722.2 million in 2015, due to
prescription growth in the U.S. adult market, which includes ADHD and BED, and the benefit of price
increases(1) taken since 2015 and growth in Shire’s international markets.
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(1) The actual net effect of price increases on current period net sales compared to the comparative period is difficult to
quantify due to the various managed care rebates, Medicaid discounts, other discount programs in which the Company
participates and fee for service agreements with wholesale customers.
Internal Medicine
Internal Medicine product sales for the year ended December 31, 2016 increased to $1,755.5 million, or
17%, from $1,500.6 million in 2015, primarily driven by sales growth from LIALDA/MEZAVANT, GATTEX/
REVESTIVE and NATPARA. LIALDA/MEZAVANT product sales increased to $792.1 million or 16% for the
year ended December 31, 2016 from $684.4 million in 2015, primarily due to an increase in prescription demand,
resulting in a U.S. market share of 40% at the end of 2016 (compared to 36% in 2015). GATTEX/REVESTIVE
and NATPARA product sales increased to $219.4 million or 55% and $85.3 million or 250%, respectively, for
2016, compared to product sales in 2015 primarily due to an increase in the numbers of patients on therapy.
Genetic Diseases
Genetic Diseases product sales, which now excludes HAE product sales,
for the year ended
December 31, 2016 increased to $1,387.1 million or 4% from $1,336.2 million in 2015, primarily driven by an
increase in the number of patients on therapy for ELAPRASE and REPLAGAL. ELAPRASE product sales for
the year ended December 31, 2016 increased to $589.0 million, or 7%, from $552.6 million in 2015, primarily
due to an increase in the number of patients on therapy and partially offset by the impact of foreign exchange.
Oncology
Oncology, acquired with Baxalta in June 2016, reported product sales of $130.5 million. Oncology
includes sales of ONCASPAR and ONIVYDE. ONIVYDE was approved in the EU on October 18, 2016. As
Shire sold its oncology franchise to Servier on August 31, 2018, these products are no longer included in its
business following such sale.
Ophthalmics
Ophthalmic product sales relate to XIIDRA, which was made available to patients on August 29, 2016.
XIIDRA product sales were $54.4 million for the year ended December 31, 2016.
Royalties and other revenues
Royalties and other revenues increased to $510.8 million or 61% for the year ended December 31, 2016
from $316.8 million in 2015, primarily due to $99.0 million of contract manufacturing revenue from the
acquisition of Baxalta.
Cost of product sales
Cost of product sales increased by $2,847.5 million, or 294%, to $3,816.5 million for the year ended
December 31, 2016 (33% of Total revenues) from $969.0 million in 2015 (15% of Total revenues), primarily due
to the impact of the unwind of inventory fair value adjustments in 2016 following the acquisitions of Baxalta and
Dyax and, to a lesser extent, the impact of lower margin product franchises acquired with Baxalta. Cost of
product sales included $1,118.0 million and $31.1 million of amortization of inventory fair value adjustments in
2016 and 2015, respectively. For the year ended December 31, 2016, Cost of product sales included depreciation
totaling $160.8 million. Depreciation increased primarily due to the acquisition of Baxalta.
R&D
R&D expense decreased by $124.2 million, or 8%, to $1,439.8 million for the year ended December 31,
2016 (13% of Total revenues) from $1,564.0 million in 2015 (24% of Total revenues), primarily due to lower
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in-process research and development (“IPR&D”) impairment charges in 2016 more than offset the increase in
costs related to Baxalta and Dyax and costs related to licensing SHP647. R&D expense in 2015 included
impairment charges of $467.0 million related to the SHP625 IPR&D intangible asset, due to a lower probability
of regulatory approval following trial results and revised commercial potential, and $176.7 million related to the
SHP608 IPR&D intangible asset, following preclinical toxicity findings. No significant impairment charges
occurred in 2016. R&D expense for the year ended December 31, 2016 included depreciation of $34.1 million.
SG&A
SG&A expense increased by $1,172.7 million, or 64%,
to $3,015.2 million for the year ended
December 31, 2016 (26% of Total revenues) from $1,842.5 million in 2015 (29% of Total revenues), primarily
due to the inclusion of Baxalta related costs and XIIDRA launch and promotional costs. For the year ended
December 31, 2016, SG&A expense included depreciation of $98.0 million.
Amortization of acquired intangible assets
For the year ended December 31, 2016, Shire recorded amortization of acquired intangible assets of
$1,173.4 million compared to $498.7 million in 2015. The increase of $674.7 million was primarily related to
amortization on the intangible assets acquired with the Baxalta and Dyax transactions.
Integration and acquisition costs
For
the year ended December 31, 2016, Shire recorded integration and acquisition costs of
$883.9 million, primarily related to the Baxalta and Dyax transactions, which included severance and employee
termination benefits. In 2015, Shire recorded integration and acquisition costs of $39.8 million, representing
acquisition and integration costs of $189.7 million, primarily related to NPS, ViroPharma, Baxalta and Dyax.
These costs were offset by a net credit of $149.9 million from the change in fair value of contingent
consideration, primarily relating to SHP625 and SHP608.
Reorganization costs
For the year ended December 31, 2016, Shire recorded reorganization costs of $121.4 million primarily
related to the planned closure of a facility at the Los Angeles manufacturing site acquired with Baxalta in June
2016. Reorganization costs of $97.9 million for the year ended December 31, 2015, primarily related to the
relocation of roles from Pennsylvania to Massachusetts.
Other expense, net
Other expense, net increased by $443.1 million to $476.8 million for the year ended December 31, 2016
from $33.7 million in 2015, primarily due to higher interest expense and amortization of one-time borrowing
costs, including the write off of certain financing costs related to the bridge facility for the acquisition of Baxalta.
During the third quarter of 2016, the bridge facility was fully repaid with the proceeds from the $12.1 billion
public debt offering.
Taxation
The effective tax rate on income from continuing operations for the year ended December 31, 2016 was
a benefit of 26%. The effective tax rate on income from continuing operations in 2016 was lower primarily due
to the combined impact of the relative quantum of the profit before tax for the period by jurisdiction and the
reversal of deferred tax liabilities (including in higher tax territories) from the Baxalta acquisition, inventory and
intangible asset amortization, as well as acquisition and integration costs.
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Discontinued operations
The loss from discontinued operations for the year ended December 31, 2016 was $276.1 million, net of
tax benefit of $98.8 million, primarily related to legal contingencies established in the second quarter of 2016,
related to the divested DERMAGRAFT business. The loss from discontinued operations for the year ended
December 31, 2015 was $34.1 million, net of tax, primarily related to a change in estimate for abandoned
facilities charges.
Liquidity and Capital Resources
Shire’s funding requirements depend on a number of factors, including the timing and extent of its
development programs, corporate, business and product acquisitions, the level of resources required for the
expansion of certain manufacturing and marketing capabilities as the product base expands, increases in accounts
receivable and inventory which may arise with any increase in Product sales, competitive and technological
developments, the timing and cost of obtaining required regulatory approvals for new products, the timing and
quantum of milestone payments on business combinations, in-licenses and collaborative projects, the timing and
quantum of tax and dividend payments, the timing and quantum of purchases by the Employee Benefit Trust
(“EBT”) of Shire shares in the market to satisfy awards granted under Shire’s employee share plans, the timing
and qualification of its refinancing obligations and the amount of cash generated from sales of Shire’s products
and royalty receipts.
An important part of Shire’s business strategy is to protect its products and technologies through the use
of patents, proprietary technologies and trademarks, to the extent available. Shire intends to defend its intellectual
property and as a result may need cash for funding the cost of litigation.
Shire finances its activities through cash generated from operating activities, credit facilities, private and
public offerings of equity and debt securities and the proceeds of asset or investment disposals. Shire’s
consolidated balance sheets included $193.2 million of cash and cash equivalents as of September 30, 2018.
Shire has a revolving credit facility (RCF) of $2.1 billion which matures in 2021, $915.0 million of
which was utilized as of September 30, 2018. The RCF incorporates a $250 million U.S. dollar and Euro
swingline facility operating as a sub-limit thereof. In connection with the acquisition of Dyax, Shire entered into
a $5.6 billion amortizing term loan facility in November 2015. As of September 30, 2018, there was no
outstanding balance under this term loan facility as it was fully repaid and canceled on September 28, 2018. In
connection with the acquisition of Baxalta, Shire assumed $5.0 billion of unsecured senior notes previously
issued by Baxalta Incorporated. As of September 30, 2018, a total of $1.9 billion unsecured senior notes are
outstanding, following repayment of the $375.0 million floating-rate notes and the $375.0 million fixed-rate
notes due June 2018 as well as the repurchase of $2.3 billion of the notes in the third quarter of 2018. In addition,
in connection with the acquisition of Baxalta, Shire issued $12.1 billion of unsecured senior notes in September
2016, of which $3.3 billion is due within the next twelve months.
The details of these debt agreements are described below and in Note 17, “Borrowings and Capital
Leases,” to Shire’s unaudited consolidated financial statements contained in this registration statement.
In addition, Shire also has access to certain short-term uncommitted lines of credit which are available
to utilize from time to time to provide short-term cash management flexibility. As of September 30, 2018, these
lines of credit were not utilized. Shire may also engage in financing activities from time to time, including
accessing the debt or equity capital markets.
SAIIDAC Notes
On September 23, 2016, Shire Acquisitions Investments Ireland Designated Activity Company
(“SAIIDAC”), a wholly-owned subsidiary of Shire, issued senior notes with a total aggregate principal value of
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$12.1 billion (“SAIIDAC Notes”), guaranteed by Shire plc and by Baxalta Incorporated. SAIIDAC used the net
proceeds to fully repay amounts outstanding under the January 2016 Facilities Agreement (discussed below),
which was used to finance the cash consideration payable related to Shire’s acquisition of Baxalta. Below is a
summary of the SAIIDAC Notes as of September 30, 2018:
Aggregate
amount
Coupon rate
Carrying amount
as of
September 30,
2018
(millions of dollars, except percentages)
Fixed-rate notes due 2019 . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2021 . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2023 . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2026 . . . . . . . . . . . . . . . . . . . . . . .
Total SAIIDAC Notes . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,300.0
3,300.0
2,500.0
3,000.0
$12,100.0
1.900%
2.400%
2.875%
3.200%
$ 3,295.3
3,289.0
2,490.8
2,983.8
$12,058.9
As of September 30, 2018, there were $41.1 million of debt issuance costs and discounts recorded as a
reduction of the carrying amount of debt. These costs will be amortized as additional interest expense using the
effective interest rate method over the period from issuance through maturity.
Baxalta Notes
Shire plc guaranteed senior notes issued by Baxalta Incorporated with a total aggregate principal amount
of $5.0 billion in connection with the Baxalta acquisition (“Baxalta Notes”). Following repayment of the $375.0
million floating-rate notes and the $375.0 million fixed-rate notes due in June 2018 and the subsequent $2.3
billion bond tender offer on September 11, 2018, the remaining Baxalta Notes as of September 30, 2018 are
shown below:
Aggregate
amount
Coupon rate
Carrying amount
as of
September 30,
2018
Fixed-rate notes due 2020 . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2022 . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2025 . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2045 . . . . . . . . . . . . . . . . . . . . . . . .
Total Baxalta Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(millions of dollars, except percentages)
404.5
219.4
800.5
500.4
$1,924.8
403.0
221.9
799.7
515.3
$1,939.9
2.875%
3.600%
4.000%
5.250%
The book values above include any premiums, discounts and adjustments related to hedging
instruments. For further details related to the interest rate derivative contracts, please see Note 16. Financial
Instruments, to Shire’s unaudited consolidated financial statements included in this registration statement.
Debt Tender Offer
On September 11, 2018, Shire purchased an aggregate of $2.3 billion in principal amount of Baxalta
Notes from existing holders consisting of its 2.875% Notes due June 2020, 3.600% Notes due June 2022, 4.00%
Notes due June 2025 and 5.250% Notes due June 2045 pursuant to a debt tender offer. Shire paid approximately
$2.4 billion, including accrued and unpaid interest and tender premium, to purchase such notes. As a result of the
debt tender offer, Shire recognized a loss on extinguishment of debt in the third quarter of 2018 of $40.6 million,
which is included in Other (expense)/income, net within Shire’s unaudited consolidated statements of operations.
Revolving Credit Facilities Agreement
On December 12, 2014, Shire entered into a $2.1 billion revolving credit facilities agreement with a
number of financial institutions. Shire plc and SAIIDAC are able to borrow under the RCF; Shire plc, SAIIDAC
127
and Baxalta Incorporated are guarantors under the RCF. As of September 30, 2018 Shire utilized $915.0 million
of the RCF. The RCF, which terminates on December 12, 2021, may be applied towards financing the general
corporate purposes of Shire. The RCF incorporates a $250 million U.S. dollar and Euro swingline facility
operating as a sub-limit thereof. Interest on any loans made under the RCF is payable on the last day of each
interest period, which may be one week or one, two, three or six months at the election of Shire, or as otherwise
agreed with the lenders. The interest rate for the RCF is: LIBOR (or, in relation to any revolving loan in Euro,
EURIBOR); plus 0.30% per annum subject to change depending upon (i) the prevailing ratio of Net Debt to
EBITDA (each as defined in the RCF) in respect of the most recently completed financial year or financial half
year and (ii) the occurrence and continuation of an event of default in respect of the financial covenants or the
failure to provide a compliance certificate. Shire also will pay (i) a commitment fee equal to 35% of the
applicable margin on available commitments under the RCF for the availability period applicable thereto and
(ii) a utilization fee equal to (a) 0.10% per year of the aggregate of all outstanding loans up to an aggregate base
currency amount equal to $700.0 million, (b) 0.15% per year of the amount by which the aggregate base currency
amount of all outstanding loans exceeds $700.0 million but is equal to or less than $1,400.0 million and (c)
0.30% per year of the amount by which the aggregate base currency amount of all outstanding loans exceeds
$1,400.0 million.
The RCF includes customary representations and warranties, covenants and events of default, including
requirements that Shire’s (i) ratio of Net Debt to EBITDA in respect of the most recently-ended 12-month
relevant period (each as defined in the RCF) must not, at any time, exceed 3.5:1 except that, following an
acquisition fulfilling certain criteria, Shire may elect to increase this ratio to (a) 5.5:1 for the relevant period in
which the acquisition was completed (b) 5.0:1 in respect of the first relevant period following the relevant period
in which the acquisition was completed and (c) 4.5:1 in respect of the second relevant period following the
relevant period in which the acquisition was completed and (ii) ratio of EBITDA to Net Interest for the most
recently-ended 12-month relevant period (each as defined in the RCF) must not be less than 4.0:1. Shire elected
to increase the Net Debt to EBITDA ratio in connection with the period ended June 30, 2016, following the
completion of the acquisition of Baxalta during the period. The final relevant period ended June 2017.
The RCF restricts, subject
financial
indebtedness, grant security over its assets or provide loans/grant credit. Further, any lender may require
mandatory prepayment of its participation if there is a change of control of Shire, subject to certain exceptions
for schemes of arrangement and analogous schemes.
to certain exceptions, Shire’s ability to incur additional
Events of default under the RCF include, subject to customary grace periods and materiality thresholds:
(i) non-payment of any amounts due under the finance documents (as defined in the RCF), (ii) failure to satisfy any
financial covenants, (iii) material misrepresentation in any of the finance documents, (iv) failure to pay, or certain
other defaults, under other financial indebtedness, (v) certain insolvency events or proceedings, (vi) material
adverse changes in the business, operations, assets or financial condition of Shire as a whole, (vii) if it becomes
unlawful for Shire (or any successor parent company) or any of their respective subsidiaries that are parties to the
RCF to perform their obligations thereunder or (viii) if Shire (or any successor parent company) or any subsidiary
thereof which is a party to the RCF repudiates such agreement or other finance document, among others.
Term Loan Facilities Agreement
November 2015 Facilities Agreement
On November 2, 2015, Shire entered into a $5.6 billion facilities agreement with various financial
institutions (November 2015 Facilities Agreement). Shire plc, SAIIDAC and Baxalta Incorporated are guarantors
under the November 2015 Facilities Agreement. SAIIDAC is the borrower under the November 2015 Facilities
Agreement. The November 2015 Facilities Agreement comprises three credit facilities: (i) a $1.0 billion term
loan facility of which, following the exercise of the one year extension option in the amount of $400.0 million,
$600.0 million matured and was repaid on November 2, 2016 and $400.0 million was repaid on July 31, 2017,
128
(ii) a $2.2 billion amortizing term loan facility which was fully paid during 2017 and (iii) a $2.4 billion
amortizing term loan facility with ultimate maturity on November 2, 2018. As of September 30, 2018, there were
no amounts outstanding under the November 2015 Facilities Agreement as it was fully repaid and cancelled on
September 28, 2018.
January 2016 Facilities Agreement
On January 11, 2016, Shire (as original guarantor and original borrower), entered into an $18.0 billion
bridge facilities agreement with various financial institutions (January 2016 Facilities Agreement). The January
2016 Facilities Agreement comprised two credit facilities: (i) a $13.0 billion term loan facility originally
maturing on January 11, 2017 (January 2016 Facility A) and (ii) a $5.0 billion revolving loan facility originally
maturing on January 11, 2017 (January 2016 Facility B). On April 1, 2016, SAIIDAC became an additional
borrower and additional guarantor under the January 2016 Facilities Agreement. The January 2016 Facility A
was fully repaid in September 2016. The January 2016 Facility B was canceled effective on July 11, 2016, in
accordance with its terms.
Short-term uncommitted lines of credit (credit lines)
Shire has access to various credit lines from a number of banks which are available to be utilized from
time to time to provide short-term cash management flexibility. These credit lines can be withdrawn by the banks
at any time. The credit lines are not relied upon for core liquidity. As of September 30, 2018, these credit lines
were not utilized.
Financing
Shire anticipates that its operating cash flow together with available cash, cash equivalents, and the RCF
will be sufficient to meet its anticipated future operating expenses, capital expenditures, tax and interest
payments, lease obligations, debt repayments and milestone payments as they become due over the next twelve
months. If Shire decides to acquire other businesses, it expects to fund these acquisitions from cash resources, the
RCF and through new borrowings (including issuances of debt securities) or the issuance of new equity, if
necessary.
Sources and uses of cash
The following table provides an analysis of Shire’s gross and net cash (excluding restricted cash):
Cash and cash equivalents . . . . . .
Long term borrowings (excluding
. . . . . . . . . . . . .
capital leases)
Short term borrowings
As of December 31,
As of September 30,
2016
2017
2018
$
528.8
(millions of dollars)
472.4
$
$
193.2
(19,552.6)
(16,410.7)
(10,740.7)
(excluding capital leases) . . . .
Capital leases . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . .
(3,061.6)
(353.6)
(22,967.8)
(2,781.2)
(349.2)
(19,541.1)
(4,239.2)
(366.8)
(15,346.7)
Substantially all of Shire’s cash and cash equivalents are held by foreign subsidiaries (i.e. those
subsidiaries incorporated outside of Jersey, Channel Islands, the jurisdiction of incorporation of Shire). The
amount of cash and cash equivalents held by foreign subsidiaries has not had, and is not expected to have, a
material impact on Shire’s liquidity and capital resources.
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Cash flow activity
Net cash provided by operating activities increased by $70.4 million, or 3%, to $2,807.5 million (2017:
$2,737.1 million) during the nine months ended September 30, 2018, primarily due to improvements in working
capital offset by decrease in cash generated from business operations resulting in a favorable comparison period
as the nine months ended September 30, 2017 included a payment of $351.6 million associated with the
settlement of the DERMAGRAFT litigation.
Net cash provided by operating activities for the year ended December 31, 2017 increased 60% to
$4,256.7 million (2016: $2,658.9 million), primarily due to inclusion of a full year of Baxalta operating cash
flows, increased cash receipts from higher sales and operating profitability, partially offset by a payment of
$351.6 million associated with the settlement of the DERMAGRAFT litigation and higher interest payments.
Net cash provided by operating activities for the year ended December 31, 2016 increased 14% to
$2,658.9 million (2015: $2,337.0 million), primarily due to increased cash receipts from higher sales, partially
offset by higher tax and interest payments, costs related to the Baxalta integration and a payment associated with
the termination of a biosimilar collaboration acquired with Baxalta.
Net cash provided by investing activities was $1,676.8 million during the nine months ended
September 30, 2018, primarily related due to proceeds from the sale of
the Oncology franchise of
$2,412.2 million, proceeds from the sale of investments of $31.8 million, offset by purchases of $564.6 million
of PP&E due to continued investments in manufacturing operations, and the acquisition of a European plasma
company for $104.7 million.
Net cash used in investing activities was $700.9 million for the year ended December 31, 2017,
primarily related to purchase of $798.8 million of PP&E due to continued investments in manufacturing
operations, offset by $88.6 million of proceeds from the sale of investments.
Net cash used in investing activities was $18,092.2 million for the year ended December 31, 2016,
primarily related to the cash paid for the acquisitions of Baxalta ($12,366.7 million, less cash acquired of $583.2
million) and Dyax ($5,934.0 million, less cash acquired of $241.2 million). Shire’s investing activities also
included the purchase of $648.7 million of PP&E due to the continued investment in manufacturing operations.
Net cash used in financing activities was $4,751.1 million during the nine months ended
September 30, 2018, principally due to the repurchase of $2.3 billion of Baxalta Notes, $1.2 billion of
repayments under the November 2015 Facility, a contingent consideration payment of $396.0 million, repayment
of the $375.0 million floating-rate Baxalta Notes and the $375.0 million fixed-rate Baxalta Notes, and a dividend
payment of $276.6 million, which was partially offset by $105.0 million of increased borrowings under the RCF,
and $180.8 million of cash proceeds from the exercise of options.
Net cash used in financing activities was $3,619.3 million for the year ended December 31, 2017,
principally due to repayments of November Facilities of $3,800.0 million and dividend payments of
$281.3 million, offset by monies borrowed under the RCF of $360.0 million and proceeds from the issuance of
stock and share-based compensation arrangements of $134.1 million.
Net cash provided by financing activities was $15,825.8 million for the year ended December 31, 2016,
principally due to monies borrowed under the January 2016 Facilities Agreement to partially fund the acquisition
of Baxalta (repaid using the proceeds of the issuance of the SAIIDAC Notes) and drawings made under the RCF
and the November 2015 Facilities Agreement to fund the acquisition of Dyax (net of subsequent repayments). In
addition, Shire made dividend payments of $171.3 million.
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Outstanding Letters of credit
As of September 30, 2018 and December 31, 2017, Shire had irrevocable standby letters of credit and
guarantees with various banks totaling $249.5 million and $224.8 million, providing security for Shire’s
performance of various obligations. These obligations are primarily in respect of the recoverability of insurance
claims, lease obligations and supply commitments.
Cash Requirements
As of December 31, 2017, Shire’s cash requirements for current and non-current liabilities reflected on
Shire’s consolidated balance sheets and other contractual obligations were as follows:
Payments due by period
Total
Less than
1 year
1 - 3 years
3 - 5 years
Borrowings and capital lease obligations . . . . . . . . . . .
Operating leases obligations . . . . . . . . . . . . . . . . . . . . .
Purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
$23,626.5
1,579.7
3,946.6
1,077.6
$30,230.4
(millions of dollars)
$5,294.7
320.0
1,501.4
473.9
$7,590.0
$4,555.0
275.4
281.1
323.9
$5,435.4
$3,330.5
188.5
2,113.4
—
$5,632.4
More than
5 years
$10,446.3
795.8
50.7
279.8
$11,572.6
Calculations of expected interest payments incorporate current period assumptions for interest rates,
foreign currency translation rates and hedging strategies (refer to Note 15 to the consolidated financial statements
of Shire contained in this registration statement), and assume that interest is accrued through the maturity date or
expiration of the related instrument. Shire leases certain land, facilities, motor vehicles and certain equipment
under operating leases expiring through 2033.
Purchase obligations include agreements to purchase goods, investments or services (including clinical
trials, contract manufacturing and capital equipment), and open purchase orders, that are enforceable and legally
binding and that specify all significant terms. Shire expects to fund these commitments with cash flows from
operating activities.
Unrecognized tax benefits and associated interest and penalties of $143.8 million are included within
payments due in one to three years.
The following items have been excluded from the table above:
•
•
Cash outflows related to the assumed pension and other post-employment benefit plans, in which
timing of funding is uncertain and dependent on future movements in interest rates and investment
returns, changes in laws and regulations and other variables.
In connection with Shire’s acquisitions, Shire recorded contingent consideration liabilities related to
development, regulatory and commercial milestones and royalty payments. These liabilities were
recorded at fair value on the respective acquisition dates and revalued each reporting period. Shire
may pay up to approximately $2.7 billion, which excludes royalty related payments, upon achieving
clinical, regulatory and commercialization milestones. For additional information, see Note 14 to
Shire’s consolidated financial statements included in this registration statement.
• Milestone payments to third parties upon the achievement of development, regulatory and
commercial milestones, as well as potential royalty payments, associated with in-licensing and
collaboration agreements. Potential future milestone payments associated with these arrangements
was approximately $5.5 billion, which excludes potential royalty payments. For additional
information, see Note 4 to Shire’s consolidated financial statements included in this registration
statement.
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• Milestone payments related with collaboration agreements that become payable only if Shire
chooses to exercise one or more of its options and potential contingent payments associated with
R&D costs that may be funded by collaboration partners in the future.
•
An unfunded commitment of $48.9 million as a limited partner in multiple investment companies,
in which the timing of future payments is uncertain.
During the nine months ended September 30, 2018,
contractual obligations disclosed above, except as described below.
there were no material changes to Shire’s
On September 11, 2018, Shire purchased an aggregate of $2.3 billion in principal amount of Baxalta
Notes from existing holders consisting of its 2.875% Notes due June 2020, 3.600% Notes due June 2022, 4.000%
Notes due June 2025 and 5.250% Notes due June 2045 pursuant to a debt tender offer. Shire paid approximately
$2.4 billion, including accrued and unpaid interest and tender premium, to purchase such notes. As a result of the
debt tender offer, Shire recognized a loss on extinguishment of debt in the third quarter of 2018 of $40.6 million,
which is included in Other (expense)/income, net within the unaudited consolidated statements of operations.
Off-balance sheet arrangements
There are no off-balance sheet arrangements, aside from those outlined above, that have, or are
reasonably likely to have, a current or future material effect on Shire’s financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.
Foreign currency fluctuations
A number of Shire’s subsidiaries have a functional currency other than the U.S. dollar. As such, the
consolidated financial results are subject to fluctuations in exchange rates, particularly in the Euro, Swiss franc,
Japanese yen and Pound sterling against the U.S. dollar.
Accumulated foreign currency translation differences of $1,279.6 million are reported within
Accumulated other comprehensive income as of December 31, 2017. Foreign exchange losses for the year ended
December 31, 2017 of $97.3 million are reported in Shire’s consolidated statements of operations.
As of December 31, 2017, Shire had outstanding foreign exchange swap and forward contracts that
manage the currency risk associated with intercompany transactions. As of December 31, 2017 the fair value of
these contracts was a net asset of $11.4 million. For the year ended December 31, 2017, net gains on foreign
exchange swaps and forwards of $93.6 million are reported in Shire’s consolidated statements of operations.
Concentration of credit risk
Financial instruments that potentially expose Shire to concentrations of credit risk consist primarily of
short-term cash investments, derivative contracts and trade accounts receivable from product sales and from third
parties from which Shire receives royalties. Cash is invested in short-term money market instruments, including
money market and liquidity funds and bank term deposits or held on account. The money market and liquidity
funds where Shire invests are all triple A rated by both Standard and Poor’s and by Moody’s credit rating
agencies.
Shire is exposed to the credit risk of the counterparties with which it enters into bank term deposit
arrangements and derivative instruments. Shire limits this exposure through a system of internal credit limits
which vary according to ratings assigned to the counterparties by the major rating agencies. The internal credit
limits are approved by Shire’s board of directors and exposure against these limits is monitored by Shire’s
corporate treasury function. The counterparties to these derivatives contracts are major international financial
institutions.
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Inflation
Although at reduced levels in recent years, inflation continues to apply upward pressure on the cost of
goods and services which are used in the business. However, Shire believes that the net effect of inflation on its
revenues and operations has been minimal during the past three years.
Critical accounting estimates
The preparation of Shire’s consolidated financial statements, in conformity with U.S. GAAP and SEC
regulations, requires management to make estimates, judgments and assumptions that affect the reported amounts
of assets, liabilities and equity at the date of Shire’s consolidated financial statements and reported amounts of
revenues and expenses during the reporting period. On an on-going basis, Shire evaluates its estimates,
judgments and methodologies. Estimates are based on historical experience, current conditions and on various
other assumptions that are reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets, liabilities and equity and the amounts of revenues and expenses.
Actual results may differ from these estimates under different assumptions or conditions.
Revenue Recognition and Related Allowances
a.
Product Revenue
Shire recognizes revenues from Product sales when there is persuasive evidence that an arrangement
exists, delivery has occurred, the price is fixed or determinable and collectability is reasonably assured. Shire
records Product sales net of sales deductions.
b.
Other Revenue
Royalty income relating to licensed technology is generally recognized when the licensee sells the
underlying product. Shire estimates sales amounts and related royalty income based on the historical product
information. Estimates are revised pursuant to receiving sales information from the relevant licensee. If Shire is
unable to reliably estimate the amount based on past experiences, the amount of royalty income is recorded when
sales information from the relevant licensee is received.
c.
Sales Deductions
Sales deductions consist primarily of statutory rebates to State Medicaid and other government agencies,
Medicare Part D rebates, commercial rebates and fees to MCOs, Group Purchasing Organizations, distributors
and specialty pharmacies, product returns, sales discounts (including trade discounts), distribution service fees,
wholesaler chargebacks and allowances for coupon and patient assistance programs. These deductions are
recorded as reductions to revenue in the same period as the related sales are recognized. Reserves are based on
estimates of the amounts earned or to be claimed on the related sales. Estimates are based on Shire’s historical
experience of existing or similar programs, current contractual and statutory requirements, specific known
market events and trends, industry data and forecasted customer buying and payment patterns. Additionally,
certain rebates are based on annual purchase volumes which are not known until completion of the annual period
on which they are based. As a result, Shire estimates the accruals and related reserves required for amounts
payable under these programs.
If actual results vary, Shire may need to adjust these estimates, which could have an effect on earnings
in the period of the adjustment. Aggregate reserves for Medicaid and MCO rebates as of December 31, 2017,
2016 and 2015 were $1,612.7 million, $1,431.3 million and $982.4 million or 11%, 13% and 16%, respectively,
of product sales. Historically, actual rebates have not varied significantly from the reserves provided.
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d.
Product Returns
Shire typically accepts customer product returns in the following circumstances: (a) expiration of shelf
life on certain products; (b) product damaged while in Shire’s possession; (c) under sales terms that allow for
unconditional return (guaranteed sales); or (d) following product recalls or product withdrawals. Generally,
returns for expired product are accepted three months before and up to one year after expiration date of the
relevant product and the returned product is destroyed. Depending on the product and Shire’s return policy with
respect to that product, Shire may either refund the sales price paid by the customer by issuance of a credit, or
exchange the returned product with replacement inventory. Shire typically does not provide cash refunds.
Shire estimates the proportion of recorded revenue that will result in a return by considering relevant
factors, including but not limited to:
•
•
•
•
•
•
•
past product returns activity;
the duration of time taken for products to be returned;
the estimated level of inventory in the distribution channel;
product recalls and discontinuances;
the shelf life of products;
the launch of new drugs or new formulations; and
the loss of patent protection, exclusivity or new competition.
The accrual estimation process for product returns involves, in each case, a number of interrelating
assumptions, which vary for each combination of product and customer. As of December 31, 2017, 2016 and
2015, reserves for product returns were $175.7 million, $118.4 million, and $128.3 million or 1.2%, 1.1% and
2.1%, respectively, of Product sales. Historically, actual returns have not varied significantly from the reserves
provided.
Valuation of intangible assets, including IPR&D
In conjunction with the accounting for business combinations, Shire recorded intangible assets primarily
related to commercially marketed products and IPR&D projects. Shire has intangible assets, net of
$33,046.1 million as of December 31, 2017 and $34,697.5 million as of December 31, 2016.
If Shire acquires an asset or group of assets that do not meet the definition of a business under
applicable accounting standards, the acquired IPR&D is expensed on its acquisition date. Future costs to develop
these assets are recorded to Research and development expense as they are incurred.
The identifiable intangible assets are measured at their respective fair values as of the acquisition date.
When significant identifiable intangible assets are acquired, Shire engages an independent third-party valuation
firm to assist in determining the fair values of these assets as of the acquisition date. Discounted cash flow
models are typically used in these valuations and the models used in valuing these intangible assets require the
use of significant estimates and assumptions including but not limited to:
•
•
•
•
•
estimates of revenues and operating profits related to the products or product candidates;
the probability of success for unapproved product candidates considering their stages of
development;
the time and resources needed to complete the development and approval of product candidates;
projecting regulatory approvals; and
developing appropriate discount rates and probability rates by project.
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Shire believes the fair values used to record intangible assets acquired in connection with a business
combination are based upon reasonable estimates and assumptions given the facts and circumstances as of the
acquisition date.
Impairment and Amortization of Long-lived Assets, including intangible assets
Long-lived assets to be held and used include intangible assets and property, plant and equipment.
Property, plant and equipment and intangible assets related to Shire’s commercially marketed products are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable. Management reviews intangible assets related to IPR&D product rights for
impairment annually, as of October 1, and whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. When performing the impairment assessment, management
calculates the fair value of the intangible assets using the same methodology as described above under
“Valuation of intangible assets, including IPR&D.” For property, plant and equipment, Shire uses a variety of
methodologies to determine the fair value, including appraisals and discounted cash flow models, which estimate
the future cash flows expected to result from the use of the asset and its eventual disposition. If the carrying value
of long lived assets exceeds its fair value, then the asset is written-down to its fair value.
Intangible assets related to commercially marketed products are amortized over their estimated useful
lives on an economic consumption method, or a straight-line basis when straight-line method approximates
economic consumption method. Intangible assets related to IPR&D product rights are treated as indefinite-lived
intangible assets and not amortized until the product is approved for sale by regulatory authorities in specified
markets. At that time, Shire will determine the useful life of the asset, reclassify the asset out of IPR&D and
begin amortization.
If IPR&D projects are not successfully developed and/or the value of the commercially marketed
products becomes impaired, fail during development, are abandoned or subject to significant delay or do not
receive the relevant regulatory approvals, Shire may not realize the future cash flows that it has estimated nor
recover the value of the initial or subsequent R&D investments made subsequent to acquisition of the asset
project. If such circumstances occur, Shire’s future operating results could be materially adversely impacted.
Goodwill
Goodwill represents the excess of the consideration transferred over the estimated fair value of assets
acquired and liabilities assumed in a business combination. Shire has $19,831.7 million and $17,888.2 million of
goodwill as of December 31, 2017 and 2016, respectively, as a result of accounting for business combinations
using the acquisition method of accounting.
Shire assesses the goodwill balance within its single reporting unit annually, as of October 1, and
whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable to
determine whether any impairment in this asset may exist and, if so, the extent of such impairment. Shire reviews
goodwill for impairment by assessing qualitative and quantitative factors, including comparing the market
capitalization of Shire to the carrying value of its assets. Events or circumstances that might require an interim
evaluation include unexpected adverse business conditions, economic factors, unanticipated technological
changes or competitive activities and acts by governments and courts.
Shire completed its annual impairment test in the fourth quarters of 2017, 2016 and 2015, respectively,
and determined in each of those periods that the carrying value of goodwill was not impaired. In each year, the
fair value of the reporting unit, which includes goodwill, was significantly in excess of the carrying value of the
reporting unit.
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Income Taxes
Shire accounts for income taxes under the asset and liability method. Provisions for federal, state and
foreign income taxes are calculated on reported pre-tax earnings based on current laws. Deferred taxes are
provided using enacted tax rates on the future tax consequences of temporary differences, which are the
differences between the financial statement carrying amount of assets and liabilities and their respective tax bases
and the tax benefits of carryforwards. In the normal course of business, Shire is audited by the Irish and foreign
tax authorities, and it is periodically challenged regarding the amount of taxes due. These challenges primarily
relate to the timing and amount of deductions and the transfer pricing in various tax jurisdictions. Shire believes
its tax positions comply with applicable tax law and Shire intends to defend its positions.
In accounting for uncertainty in income taxes, management is required to develop estimates as to
whether a tax benefit should be recognized in Shire’s consolidated financial statements, based on whether it is
more likely than not that the technical merits of the position will be sustained based on audit by the tax
authorities. In accounting for income tax uncertainties, management is required to make judgments in the
determination of the unit of account, the evaluation of the facts, circumstances and information in respect of the
tax position taken, together with the estimates of amounts that Shire may be required to pay in ultimate
settlement with the tax authority. Any outcome upon settlement that differs from the recorded provision for
uncertain tax positions may result in a materially higher or lower tax expense in future periods, which could
significantly impact Shire’s results of operations or financial condition. However, Shire does not believe it is
possible to reasonably estimate the potential impact of any such change in assumptions, estimates or judgments
and the resultant change, if any, in Shire’s provision for uncertain tax positions, as any such change is dependent
on factors such as future changes in tax law or administrative practice, the amount and nature of additional taxes
which may be asserted by the taxation authorities, and the willingness of the relevant tax authorities to negotiate
a settlement for any such position.
Shire has significant deferred tax assets due to various tax attributes, including net operating losses and
tax credits from research and development activities principally in the Republic of Ireland, the U.S., Switzerland,
Belgium and Germany. The realization of these assets is not assured and is dependent on various factors.
Management is required to exercise judgment in determining whether it is more likely than not that it would
realize these deferred tax assets. In assessing the need for a valuation allowance, management weighs all
available positive and negative evidence including cumulative losses in recent years, expectations of future
taxable income, carry forward and carry back potential under relevant tax law, expiration period of tax attributes,
taxable temporary differences, and prudent and feasible tax-planning strategies. A valuation allowance is
established where there is an expectation that on the balance of probabilities management considers it is more
likely than not that the relevant deferred tax assets will not be realized. If actual events differ from management’s
estimates, or to the extent that these estimates are adjusted in the future, any changes to the valuation allowance
could significantly impact Shire’s financial condition and results of operations.
Litigation and legal proceedings
Shire has a number of lawsuits pending. Shire recognizes loss contingency provisions for probable
losses when management is able to reasonably estimate the loss. Estimates of losses may be developed
substantially before the ultimate loss is known, and are therefore refined each accounting period as additional
information becomes known. In instances where Shire is unable to develop a reasonable estimate of loss, no loss
contingency provision is recorded at that time; however, disclosure would be made if the loss contingency is at
least reasonably possible to occur. These estimates are reviewed quarterly and changed when expectations are
revised. An outcome that deviates from Shire’s estimate may result in an additional expense (or credit) in a future
accounting period. As of December 31, 2017, provisions for litigation losses, insurance claims and other disputes
totaled $76.2 million (2016: $415.0 million).
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Contingent consideration payable
The fair value of Shire’s contingent consideration payable as of December 31, 2017 was
$1,168.2 million (2016: $1,058.0 million). Contingent consideration payable represents future milestones and
royalties Shire may be required to pay in conjunction with various business combinations. The amounts
ultimately payable by Shire are dependent upon the successful achievement of the relevant milestones and future
net sales of the relevant products over the life of the milestone or royalty term, respectively. Shire estimates the
fair value of contingent consideration payable using the income approach, based on a discounted cash flow
method. The discounted cash flow method uses inputs with values that may not be observable in a public trading
market, including, but not limited to: the probability of, and period in which, the relevant milestone event is
expected to be achieved; the amount of royalties that will be payable based on forecast net sales of the relevant
products; and the discount rates to be applied in calculating the present values of the relevant milestone or
royalty. Significant judgment is employed by Shire in developing these estimates and assumptions. If actual
events differ from management’s estimates, or to the extent that these estimates are adjusted in the future, Shire’s
financial condition and results of operations could be materially affected in the period of any such change of
estimate.
Pension and other postemployment benefit (OPEB) plans
The valuation of the funded status and net periodic benefit cost
is calculated using actuarial
assumptions. These significant assumptions include the following:
•
•
•
•
•
interest rates used to discount pension and OPEB plan liabilities;
the long-term rate of return on pension plan assets;
rates of increases in employee compensation (used in estimating liabilities);
anticipated future healthcare costs (used in estimating the OPEB plan liability); and
other assumptions involving demographic factors such as retirement, mortality and turnover (used
in estimating liabilities).
Selecting assumptions involves an analysis of both short-term and long-term historical trends and
known economic and market conditions at the time of the measurement date. The use of different assumptions
would result in different measures of the funded status and net cost. Actual results in the future could differ from
expected results. A 50 basis points decrease in the discount rate would result in an annual increase in pension and
other postretirement benefit expense of approximately $6.5 million and an increase in the benefit obligation of
approximately $108.2 million. A 50 basis points increase in the discount rate would result in an annual decrease
in pension and other postretirement benefit expense of approximately $7.3 million and a decrease in the benefit
obligation of approximately $93.8 million. Shire’s key assumptions are listed in Note 19 to Shire’s consolidated
financial statements included in this registration statement.
Share-based compensation
Shire makes certain assumptions in order to value and record expense associated with awards made
under the share-based compensation arrangements. Changes in these assumptions may lead to variability with
respect to the amount of expense recognized in connection with share-based payments. Shire uses the Black-
Scholes model to compute the estimated fair value of stock option awards. Using this model, fair value is
calculated based on assumptions with respect to (i) expected volatility of stock price, (ii) the periods of time
options are expected to be held prior to exercise (expected lives), (iii) expected dividend yield on common stock,
and (iv) risk-free interest rates.
Restructuring costs
Shire has made estimates and judgments regarding the amount and timing of its restructuring expense
and liability, including current and future period termination benefits and other exit costs to be incurred when
137
related actions take place. Severance and other related costs are reflected in Shire’s consolidated statements of
operations as a component of reorganization costs or Integration and acquisition costs. Actual results may differ
from these estimates.
Newly Adopted Accounting Standards Requiring Full Retrospective Adoption
Effective January 1, 2018, Shire adopted the following standards that would require a retrospective
application to historical financial statements:
•
•
•
ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts
and Cash Payments. The new standard clarifies certain aspects of the statement of cash flows, and
aims to reduce diversity in practice regarding how certain transactions are classified in the
statement of cash flows.
ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The new guidance is
intended to reduce diversity in the presentation of restricted cash and restricted cash equivalents in
the statement of cash flows. The guidance requires that restricted cash and restricted cash
equivalents be included as components of total cash and cash equivalents as presented on the
statement of cash flows. If the requirements of this ASU had been retrospectively applied to the
years ended December 31, 2017, 2016 and 2015, $39.4 million, $25.6 million, and $86.0 million of
restricted cash and restricted cash equivalents would have been included in the ending total cash
and cash equivalents in the statement of cash flows, resulting in restated ending cash and cash
equivalents of $511.8 million, $554.4 million, and $221.5 million for each of the respective periods.
ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net
Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The standard amends the
income statement presentation of the components of net periodic benefit cost for defined benefit
pension and other postretirement plans. The standard requires entities to (1) disaggregate the
current-service-cost component from the other components of net benefit cost (the “other
components”) and present it with other current compensation costs for related employees in the
income statement and (2) present the other components elsewhere in the income statement and
outside of income from operations if such a subtotal is presented. It also requires entities to disclose
the income statement
lines that contain the other components if they are not presented on
appropriately described separate lines. If the requirements of this ASU had been retrospectively
applied to the years ended December 31, 2017, 2016 and 2015, $0.1 million, $(47.3) million, and
$0.0 million of net periodic benefit cost included in Operating income from continuing operations
would have been included in total other expense, net in the income statement, resulting in restated
total other expense, net of $561.9 million for the year ended December 31, 2017 and $429.5 million
for the year ended December 31, 2016.
Shire’s financial statements as of December 31, 2017 and 2016 and for the years ended December 31,
2017, 2016 and 2015 that have been included herein have not been revised for the retrospective application of the
above standards since the impact of these standards was not material. Refer to Shire’s audited and unaudited
consolidated financial statements contained in this registration statement for additional discussion of recently
issued accounting standards.
138
Item 6. Directors, Senior Management and Employees
A.
Directors and Senior Management.
Directors
The following table provides information about Directors of the Company as of the date of this
registration statement.
Name
(Date of Birth)
Responsibilities and
Status within Takeda
Christophe Weber
(November 14,
1966)
Representative Director,
President and Chief
Executive Officer
Masato Iwasaki,
Director and President,
Ph.D.
(November 6,
1958)
Japan Pharma
Business Unit
Andrew S. Plump,
M.D., Ph.D.
(October 13,
1965)
Director and Chief
Medical & Scientific
Officer
End of Term
Note 1
Note 1
Note 1
Business Experience
is President
Christophe Weber
and Chief
Executive Officer of Takeda. He joined Takeda in
April 2014 as Chief Operating Officer and
Corporate Officer, was named President and
Representative Director in June 2014 and was
subsequently appointed Chief Executive Officer
in April 2015. Prior to joining Takeda, Mr. Weber
held positions of
increasing responsibility at
including President and
GlaxoSmithKline plc,
General Manager at GlaxoSmithKline Vaccines,
Chief Executive Officer of GlaxoSmithKline
Biologicals SA in Belgium, and member of the
GlaxoSmithKline global Corporate Executive
Team. From 2008 to 2010, Mr. Weber served as
Asia Pacific SVP and Regional Director at
GlaxoSmithKline Asia Pacific in Singapore.
is the President of Takeda’s
Masato Iwasaki
Japan Pharma Business Unit. He joined Takeda
in 1985 and had an extensive career in roles of
increasing responsibility in sales and marketing
under the Pharmaceutical Marketing Division. In
2003, Mr. Iwasaki was appointed Manager of
Strategic Product Planning and Project Leader
for the Cardiovascular and Metabolic franchise.
He was appointed Senior Vice President of the
Strategic Product Planning department in 2008.
In 2010, Mr. Iwasaki was named Corporate
Officer. Mr. Iwasaki has been a Director of our
board of directors since 2012 and was named
President of the Japan Pharma Business Unit in
2015.
Andrew S. Plump, MD., Ph.D. joined Takeda as
Chief Medical and Scientific Officer (CMSO) in
2015. Dr. Plump also serves as a member of our
executive team and our board of directors. In his
position, he
leads our global Research &
Development organization, where he provides
strategic direction and oversight. Prior to joining
Takeda, Dr. Plump served as Senior Vice
President, Research & Translational Medicine,
Deputy to the President of R&D at Sanofi, where
research and
he was
responsible for global
139
Name
(Date of Birth)
Responsibilities and
Status within Takeda
Business Experience
End of Term
translational medicine across all therapeutic areas.
Dr. Plump also spent more than 10 years at Merck
in a Clinical Pharmacology group, working on
programs
immunology,
in neurodegeneration,
metabolism and infectious diseases.
Masahiro Sakane
External Director
(January 7, 1941)
and External Director
Masahiro Sakane has served as External Director
of Takeda since June 2014 and was appointed
Chairman of the Board in June 2017. Mr. Sakane
currently also serves as Councilor of Komatsu
Ltd.,
of Kajima
Corporation. Mr. Sakane started his career at
Komatsu Ltd. in April 1963. In the Komatsu
group, he served in several senior leadership
positions including Chairman of the Board and
and
Representative Director
Representative Director of Komatsu Ltd. and
COO of Komatsu Dresser Company (currently
Komatsu America Corp.). Mr. Sakane has also
served
of Nomura
Holdings, Inc., External Director of Nomura
Securities Co., Ltd., External Director of Tokyo
Electron Limited, External Director of Asahi
Glass Company, Ltd. and Vice Chairman of
Keidanren (Japan Business Federation).
as External Director
and President
Yoshiaki Fujimori
(July 3, 1951)
External Director
Emiko Higashi
External Director
(November 6,
1958)
Takeda
served as External
Yoshiaki Fujimori has
Director
2016.
June
since
of
Mr. Fujimori currently also serves as Advisor of
LIXIL Group Corporation and External Director
of Tokyo Electric Power Company, Incorporated
(currently Tokyo Electric Power Company
Holdings, Incorporated). He previously served in
a number of senior leadership positions within
including Representative
the LIXIL Group,
Director, Chairman
and CEO of LIXIL
Corporation. Mr. Fujimori has also served in a
number of senior positions in the General
Electric Group, including Chairman of GE Japan
Corporation and Chairman, President and CEO
of General Electric Japan Ltd.
Emiko Higashi has served as External Director
of Takeda since June 2016. She currently also
serves as External Director of MetLife Insurance
K.K., External Director of InvenSense Inc. and
External Director of KLA-Tencor Corporation.
Ms. Higashi previously served as Managing
Director of Tomon Partners, LLC, CEO of Gilo
of
Ventures,
LLC, Managing Director
140
Note 1
Note 1
Note 1
Name
(Date of Birth)
Responsibilities and
Status within Takeda
Business Experience
End of Term
Michel Orsinger
External Director
(September 15,
1957)
Toshiyuki Shiga
External Director
(September 16,
1953)
Yasuhiko Yamanaka
Director (Audit and
(January 18,
1956)
Supervisory
Committee member)
Investment Banking, Merrill Lynch & Co. and
Director of Wasserstein Perella & Co., Inc.
Michel Orsinger has served as External Director
of Takeda since June 2016. He previously served
as a Member of Global Management Team of
Johnson & Johnson, Worldwide Chairman,
Global Orthopedics Group of DePuy Synthes
Companies of Johnson & Johnson and President
and Chief Executive Officer and Chief Operating
Officer of Synthes, Inc. (currently Johnson &
leadership
Johnson). He has also held several
positions
including Chief
Executive Officer and President of OTC Division
Worldwide, Consumer Health; President of
Global Medical Nutrition, Consumer Health; and
Regional President of Europe, Middle East and
Africa, Consumer Health.
at Novartis AG,
Toshiyuki Shiga has served as External Director
of Takeda since June 2016. Mr. Shiga currently
also serves as Chairman and CEO of Innovation
Network Corporation of Japan, Vice Chairman
of KEIZAI DOYUKAI (Japan Association of
Corporate Executives) and Vice Chairman of
Nissan Motor Co., Ltd. Mr. Shiga started his
career at Nissan Motor Co., Ltd. in April 1976.
At Nissan Motor Co., Ltd., he served in a
including
number
Director, Chief Operating Officer and Senior
Vice President (Officer). He has also served as
Chairman
Automobile
Japanese
of
Manufacturers Association, Inc.
leadership
positions
of
of
the Audit
of Takeda
and
since
Yasuhiko Yamanaka has served as Director and
Supervisory
member
Committee
2016.
June
Mr. Yamanaka joined Takeda in April 1979 and
has served in a number of leadership positions
within
including Corporate
Auditor, Special Missions, Special Missions
to CEO,
assigned by President, Assistant
Globalization
the Company, Managing
Director and Director.
company,
the
of
Shiro Kuniya
(February 22,
1957)
External Director
(Chairperson of
Audit and
Supervisory
Committee)
Shiro Kuniya has served as External Director
and Supervisory
the Audit
and Head of
Committee of Takeda since June 2016. He
currently also serves as Managing Partner of
Oh-Ebashi LPC & Partners, External Director of
NEXON Co., Ltd., External Director of EBARA
CORPORATION and External Director of Sony
141
Note 1
Note 1
Note 2
Note 2
Name
(Date of Birth)
Responsibilities and
Status within Takeda
Business Experience
End of Term
Jean-Luc Butel
(November 8,
1956)
External Director
(Audit and
Supervisory
Committee member)
Koji Hatsukawa
(September 25,
1951)
External Director
(Audit and
Supervisory
Committee member)
Financial Holdings
Inc. Mr. Kuniya was
registered as an attorney-at-law (Osaka Bar
Association) and joined Oh-Ebashi Law Offices
in April 1982 and was also admitted to practice
law in New York State in the United States in
May 1987. He has also previously served as our
Outside Corporate Auditor as well as Chairman
of the Inter-Pacific Bar Association, Outside
Corporate Auditor of NIDEC CORPORATION
and Outside Corporate Auditor of Sunstar Inc.
Jean-Luc Butel has served as External Director
and member of
the Audit and Supervisory
Committee of Takeda since June 2016. He
currently also serves as Global Healthcare
Advisor, President of K8 Global Pte. Ltd and
Director of Novo Holdings A/S. Mr. Butel
International,
previously served as President,
Corporate Vice
and Operating
President
Committee Member of Baxter International Inc.
and has held leadership positions at Medtronic,
Inc., Johnson & Johnson, Becton, Dickinson and
Company
and Nippon Becton Dickinson
Company, Ltd.
Koji Hatsukawa has served as External Director
and member of
the Audit and Supervisory
Committee of Takeda since June 2016. He
currently also serves as Outside Audit and
Supervisory Board Member of Fujitsu Limited.
Mr. Hatsukawa started his career at Price
Waterhouse Accounting Office in March 1974.
Mr. Hatsukawa has previously served CEO of
PricewaterhouseCoopers Aarata and has held
leadership
ChuoAoyama
positions
PricewaterhouseCoopers
and Aoyama Audit
Corporation. In addition, he has also served as
an Audit and Supervisory Board Member of The
Norinchukin Bank and Outside Audit and
Supervisory Board Member of Accordia Golf
co., Ltd.
at
Note 2
Note 2
Notes:
(1) The term of office for Directors of the Company who are not audit and supervisory committee members is
from the end of the ordinary general meeting of shareholders for the fiscal year ended March 31, 2018
through the end of the ordinary general meeting of shareholders for the fiscal year ending March 31, 2019.
(2) The term of office for Directors of the Company who are also audit and supervisory committee members is
from the end of the ordinary general meeting of shareholders for the fiscal year ended March 31, 2018
through the end of the ordinary general meeting of shareholders for the fiscal year ending March 31, 2020.
In addition to the Directors named above, our shareholders approved the election of the following three
additional directors at our extraordinary general meeting of shareholders on December 5, 2018. The election of
142
these new Directors is conditional upon the Scheme taking effect as planned and will become effective upon the
date of completion of the Shire Acquisition, which we intend to be on or around January 8, 2019. As of the date
of this registration statement, none of these new Directors own any shares of our common stock.
Name
(Date of Birth)
Ian Clark
(August 27, 1960)
Responsibilities and
Status within Takeda upon
effectiveness of election
External Director
Olivier Bohuon
External Director
(January 3, 1959)
Steven Gillis, PhD
(April 25, 1953)
External Director
End of Term
Note 1
Business Experience
Ian Clark is External Director of Shire plc, and also
currently holds External Directorships at Agios
Inc., Corvus Pharmaceuticals,
Pharmaceuticals,
Inc., Guardant Health, Inc., AVROBIO Inc. and
Forty Seven Inc. and is a member of the Gladstone
Institute. Mr. Clark served as Chief Executive
Officer and Director of Genentech Inc. (part of the
Roche Group) and Head of North American
Commercial Operations for Roche until 2016.
From 2003 to 2010 he held the positions of Head
of Global Product Strategy and Chief Marketing
Officer, Executive Vice President—Commercial
Operations and Senior Vice President and General
Manager—BioOncology at Genentech.
Note 1
Note 1
Olivier Bohoun is External Director of Shire plc
Mr. Bohuon currently also holds the positions of
External Director
at Virbac SA, External
Director at Smiths Group plc and External
Director and Vice Chairman at LEO Pharma A/
S. Mr. Bouhon has previously served as Chief
Executive Officer of Smith & Nephew plc, Chief
Executive Officer and President of Pierre Fabre
Abbott
Group
Pharmaceuticals; a division of US-based Abbott
diverse
has
Laboratories. He
commercial
at
leadership
GlaxoSmithKline and its predecessor companies
in France.
held
positions
President
also
and
of
as
Dr. Steven Gillis is External Director of Shire
plc and also currently holds the positions of
Managing Director at ARCH Venture Partners,
External Director of Pulmatrix,
and
External Director and Chairman, VBI Vaccines,
Inc. Dr. Gillis was a founder and Director of
by
Corixa
GlaxoSmithKline in 2005, and before that a
founder and Director of Immunex Corporation.
Corporation,
acquired
Inc.,
Note:
(1) The term of office for these new Directors will last through the end of the ordinary general meeting of
shareholders for the fiscal year ending March 31, 2019.
143
Executive Officers
The following table provides information about the Company’s Executive Officers who are not also
directors as of the date of this registration statement.
Name
(Date of Birth)
Responsibilities and Status within
Takeda
Business Experience
Costa Saroukos
(April 15, 1971)
Chief Financial Officer
(CFO)
Christophe Bianchi, M.D.
President, Global Oncology
(June 1, 1961)
Business Unit
144
In March 2018, Costa Saroukos was appointed
Takeda’s Chief Financial Officer. He is also a
the Takeda Executive Team (TET)
member of
reporting to the company’s President & CEO.
Mr. Saroukos has over 20 years of experience in
both the private and public sectors, having held a
leadership positions with
number of
financial responsibility for businesses in over 100
countries across Asia-Pacific, Europe, Africa and
the Middle East.
finance
Mr. Saroukos has been with Takeda since May
2015, as Chief Financial Officer of the Europe and
Canada Business Unit, significantly contributing to
the transformation of the Business Unit towards a
specialty healthcare provider.
to joining Takeda, Mr. Saroukos was at
Prior
Allergan as Head of Finance
and Business
Development for the Asia-Pacific region, including
China and Japan. He was also Finance Director for
Greater China and Japan. Previously, he spent 13
years at Merck & Co.
increasing
responsibility, including Executive Finance Director
for EEMEA (Eastern Europe, Middle East and
Africa), Finance Director of South Korea and Head
of Internal Audit Asia Pacific and Global Joint
Ventures.
in roles of
Christophe Bianchi, M.D., is President of the Takeda
Global Oncology Business Unit, a position he has
held since October 2014.
role,
is responsible for oncology business
Dr. Bianchi
activities in seven countries,
including the U.S.,
Japan, U.K., Germany, France, Brazil and Indonesia.
In his current
17
than
years
positions with Sanofi-Aventis
has more
of
Dr. Bianchi
industry experience and has held
pharmaceutical
executive
and
Millennium Pharmaceuticals. During his career, he
has built commercial and sales organizations,
launched major brands, delivered sustained growth
and managed collaboration with partner companies.
Dr. Bianchi joined Millennium in 2006 where he
company’s
was
for growing the
responsible
Name
(Date of Birth)
Responsibilities and Status within
Takeda
Business Experience
commercial and sales organizations and overseeing
all commercial and sales activities for VELCADE.
Previously
led the $2 billion U.S.
At Sanofi, Dr. Bianchi
including Eloxatin and
oncology business unit
Taxotere.
Sanofi-Synthelabo,
at
Dr. Bianchi headed the internal medicine and
central nervous system business unit with sales of
$1.2 billion. Dr. Bianchi also spent more than 10
years at Rhone-Poulenc Rorer, where he last served
as Vice President, Head of Global Marketing and
the
led many of
antithrombotic, Lovenox.
the commercial efforts
for
Gerard Greco, Ph.D.
(February 8, 1962)
Global Quality Officer
In September 2014, Dr. Gerard Greco joined Takeda
as Global Quality Officer. Dr. Greco has more than
31 years of experience in quality leadership roles in
the pharmaceutical industry.
has
introduced
At Takeda, Dr. Greco
key
transformations by creating a Global Quality
Organization that aligns the quality units and
establishes consistent quality systems and programs
across the network.
Haruhiko Hirate
(August 8, 1957)
Corporate
Communications & Public
Affairs Officer
Prior to joining Takeda, Dr. Greco held positions of
increasing responsibility at Johnson & Johnson,
Wyeth Pharmaceuticals, Pfizer
Inc. and Teva
Pharmaceuticals, where he served as Senior Vice
President of Global Quality Operations.
became Takeda’s Corporate
Haruhiko Hirate
Communications and Public Affairs Officer
in
October 2014. He previously served as President of
North Asia in 2011, and has held Corporate Officer
and Senior Vice President positions at Takeda since
2010.
the
Japanese
in Japan and, before
Prior to joining Takeda, Mr. Hirate held the position
of Representative Senior Managing Director at
GlaxoSmithKline
that,
Representative Director and President of Banyu
Pharmaceuticals,
of
Merck & Co. He joined Banyu Pharmaceuticals in
2004 from his role as Senior Vice President at
Merck & Co, based in the U.S. He had previously
held the position of Representative Director and
President at Roche Diagnostics based in Japan and
before that, Asia Pacific Regional President of
Draeger.
subsidiary
Mr. Hirate began his career with Nissei Sangyo, a
subsidiary of Hitachi, in 1980. During his career at
Hitachi group companies, he lived for about five
145
Name
(Date of Birth)
Responsibilities and Status within
Takeda
Business Experience
years in Germany, mainly working with former
Boehringer Manheim, and a series of overseas
projects in the U.S. and Asia between 1980 and
1996.
respected in the Japanese pharmaceutical
Well
the
industry, Mr. Hirate served as Director at
Pharmaceutical Manufacturers
of
Federation
Associations of
the
Japan, and Chairman of
Pharmaceutical Research and Manufacturers of
America (PhRMA) Japan. In 2012, he became a
member of the Japan Association of Corporate
Executives. In 2014, he became Chairman of the
International Affairs Committee
Japan
the
Pharmaceutical Manufacturers Association.
at
Ricardo Marek is President of Emerging Markets
Business Unit (EM BU), and a member of Takeda’s
Executive Team,
reporting to the Company’s
CEO & President, Christophe Weber.
Ricardo has over 25 years of experience in various
industries and leadership roles. He has been with
Takeda for 6 years and over
time he
simultaneously held the roles of Area Head for
Latin America (LATAM) since 2014, President for
Brazil since 2013. Prior to that, he was Chief
Financial Officer (CFO) of Brazil.
this
Ricardo led the realignment and restructuring of the
LATAM area, positioning it as one of the top
performers across EM BU, and Takeda Brazil as
one of the top 10 pharmaceutical companies in the
country. He also secured a number of acquisitions
as well as launched the Oncology business in the
region for Takeda’s potentially life-saving and life-
transforming medicines. Under his
leadership,
Takeda was recognized for the first time as a top
employer in all seven countries across the LATAM
region, and also received several other HR awards,
such as Great Place to Work.
Before joining Takeda in 2011, Ricardo was CFO
for Organon International in the US, and Managing
Director and Vice President Finance for the Akzo
Nobel Group in Brazil. He also has experience in
other industries such as chemicals and aerospace.
In October
2014, Yoshihiro Nakagawa was
appointed Corporate Officer and Global General
Counsel of Takeda, with responsibility for
the
company’s global legal, compliance and intellectual
property organizations.
Ricardo Marek
(May 30, 1970)
President, Emerging Markets
Business Unit
Yoshihiro Nakagawa
(July 26, 1960)
Global General Counsel
146
Name
(Date of Birth)
Responsibilities and Status within
Takeda
Business Experience
Mr. Nakagawa joined the company in 1983. At that
time, he served in varying roles of responsibility
including reviewing, negotiating and drafting
intellectual
technology-related
licensing agreements as a member of the Patent &
Trademark Department.
property
and
Giles Platford
(April 26, 1978)
President, Europe and
Canada business unit
Ramona Sequeira
President, United States
(November 21, 1965)
business unit
In 1995, he moved to the Legal Department, then
spent more than two years in London as Company
Secretary for Takeda Europe Holdings. Prior to his
current appointment, Mr. Nakagawa served as
Senior Vice President of the Legal Department at
Takeda headquarters in Japan.
Giles Platford is President of Europe & Canada for
Takeda. He is also a Corporate Officer and a
member of Takeda’s Executive Team reporting to
the Company’s CEO & President.
A seasoned industry leader with over 15 years of
pharmaceutical experience, Giles was
formerly
President of Emerging Markets for Takeda, where
he oversaw the launch of Takeda’s innovative
pipeline across the region, and led the design and
roll-out of Takeda’s global Access to medicines
program.
Previously Giles headed the Middle East, Turkey
and Africa region where he strengthened controls
and compliance whilst re-engineering the business
leadership
for growth. He also held various
positions including General Manager Brazil, where
he transformed Takeda into a top 10 pharma
industry player, being externally recognized for the
first time as one of the country’s top employers and
best companies to work for.
Before joining Takeda in 2009, Giles spent eight
years in Asia Pacific, where he assumed a number
of business development, commercial and general
Management roles.
Ramona Sequeira, President, United States Business
Unit, is responsible for the company’s commercial
operations in the U.S. She serves as a member of
Takeda’s executive team.
Prior to joining Takeda, Ms. Sequeira held various
senior roles of increasing responsibility at Eli Lilly,
both in the U.S. and the U.K. During her career, she
led several successful product launches, managed
relationships with partners,
improved operational
performance and workforce engagement. In her role
had
as General Manager, U.K. Hub,
she
147
Name
(Date of Birth)
Responsibilities and Status within
Takeda
Business Experience
responsibility for all affiliate operations in the U.K.,
Republic of Ireland and Northern Europe. She was a
the British
of
member
Pharmaceutical Industry.
the Association
of
Padma Thiruvengadam
(January 18, 1965)
Chief Human Resources
Officer
Rajeev Venkayya, M.D.
President, Global Vaccine
(March 6, 1967)
business unit
Ms. Sequeira is a member of the PhRMA board of
directors. PhRMA is the Pharmaceutical Research
and Manufacturers of America, representing the
country’s leading biopharmaceutical researchers and
biotechnology
Additionally,
companies.
Ms. Sequeira is a board member of the Healthcare
Leadership Council, a coalition of executives from
all disciplines within American healthcare. It is the
exclusive forum for the nation’s healthcare leaders
to jointly develop policies, plans, and programs to
achieve their vision of a 21st century system that
makes affordable, high-quality care accessible to all
Americans.
Padma Thiruvengadam is a senior human resources
executive with more than 25 years of experience
developing and implementing leading-edge people
strategies and organizational solutions. She was
appointed as Takeda’s Chief Human Resources
Officer and a member of the Takeda executive team
in June 2018, and is responsible for all HR
strategies and programs supporting the company’s
global business.
Prior to joining Takeda, she served as Chief People
Officer for Lego, with responsibility for Human
Resources and global organizational capability
building.
Previously, Ms. Thiruvengadam was CVP and Chief
Human Resources Officer with Integra Life
Sciences. She joined Pfizer, first as Vice President,
Human Resources for Oncology and subsequently
led global integration activities for Pfizer Oncology
following a major acquisition and later as Vice
President, Asia Pacific and Canada for the group’s
Oncology Business Unit. Earlier in her career she
worked as a Senior Vice President and Human
Resources Executive at Bank of America.
Dr. Rajeev Venkayya serves as President of the
Vaccine Business Unit. He joined Takeda in 2012 to
launch the global vaccine business, building upon a
longstanding business in Japan. Since then, he has
formed a global organization and established a high-
impact vaccine pipeline that
includes promising
late-stage candidates for dengue and norovirus,
148
Name
(Date of Birth)
Responsibilities and Status within
Takeda
Business Experience
gained through the acquisitions of LigoCyte and
Inviragen Inc.
Prior to Takeda, Dr. Venkayya served as Director of
Vaccine Delivery in the Global Health Program at
the Bill & Melinda Gates Foundation, where he was
responsible for the Foundation’s efforts in polio
eradication and new vaccine introduction, and a
grant portfolio of $500 million/year. While at the
foundation, he served on the board of the Global
Alliance for Vaccines and Immunization (GAVI).
Dr. Venkayya was previously the Special Assistant to
the President for Biodefense at the White House. In
this capacity, he oversaw U. S. preparedness for
bioterrorism and
and was
biological
responsible for the development and implementation
of the National Strategy for Pandemic Influenza. He
first came to Washington though the non-partisan
White House Fellowship program in 2002.
threats,
Dr. Venkayya was trained in pulmonary and critical
care medicine and served as an Assistant Professor
of Medicine in the Division of Pulmonary and
Critical Care Medicine
the University of
California, San Francisco. He also served as
co-director of the Medical Intensive Care Unit and
Director of the High-Risk Asthma Clinic at San
Francisco General Hospital.
at
In July 2014, Thomas Wozniewski, Ph.D. joined
Takeda as Global Manufacturing and Supply
Officer. He has more than 20 years of experience in
the pharmaceutical industry.
joined Takeda
Dr. Wozniewski
from Bayer
Healthcare Switzerland, where he was Head of
Product Supply Consumer Care. In this role, he was
responsible for the end-to-end supply chain for all
Bayer global OTC products. Prior to this, he served
as Head of Global Pharmaceuticals Product Supply
at Bayer Healthcare AG and Schering AG in
Germany.
While at Schering AG, he was also Head of Global
Quality, Environment and Safety,
leading the
development and implementation of an Integrated
company.
Management
the
Dr. Wozniewski
also worked at Boehringer
Ingelheim, where he held several positions in
quality & production.
System
for
Thomas Wozniewski,
Global Manufacturing and
Ph.D. (July 26, 1962)
Supply Officer
149
B.
Compensation.
The following table provides information about our executive officers whose compensations were
greater than ¥100 million on an individual basis in the fiscal year ended March 31, 2018.
Name
(Position)
Christophe Weber
Total
consolidated
compensation
(millions of yen)
Amount of consolidated compensation by type (millions of yen)
Company
Base
Compensation
Bonus
Long-Term
Incentive(1)
Other
(Director) . . . . . . . .
1,217
Takeda
James Kehoe
(Director)(4)
Andrew S. Plump
. . . . . .
(Director) . . . . . . . .
237
536
Takeda
Takeda
Takeda
Pharmaceuticals
International,
Inc.(7)
Shinji Honda
(Director)(10) . . . . . .
105
Takeda
254(2)
152(5)
12
106
95
334
20
—
173
—
629(3)
65(6)
—
—
—
—
219(8)
26(9)
10(11)
—
Notes:
(1) Compensation expense related to the long-term incentive plan is recognized over multiple fiscal years,
depending on the length of the period eligible for earning compensation. This column shows amounts
recognized as expenses during the fiscal year ended March 31, 2018.
(2) Base compensation includes the amounts paid for residence and pension expenses for the relevant officers
and taxes on such amounts (¥112 million).
(3) The amount recognized as an expense during the fiscal year ended March 31, 2018, representing stock
incentive plan (Board Incentive Plan) granted starting in the fiscal year ended March 31, 2015 and ending in
the fiscal year ended March 31, 2018.
(4) Resigned on May 31, 2018.
(5) Base compensation includes the amounts paid for residence and pension expenses for the relevant officers
and taxes on such amounts (¥66 million).
(6) The amount recognized as an expense during the fiscal year ended March 31, 2018, based on the stock
incentive plan (Board Incentive Plan) granted during the fiscal year ended March 31, 2018.
(7) Shows the salary and other amounts earned as the Chief Medical & Scientific Officer of Takeda
Pharmaceuticals International, Inc.
(8) The amount recognized as an expense during the fiscal year ended March 31, 2018, representing stock
incentive plan (Employee Stock Ownership Plan) granted starting in the fiscal year ended March 31, 2016
and ending in the fiscal year ended March 31, 2018.
(9) Amounts of local pension plan contributions and fringe benefits paid by Takeda Pharmaceuticals
International, Inc. during the fiscal year ended March 31, 2018, as well as the amount equal to taxes on such
amounts.
(10) Resigned as of the conclusion of the 141st annual meeting of shareholders held on June 28, 2017.
(11) The amount recognized as an expense during the fiscal year ended March 31, 2018, representing the stock
incentive plan (Board Incentive Plan) granted starting in the fiscal year ended March 31, 2015 and ending in
the fiscal year ended March 31, 2017.
Share-based Compensation Payments
We maintain certain share-based compensation payment plans for the benefit of our directors and
certain of our employees. In the fiscal years ended March 31, 2016, 2017 and 2018, we recorded total
compensation expense related to our share-based payment plans of ¥14.7 billion, ¥17.4 billion and ¥22.2 billion,
in our consolidated statements of income. For detailed information about our share-based
respectively,
150
compensation plans, including our stock option plan, stock incentive plan, phantom stock appreciation rights and
restricted stock units, see Note 28 to our audited consolidated financial statements included in this registration
statement.
C.
Board Practices.
See “—A. Directors and senior management” for information about the terms of service of the members
of our Board of Directors and the committees thereof.
Corporate Governance Structure
Under the Companies Act, joint stock corporations in Japan may adopt a corporate governance structure
comprised of a board of directors and an audit and supervisory committee, commonly referred to as the audit and
supervisory committee system, in lieu of the traditional structure comprised of a board of directors and a board of
corporate auditors or the alternative structure comprised of a board of directors and three statutory committees.
The members of the audit and supervisory committee consist of three or more directors. We adopted the audit
and supervisory committee system in June 2016, in order to further enhance our corporate governance, accelerate
decision-making across our operations and improve our internal decision-making structure to be on a similar
level with those of major international companies that are expanding their businesses globally.
Board of Directors
Pursuant to the audit and supervisory committee system, our board of directors is comprised of directors
who are audit and supervisory committee members and directors who are not. Our articles of incorporation
provide for a board of directors consisting of no more than 12 members who are not audit and supervisory
committee members and no more than four directors who are audit and supervisory committee members. All
directors are elected by our shareholders at a general meeting of shareholders, with directors who are audit and
supervisory committee members elected separately from other directors. The term of office for directors who are
not audit and supervisory committee members expires at
the close of the ordinary general meeting of
shareholders held with respect to the last fiscal year ended within one year after their election, and the term of
office for directors who are audit and supervisory committee members expires at the close of the ordinary general
meeting of shareholders held with respect to the last fiscal year ended within two years after their election. The
current terms of our directors are set forth under “Item 6. Directors, Senior Management and Employees—A.
Directors and Senior Management”. All directors may serve any number of consecutive terms.
Our board of directors has the ultimate responsibility for the administration of our affairs. Our board of
directors, however, may delegate by its resolution some or all of its decision-making authority in respect of the
execution of operational matters (excluding certain matters specified in the Companies Act) to individual
directors and has delegated such decision-making authority as described below. Our board of directors elects one
or more representative directors from among its members who are not audit and supervisory committee members.
Each of the representative directors has the authority to represent us in the conduct of our affairs.
Audit and Supervisory Committee
Our directors who are audit and supervisory committee members are not required to be certified public
accountants. They may not serve concurrently as executive directors, managers or any other type of employee for
us or for any of our subsidiaries, or as accounting advisors or corporate executive officers for any of our
subsidiaries. In addition, more than half of our directors who are audit and supervisory committee members at
any one time must be external directors as defined under the Companies Act, who have not served as executive
directors, corporate executive officers, managers or any other type of employee for us or any of our subsidiaries
for ten years prior to their election and fulfill certain other requirements specified in the Companies Act.
151
The audit and supervisory committee has a statutory duty to audit the administration of our affairs by
our directors, to examine the financial statements and business reports to be submitted to the shareholders by a
representative director, to prepare an audit report each year, to determine details of proposals concerning the
appointment and dismissal of independent auditors and the refusal
independent auditors for
submission to general meetings of shareholders and to determine the opinion on election, removal, resignation of
or compensation for directors who are not audit and supervisory committee members, which may be expressed at
a general meeting of shareholders. An audit and supervisory committee member may note his or her opinion in
the audit report issued by the audit and supervisory committee if such an opinion differs from that expressed in
the audit report. We are required to appoint and have appointed an independent auditor, who has a statutory duty
of examining the financial statements to be submitted to the shareholders by a Representative Director and
preparing its audit report thereon. KPMG AZSA LLC currently acts as our independent auditor.
to reappoint
Takeda Executive Team
As management tasks continue to diversify, we have established a Takeda executive team under the
President and Chief Executive Officer, consisting of certain directors and employees in senior positions who
manage and supervise our key functions, as well as a business review committee, which is responsible for
consideration and determination of general management matters, a portfolio review committee, which is
responsible for research and development and products-related matters, and an audit, risk and compliance
committee, which is responsible for internal audit, risk management and compliance matters. Our board of
directors has delegated all of its decision-making authority in respect of operational matters (excluding certain
matters specified in the Companies Act, as well as substantive matters valued at ¥100 billion or more or those
matters which will have substantial impact on us or our stakeholders) to the President and Chief Executive
Officer, two directors belonging to the business review committee and one director belonging to the portfolio
review committee.
Nomination Committee and a Compensation Committee
We have also voluntarily established a nomination committee and a compensation committee as
advisory committees of the board of directors. As of the date of this registration statement, the nomination
committee consists of one external director who serves as chairman, two other external directors and one other
director who is not an external director, and the compensation committee consists of one external director who
serves as chairman, one other external director and one other director who is not an external director. Together,
the committees serve to ensure transparency and objectivity in decision-making relating to personnel matters for
directors who are not external directors (including appropriate standards and procedures for appointment and
reappointment and establishing and administering appropriate succession plans) and the compensation system
(including appropriate levels of compensation for the directors, appropriate performance targets within the bonus
system for directors and appropriate bonuses based on business results).
Limitation of Liability of Directors
Our articles of incorporation provide that we may enter into agreements with our directors (excluding
executive directors (as defined under the Companies Act)) to limit their respective liabilities to us arising from
their failure to execute their duties in good faith and without gross negligence, subject to applicable laws and
regulations. We have entered into such agreements with our external directors, which limit the maximum amount
of their respective liabilities to us to the minimum amount stipulated by applicable laws and regulations, so long
as those directors act in good faith and without gross negligence in performing their duties.
D.
Employees.
As of March 31, 2018, we had 27,230 employees on a consolidated basis, of which 6,957 employees
were based in Japan and 20,273 employees were based outside Japan.
152
We have concluded a collective bargaining agreement with the Takeda Pharmaceutical Workers Union,
through which we have established sound relations with our employees. We hold regular dialogues with the
union concerning, among other issues, conditions of employment and human resources practices. Similarly, all of
our group companies hold discussions with their respective workers unions and employee representatives in
accordance with local laws. We have an employee stock ownership association for employees of Takeda.
E.
Share Ownership.
The following table shows the number of shares owned by our directors as of March 31, 2018.
Directors
Name
Number of Shares Held
(of which, number of shares scheduled
to be issued pursuant to equity-
settled
share-based compensation plans)
(thousands of shares)
Christophe Weber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Masato Iwasaki . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Andrew Plump . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Masahiro Sakane . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yoshiaki Fujimori
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Emiko Higashi
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael Orsinger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Toshiyuki Shiga . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yamanaka Yasuhiko . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shiro Kuniya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jean-Luc Butel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Koji Hatsukawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
204
(122)
16
(7)
44
(44)
3
(2)
3
(2)
4
(4)
4
(4)
3
(2)
23
(5)
3
(2)
4
(4)
2
(2)
314
(200)
Each of our directors held less than one percent of our total issued shares as of March 31, 2018.
153
Item 7. Major Shareholders and Related Party Transactions
A.
Major Shareholders.
The following table sets forth the number of shares held of record by each of our principal shareholders
as well as the percentage of our issued shares held by each of our principal shareholders as of September 30,
2018.
Shareholder
The Master Trust Bank of Japan, Ltd. (Trust account)
. . .
Nippon Life Insurance Company . . . . . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd. (Trust account). . . . . . .
Takeda Science Foundation . . . . . . . . . . . . . . . . . . . . . . . .
MSCO CUSTOMER SECURITIES . . . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd. (Trust account 5) . . . . .
State Street Bank West Client-Treaty 505234 . . . . . . . . . .
The Bank of New York Mellon as Depositary Bank for
Depositary Receipt Holders . . . . . . . . . . . . . . . . . . . . . .
State Street Bank and Trust Company 505001 . . . . . . . . . .
Japan Trustee Services Bank, Ltd. (Trust account 1) . . . . .
Number of shares
held of record
Percentage of
issued shares(1)
(thousands, except percentages)
5.61%
5.48
3.62
2.25
1.99
1.87
1.63
44,578
43,560
28,774
17,912
15,806
14,875
12,968
11,595
10,873
10,440
1.46
1.37
1.31
26.60
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
211,383
Note:
(1) Percentage of issued shares excludes treasury stock held as of September 30, 2018. As of September 30, 2018,
we held 10,224,406 shares of common stock as treasury stock, which include 162,380 shares held by us,
9,976,900 shares held in trust for our stock-based compensation plans and 85,126 shares held by equity-
method affiliates (based on our ownership percentage in them). The total number of issued shares, less treasury
stock, used to calculate percentages in the above table include such shares held in trust or by equity-method
affiliates.
Our major shareholders of common stock have the same voting rights as other holders of common stock.
As of September 30, 2018, there were 314,311 record holders of our common stock with addresses in
Japan, whose shareholdings represented approximately 66.9% of our outstanding common stock on that date.
Because some of these shares were held by brokers or other nominees, the number of record holders with
addresses in Japan might not fully reflect the number of beneficial owners in Japan.
B.
Related Party Transactions.
From time to time, we enter into agreements and engage in transactions with a number of subsidiaries
and affiliates in the ordinary course of our business. Takeda has one major affiliate, Teva Takeda Pharma Ltd., to
which Takeda sells products and acts as a sales agent. Total transactions with Teva Takeda Pharma Ltd. for the
years ended March 31, 2017 and 2018 were ¥15.7 billion and ¥18.2 billion, respectively. The terms and
conditions of the related party transactions are entered into on terms consistent with third-party transactions and
considering market prices. In addition, the receivables and payables are settled in cash and consistent with terms
of third party settlements.
C.
Interests of Experts and Counsel.
Not applicable.
154
Item 8. Financial Information
A.
Consolidated Statements and Other Financial Information.
Our audited consolidated financial statements are included under “Item 18—Financial Statements”.
Legal Proceedings
Takeda is involved in various legal and administrative proceedings. The most significant matters are
described below.
Takeda may become involved in significant legal proceedings for which it is not possible to make a
reliable estimate of the expected financial effect, if any, which may result from ultimate resolution of the
proceedings. In these cases, appropriate disclosures about such cases would be included herein, but no provision
would be made for the cases. Given the inherent unpredictability of litigation, it is possible that an adverse
outcome in one or more pending or future litigation matters could have a material adverse effect on our operating
results or cash flows.
With respect to each of the legal proceedings described below, other than those for which a provision
has been made, Takeda is unable to make a reliable estimate of the expected financial effect at this stage. Takeda
does not believe that information about the amount sought by the plaintiffs, if that is known, would be
meaningful with respect to those legal proceedings. This is due to a number of factors, including, but not limited
to, the stage of proceedings, the entitlement of parties to appeal a decision and clarity as to theories of liability,
damages and governing law.
Legal expenses incurred and charges related to legal claims are recorded in selling, general and
administrative expenses line. Provisions are recorded, after taking appropriate legal and other specialist advice,
where an outflow of resources is considered probable and a reliable estimate can be made of the likely outcome
of the dispute. For certain product liability claims, Takeda will record a provision where there is sufficient
history of claims made and settlements to enable management to make a reliable estimate of the provision
required to cover unasserted claims. As of March 31, 2018, Takeda’s aggregate provision for legal and other
disputes was ¥23.2 billion. The ultimate liability for legal claims may vary from the amounts provided and is
dependent upon the outcome of litigation proceedings, investigations and possible settlement negotiations.
Takeda’s position could change over time, and, therefore, there can be no assurance that any losses that
result from the outcome of any legal proceedings will not exceed by a material amount the amount of the
provisions reported in these consolidated financial statements by a material amount.
Product
liability and related claims. Pre-clinical and clinical
trials are conducted during the
development of potential products to determine the safety and efficacy of products for use by humans following
approval by regulatory bodies. Notwithstanding these efforts, when drugs and vaccines are introduced into the
marketplace, unanticipated safety issues may become, or be claimed by some to be, evident. Takeda is currently
a defendant in a number of product liability lawsuits related to its products. For the product liability lawsuits and
related claims, other than those for which provision has been made, Takeda is unable to make a reliable estimate
of the expected financial effect at this stage. The most significant product liability and related claims are
described below.
•
ACTOS: Takeda has been named as a defendant in lawsuits in U.S. federal and state courts in which
plaintiffs allege to have developed bladder cancer or other injuries as a result of taking products
containing type 2 diabetes treatment pioglitazone (U.S. brand name: ACTOS). Eli Lilly and
Company (“Lilly”), which co-promoted ACTOS in the United States for a period of time, also has
been named as a defendant in many of these lawsuits. Under the parties’ co-promotion agreement,
Takeda has agreed to defend and indemnify Lilly in the U.S. matters. Outside the U.S., lawsuits and
155
claims have also been brought by persons claiming similar injuries. In April 2015, Takeda reached
an agreement with the lead plaintiffs’ lawyers that resolved the vast majority of ACTOS product
liability lawsuits pending against Takeda and Lilly in the U.S. The settlement covered all bladder
cancer claims pending in any U.S. court as of the date of settlement. Also, claimants with unfiled
claims in the U.S. represented by counsel as of the date of settlement and within three days
thereafter were eligible to participate. The settlement became effective when 95% of litigants and
claimants opted-in. In connection with this broad settlement, Takeda has paid $2.4 billion
(¥288 billion) into a qualified settlement fund. Takeda received insurance proceeds totaling
¥58 billion under various policies covering product liability claims against Takeda. Takeda also
established reserves for remaining ACTOS claims and lawsuits. In addition to remaining product
liability claims, the following lawsuits have been filed against Takeda by public and private third-
party payors, as wells as consumers, seeking damages for alleged economic losses. A purported
nation-wide class action lawsuit has been filed federal court in California – the Painters’ Fund case
– on behalf of third-party payors and consumers seeking, among other things, reimbursement of
monies spent on Actos. In April 2018, the court dismissed the Painters’ Fund Case. Plaintiffs
appealed. The States of Mississippi and Louisiana have filed lawsuits against Takeda and Lilly
alleging that defendants did not warn about bladder cancer and other risks of ACTOS. The lawsuits
seek reimbursement of the cost of ACTOS, paid by the states on behalf of patients through programs
such as Medicaid, and for medical treatment of patients allegedly injured by ACTOS, attorneys’ fees
and expenses, punitive damages and/or penalties. The court granted Takeda’s motion to dismiss the
Louisiana case, and Louisiana appealed. In October 2018, the appellate court reversed the dismissal.
Takeda settled the Mississippi case in November 2018.
•
PREVACID: As of November 2, 2018, approximately 848 product liability lawsuits involving
PREVACID and/or DEXILANT have been filed against Takeda in U.S. federal and state courts.
Under a tolling agreement among the parties, plaintiffs’ counsel dismissed more than 2,700 cases
against Takeda without prejudice, while plaintiffs’ counsel collects information about the proton-
pump inhibitor (“PPI”) products taken by these claimants. The federal lawsuits are consolidated for
pre-trial proceedings in a multi-district litigation in federal court in New Jersey. The plaintiffs
allege they developed kidney injuries as a result of taking PREVACID or DEXILANT, and that
Takeda failed to adequately warn them of this potential danger. However, it remains unclear how
many of these claimants took Takeda PPI. Similar claims are pending against other manufacturers
of drugs in the same PPI class as PREVACID, including AstraZeneca, Proctor & Gamble and
Pfizer. In Canada, three proposed class actions have been filed in three provinces (Quebec, Ontario
and Saskatchewan) by the Merchant Law group. The defendants include Takeda, AstraZeneca,
Janssen and several generic manufacturers. It is unclear how many new lawsuits will be filed
against Takeda. At this time, a reserve is not probable or estimable.
Intellectual Property. Intellectual property claims include challenges to the validity and enforceability
of Takeda’s patents on various products or processes as well as assertions of non-infringement of those patents.
A loss in any of these cases could result in loss of patent protection for the product at issue. The consequences of
any such loss could be a significant decrease in sales of that product and could materially affect future results of
operations for Takeda.
•
PREVACID: In January 2018, Takeda received notice from Zydus that
it has amended its
application for a generic version of SoluTab. In response, Takeda filed a patent infringement
lawsuit against Zydus in the U.S. District Court for the District of New Jersey. Zydus thereafter
filed a counterclaim asserting that Takeda’s challenge of Zydus’ ANDA product violates antitrust
laws. Takeda believes the counterclaim is without merit. Subsequently, Zydus sent a paragraph IV
notice for an additional patent, and Takeda filed a new lawsuit to address the new patent and
dismissed claims asserting other patents based on the information obtained during the discovery
process. In June 2009, Apotex filed a lawsuit in Toronto, Canada, against Takeda and Abbott
its generic
Laboratories (“Abbott”) seeking alleged damages for delayed market entry of
156
lansoprazole capsules due to a prior patent infringement lawsuit against Apotex. Previously, Abbott
and Takeda filed a patent infringement lawsuit against Apotex in response to Apotex’s regulatory
submission to the Canadian Minister of Health seeking permission to market generic lansoprazole
capsules before the expiration of various Canadian patents relating to this drug. In September 2008,
Abbott and Takeda settled that patent infringement lawsuit against Apotex and Apotex was allowed
to begin selling generic lansoprazole capsules in Canada on May 1, 2009. Under the terms of the
settlement, Apotex retained its right to seek damages for delayed market entry caused by the
lawsuit. Takeda denies that it owes any such damages. Trial is anticipated during the first calendar
quarter of 2019.
PANTOPRAZOLE: On January 15, 2016, Mylan filed a suit in the Federal Court against Takeda
claiming damages as a result of the dismissal of Takeda´s previous PM(NOC) proceeding against
Mylan. Mylan claimed damages due
the market with its generic
PANTOPRAZOLE magnesium product during the time period of June 27, 2013 until June 15, 2015.
The parties settled the lawsuit in May 2018.
to being held-off
AMITIZA: In March 2017, Sucampo (Takeda’s licensor, which became a wholly-owned subsidiary
of Mallinckrodt plc in February 2018) received a paragraph IV certification directed to AMITIZA
from Amneal Pharmaceuticals, and in August 2017 received a paragraph IV certification directed to
AMITIZA from Teva. These parties contend that the patents listed in FDA’s Orange Book for
AMITIZA are invalid and/or not infringed by their ANDA product. In response, Sucampo and
Takeda filed patent infringement lawsuits against the parties. In June 2018, the parties settled the
lawsuits. Patent litigation against other ANDA filers for AMITIZA was previously settled. In
September 2018, Takeda received notice that Sun Pharmaceutical Industries Limited has submitted
an ANDA with a paragraph IV certification seeking to sell a generic version of Amitiza.
TRINTELLIX: Takeda has received notices from sixteen generic pharmaceutical companies that
they have submitted ANDAs with paragraph IV certifications seeking to sell generic versions of
TRINTELLIX. To date, at least five generic companies are challenging the patents covering the
compound, vortioxetine, which expire in 2026. Takeda filed patent infringement lawsuits against
the ANDA filers in federal court in Delaware.
ENTYVIO: Roche has filed patent infringement lawsuits against Takeda in Germany, Italy and the
U.K. alleging that ENTYVIO infringes a Roche patent. Takeda is vigorously defending the lawsuits.
Additionally, Takeda filed a lawsuit seeking nullification of Roche’s patent in the U.K., and Roche
in response filed a patent infringement counterclaim. Takeda also filed a lawsuit against Genentech
in state court in Delaware seeking a declaration that Takeda has a license to the Roche patent under
the terms of a prior agreement between Takeda and Genentech. Genentech moved to dismiss the
lawsuit, and ruling on the motion is pending.
Other: In addition to the individual patent litigation cases described above, Takeda is party to a
number of cases where Takeda has received notices that companies have submitted ANDAs with
paragraph IV certifications to sell generic versions of other Takeda products. These include
ULORIC and Alogliptin products. Takeda has filed patent infringement lawsuits against parties
involved in these situations.
•
•
•
•
•
Sales, Marketing and Regulation. Takeda has other litigations related to its products and its activities,
the most significant of which are described below.
•
Antitrust: There have been purported class action lawsuits filed in federal court in New York by
several end payors and wholesalers against Takeda alleging anticompetitive conduct to delay
generic competition for ACTOS. In September 2015, the court granted defendants’ motions to
dismiss the antitrust claims asserted by the end payors. The end payors appealed this decision to the
Federal 2nd Circuit Court of Appeals. The wholesalers’ lawsuit had been stayed pending the
appellate court’s decision in the end payors’ lawsuit. In February 2017, the appellate court reversed
157
in part the dismissal of the end-payors’ case and allowed one of plaintiffs’ antitrust theories to
proceed in the trial court. Specifically, the court ruled that plaintiffs sufficiently alleged that
Takeda’s characterizations of two patents in the FDA Orange Book were false, and that this resulted
in delaying Teva’s launch of generic ACTOS. Takeda disagrees with these allegations and believes
the Orange Book listings were correct. The court, however, affirmed the trial court’s dismissal of
other antitrust theories. The end payors’ case, along with the wholesalers’ case, is proceeding in the
trial court, where Takeda has filed a motion to dismiss the remaining legal theory.
•
Investigation of Patient Assistance Programs: In November 2016, the U.S. Department of Justice
(through the U.S. Attorneys’ Office in Boston) issued a subpoena to ARIAD, which was acquired
by Takeda during the year ended March 31, 2017, seeking information from January 2010 to the
present relating to ARIAD’s donations to 501(c) (3) co-payment foundations, financial assistance
programs, and free drug programs available to Medicare beneficiaries and the relationship between
these copayment foundations and specialty pharmacies, hubs or case management programs.
ARIAD is cooperating in the investigation.
Dividends
The following table sets forth the dividends paid with respect to each of our fiscal years indicated.
Dividends Declared
April 1, 2015 to March 31, 2016
Q1 2015 . . . . . . . . . . . . . . .
Q3 2015 . . . . . . . . . . . . . . .
April 1, 2016 to March 31, 2017
Q1 2016 . . . . . . . . . . . . . . .
Q3 2016 . . . . . . . . . . . . . . .
April 1, 2017 to March 31, 2018
Q1 2017 . . . . . . . . . . . . . . .
Q3 2017 . . . . . . . . . . . . . . .
Total
Dividends
(billions of
yen)
Dividends
per Share
(yen)
Basis Date
Effective Date
¥71.1
71.1
¥90.00
90.00
March 31, 2015
September 30, 2015
June 29, 2015
December 1, 2015
71.1
71.1
71.1
71.2
90.00
90.00
March 31, 2016
September 30, 2016
June 30, 2016
December 1, 2016
90.00
90.00
March 31, 2017
September 30, 2017
June 29, 2017
December 1, 2017
Dividends declared for which the effective date fell in the following fiscal year are as follows:
Total
Dividends
(billions of
yen)
Dividends
per Share
(yen)
Basis Date
Effective Date
¥71.5
¥90.00
March 31, 2018
June 29, 2018
Dividends Declared
April 1, 2018 to March 31, 2019
Q1 2018 . . . . . . . . . . . . . . .
B.
Significant Changes.
Except otherwise disclosed in this registration statement on Form 20-F, no significant change has
occurred since the date of the annual financial statements.
Item 9. The Offer and Listing
A.
Offer and Listing Details.
We plan to apply to have our ADSs listed on the NYSE as of the effective date of this registration
statement. Each ADSs will represent 0.5 shares of our common stock. Our ADSs are currently traded over the
counter under the symbol “TKPYY.” Currently, no public market exists for our ADSs.
158
See Item 9.C of this registration statement for information on the stock exchanges on which our
common stock is listed.
B.
Plan of Distribution.
Not applicable.
C.
Markets.
In Japan, our common stock has been listed since 1949 on the Tokyo Stock Exchange. Our common
stock is also listed on the Nagoya Stock Exchange, the Fukuoka Stock Exchange and the Sapporo Securities
Exchange. On each of these markets, our common stock trades under the securities identification code “4502.”
Prior to the effectiveness of this registration statement, we will apply to have our ADSs listed on the
New York Stock Exchange. The application requires, among others, a listing agreement executed by an executive
officer, depositary listing agreement, draft depositary agreement, a draft of this registration statement, a copy of
board resolutions authorizing the application to list securities on the NYSE as well as opinion of home country
counsel.
D.
Selling Shareholders.
Not applicable.
E.
Dilution.
Not applicable.
F.
Expenses of the Issue.
Not applicable.
Item 10. Additional Information
A.
Share Capital.
As of March 31, 2018, we had an authorized share capital of 3,500,000,000 shares of common stock,
with no par value. As of the same date, 794,688,295 shares of our common stock were issued. All issued shares
are fully-paid and non-assessable.
Of our issued shares of common stock, as of March 31, 2018, we held 13,379,133 shares as treasury
including 161,031 shares held directly by us,
stock, with an aggregate book value of ¥74.3 billion,
13,132,976 thousand shares held in trust for our stock-based compensation plans and 85,126 thousand shares
held by our equity-method affiliates. In calculating the number of treasury stock, the number of shares of our
common stock owned by equity-method affiliates is multiplied by our equity ownership percentage in the
relevant equity-method affiliate.
The table below shows our share capital as of March 31, 2018:
Class of share capital
Common stock
Authorized shares
3,500,000,000
159
Issued shares
794,688,295
The table below shows our history of share capital in the fiscal years ended March 31, 2016, 2017 and
2018:
Issue date or period
Type of issue or repurchase
Number of
shares issued or
repurchased
Number of shares after
issue or repurchase
(thousands of shares)
Fiscal year ended March 31, 2016 . . . . . . . Exercise of stock options
Fiscal year ended March 31, 2017 . . . . . . . Exercise of stock options
Fiscal year ended March 31, 2018 . . . . . . . Exercise of stock options
361
237
617
790,284
790,521
791,138
Issuance of shares to trustee
for Employee Stock
Ownership Plan Trust
3,550
794,688
B.
Memorandum and Articles of Association.
We are a joint-stock corporation incorporated in Japan under the Companies Act. The rights of our
shareholders are represented by shares of our common stock as described below, and shareholders’ liability is
limited to the amount of subscription for such shares. As of March 31, 2018, our authorized share capital
consisted of 3,500,000,000 shares of common stock of which 794,688,295 shares were issued.
Only the holders of our common stock will be entitled to the shareholder rights described below. In
order to exercise the rights described below, holders of our ADSs will be required to withdraw their ADSs in
favor of shares of our common stock in order to exercise their rights as shareholders.
Book-Entry Transfer System
The Japanese book-entry transfer system for listed shares of Japanese companies under the Book-Entry
Act of Japan (the “Book-Entry Act”) applies to the shares of our common stock. Under this system, shares of all
Japanese companies listed on any Japanese stock exchange are dematerialized. Under the book-entry transfer
system, in order for any person to hold, sell or otherwise dispose of listed shares of Japanese companies, they
must have an account at an account management institution unless such person has an account at Japan Securities
Depository Center, Incorporated (“JASDEC”). “Account management institutions” are financial instruments
business operators (i.e., securities firms), banks, trust companies and certain other financial institutions that meet
the requirements prescribed by the Book-Entry Act, and only those financial institutions that meet the further
stringent requirements of the Book-Entry Act can open accounts directly at JASDEC.
The following description of the book-entry transfer system assumes that the relevant person has no
account at JASDEC.
Under the Book-Entry Act, any transfer of shares is effected through book-entry, and the title to the
shares passes to the transferee at the time when the transferred number of shares is recorded in the transferee’s
account at an account management institution. The holder of an account at an account management institution is
presumed to be the legal owner of the shares held in such account.
Under the Companies Act, in order to assert shareholders’ rights against us, the transferee must have its
name and address registered in the register of our shareholders, except in limited circumstances. Under the book-
entry transfer system, such registration is generally made upon receipt of an all shareholders notice
tsuchi) (as described in “— Register of Shareholders”) from JASDEC. For this purpose,
(soukabunushi
shareholders are required to file their names and addresses with our transfer agent
through the account
management institution and JASDEC. See “— Register of Shareholders” for more information.
Non-resident shareholders are required to appoint a standing proxy in Japan or provide a mailing
address in Japan. Each such shareholder must give notice of its standing proxy or a mailing address to the
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relevant account management institution. Such notice will be forwarded to our transfer agent through JASDEC.
Japanese securities firms and commercial banks customarily act as standing proxies and provide related services
for standard fees. Notices from us to non-resident shareholders are delivered to the standing proxies or mailing
addresses.
Register of Shareholders
Under the book-entry transfer system, the registration of names, addresses and other information of
shareholders in the register of our shareholders will be made by us upon the receipt of an all shareholders notice
(with the exception that in the event of the issuance of new shares, we will register the names, addresses and
other information of our shareholders in the register of our shareholders without an all shareholders notice from
JASDEC) given to us by JASDEC, which will give us such all shareholders notice based on information provided
by the account management institutions. Such all shareholders notice will be made only in cases prescribed under
the Book-Entry Act such as when we fix the record date and when we make a request to JASDEC with any
justifiable reason. Therefore, a shareholder may not assert shareholders’ rights against us immediately after such
shareholder acquires our shares, unless such shareholder’s name and address are registered in the register of our
shareholders upon our receipt of an all shareholders notice; provided, however, that, in respect of the exercise of
rights of minority shareholders as defined in the Book-Entry Act, a shareholder may exercise such rights upon
giving us an individual shareholder notice (kobetsukabunushi tsuchi) through JASDEC only during a certain
period prescribed under the Book-Entry Act.
Distribution of Surplus
Under the Companies Act, the distribution of dividends takes the form of distribution of Surplus (as
defined in “—Restriction on Distribution of Surplus”), and a distribution of Surplus may be made in cash and/or
in kind, with no restrictions on the timing and frequency of such distributions. The Companies Act generally
requires a joint-stock corporation to make distributions of Surplus authorized by a resolution of a general meeting
of shareholders. However, in accordance with the Companies Act, our Articles of Incorporation provide that the
board of directors has the authority to make decisions regarding distributions of Surplus, except for limited
exceptions, as provided by the Companies Act, as long as the company that has both of an independent auditor
and an audit and supervisory committee satisfies the following requirements:
(a)
the normal term of office of directors who are not audit and supervisory committee members expires at
the close of the ordinary general meeting of shareholders held with respect to the last fiscal year ended
within one year after their election (our Articles of Incorporation currently satisfies this requirement);
and
(b)
its non-consolidated annual financial statements and certain documents for the latest fiscal year fairly
present its assets and profit or loss, as required by the ordinances of the Ministry of Justice.
A resolution of a general meeting of shareholders or the board of directors authorizing a distribution of
Surplus must specify the kind and aggregate book value of the assets to be distributed, the manner of allocation
of such assets to shareholders and the effective date of the distribution. If a distribution of Surplus is to be made
in kind, we may, pursuant to a resolution of a general meeting of shareholders or the board of directors, grant a
right to the shareholders to require us to make such distribution in cash instead of in kind. If no such right is
granted to shareholders, the relevant distribution of Surplus must be approved by a special resolution of a general
meeting of shareholders. See “— Voting Rights” for more details regarding a special resolution. Our Articles of
Incorporation provide that we are relieved of our obligation to pay any distributions in cash that go unclaimed for
three years after the date they first become payable.
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Restriction on Distribution of Surplus
Under the Companies Act, we may distribute Surplus up to the excess of the aggregate of (a) and
(b) below, less the aggregate of (c) through (f) below, as of the effective date of such distribution, if our net
assets are not less than ¥3,000,000:
(a)
the amount of Surplus, as described below;
(b)
in the event that extraordinary financial statements as of, or for a period from the beginning of the
fiscal year to, the specified date are approved, the aggregate amount of (i) the aggregate amount as
provided for by an ordinance of the Ministry of Justice as the net profit for such period described in the
statement of income constituting the extraordinary financial statements, and (ii) the amount of
consideration that we received for the treasury stock that we disposed of during such period;
(c)
the book value of our treasury stock;
(d)
(e)
(f)
in the event that we disposed of treasury stock after the end of the previous fiscal year, the amount of
consideration that we received for such treasury stock;
in the event described in (b) in this paragraph, the aggregate amount as provided for by an ordinance of
the Ministry of Justice as the net loss for such period described in the statement of income constituting
the extraordinary financial statements; and
certain other amounts set forth in the ordinances of the Ministry of Justice, including (if the sum of
one-half of goodwill and the deferred assets exceeds the total of share capital, additional paid-in capital
and legal earnings reserve, each such amount as it appears on the balance sheet as of the end of the
previous fiscal year) all or a certain part of such excess amount as calculated in accordance with the
ordinances of the Ministry of Justice.
For the purposes of this section, the amount of “Surplus” is the excess of the aggregate of (I) through
(IV) below, less the aggregate of (V) through (VII) below:
(I)
the aggregate of other capital surplus and other retained earnings at the end of the previous fiscal year;
(II)
in the event that we disposed of treasury stock after the end of the previous fiscal year, the difference
between the book value of such treasury stock and the consideration that we received for such treasury
stock;
(III) in the event that we reduced our share capital after the end of the previous fiscal year, the amount of
such reduction less the portion thereof that has been transferred to additional paid-in capital and/or
legal earnings reserve (if any);
(IV) in the event that we reduced additional paid-in capital and/or legal earnings reserve after the end of the
previous fiscal year, the amount of such reduction less the portion thereof that has been transferred to
share capital (if any);
(V) in the event that we cancelled treasury stock after the end of the previous fiscal year, the book value of
such treasury stock;
(VI) in the event that we distributed Surplus after the end of the previous fiscal year, the aggregate of the
following amounts:
(1)
(2)
(3)
the aggregate amount of the book value of the distributed assets, excluding the book value of
such assets that would be distributed to shareholders but for their exercise of the right to
receive dividends in cash instead of dividends in kind;
the aggregate amount of cash distributed to shareholders who exercised the right to receive
dividends in cash instead of dividends in kind; and
the aggregate amount of cash paid to shareholders holding fewer shares than the shares that
were required in order to receive dividends in kind;
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(VII) the aggregate amounts of (1) through (4) below, less (5) and (6) below:
(1)
(2)
(3)
(4)
(5)
in the event that the amount of Surplus was reduced and transferred to additional paid-in
capital, legal earnings reserve and/or share capital after the end of the previous fiscal year,
the amount so transferred;
in the event that we distributed Surplus after the end of the previous fiscal year, the amount
set aside in additional paid-in capital and/or legal earnings reserve;
in the event that we disposed of treasury stock in the process of (x) a merger in which we
acquired all rights and obligations of a company, (y) a corporate split in which we acquired
all or a part of the rights and obligations of a split company or (z) a share exchange in which
we acquired all shares of a company after the end of the previous fiscal year, the difference
between the book value of such treasury stock and the consideration that we received for
such treasury stock;
in the event that the amount of Surplus was reduced in the process of a corporate split in
which we transferred all or a part of our rights and obligations after the end of the previous
fiscal year, the amount so reduced;
in the event of (x) a merger in which we acquired all rights and obligations of a company,
(y) a corporate split in which we acquired all or a part of the rights and obligations of a split
company or (z) a share exchange in which we acquired all shares of a company after the end
of the previous fiscal year, the aggregate amount of (i) the amount of other capital surplus
after such merger, corporate split or share exchange, less the amount of other capital surplus
before such merger, corporate split or share exchange, and (ii) the amount of other retained
earnings after such merger, corporate split or share exchange, less the amount of other
retained earnings before such merger, corporate split or share exchange; and
(6)
in the event that an obligation to cover a deficiency, such as the obligation of a person who
subscribed for newly issued shares with an unfair amount to be paid in, was fulfilled after the
end of the previous fiscal year, the amount of other capital surplus increased by such
payment.
In Japan, the “ex-dividend” date and the record date for any distribution of Surplus come before the date
a company determines the amount of distribution of Surplus to be paid.
For information as to Japanese taxes on dividends, please refer to “Taxation — Japanese Taxation.”
Capital and Reserves
Under the Companies Act, the paid-in amount of any newly-issued shares of stock is required to be
accounted for as share capital, although we may account for an amount not exceeding one-half of such paid-in
amount as additional paid-in capital. We may generally reduce additional paid-in capital and/or legal earnings
reserve by resolution of a general meeting of shareholders, subject to completion of protection procedures for
creditors in accordance with the Companies Act, and, if so decided by the same resolution, we may account for
the whole or any part of the amount of such reduction as share capital. We may generally reduce share capital by
a special resolution of a general meeting of shareholders subject to completion of protection procedures for
creditors in accordance with the Companies Act, and, if so decided by the same resolution, we may account for
the whole or any part of the amount of such reduction as additional paid-in capital or legal earnings reserve.
Stock Splits
Under the Companies Act, we may at any time split shares in issue into a greater number of the same
class of shares by a resolution of the board of directors or by determination of an individual director to whom the
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authority to make such determination has been delegated by resolution of the board of directors. A company that
has issued only one class of shares may amend its articles of incorporation to increase the number of the
authorized shares to be issued up to a number in proportion to the stock split by resolution of the board of
directors or by determination of an individual director to whom the authority to make such determination has
been delegated by resolution of the board of directors, rather than a special resolution of a general meeting of
shareholders, which is otherwise required for amending the articles of incorporation. When a stock split is to be
made, we must give public notice of the stock split, specifying the record date therefor, at least two weeks prior
to such record date.
Under the book-entry transfer system, on the effective date of the stock split, the numbers of shares
recorded in all accounts held by our shareholders at account management institutions will be increased in
accordance with the applicable ratio.
Gratuitous Allocations
Under the Companies Act, we may allot any class of shares to our existing shareholders without any
additional contribution by resolution of the board of directors or by determination of an individual director to
whom the authority to make such determination has been delegated by resolution of the board of directors;
provided that although our treasury stock may be allotted to our shareholders, any allotment of shares will not
accrue to shares of our treasury stock.
When a gratuitous allocation is to be made and we set a record date therefor, we must give public notice
of the gratuitous allocation, specifying the record date therefor, at least two weeks prior to the record date.
Under the book-entry transfer system, on the effective date of the gratuitous allocation, the number of
shares of our common stock recorded in accounts held by our shareholders at account management institutions
will be increased in accordance with a notice from us to JASDEC.
Reverse Stock Split
Under the Companies Act, we may at any time consolidate our shares into a smaller number of shares
by a special resolution of the general meeting of shareholders. We must disclose the reason for the reverse stock
split at the general meeting of shareholders. When a reverse stock split is to be made, we must give public notice
of the reverse stock split, at least two weeks (or, in certain cases where any fractions of shares are left as a result
of a reverse stock split, 20 days) prior to the effective date of the reverse stock split.
Under the book-entry transfer system, on the effective date of the reverse stock split, the numbers of
shares recorded in all accounts held by our shareholders at account management institutions will be decreased in
accordance with the applicable ratio.
Unit Share System
General
Our Articles of Incorporation provide that 100 shares constitute one “unit” of common stock. Our board of
directors or an individual director to whom the authority to make such determination has been delegated by
resolution of the board of directors is permitted to reduce the number of shares that will constitute one unit or to
abolish the unit share system entirely by amending our Articles of Incorporation, without shareholders’ approval,
with public notice without delay after the effective date of such amendment.
Transferability of Shares Constituting Less Than One Unit
Under the book-entry transfer system, shares constituting less than one unit are transferable. Under the
rules of the Japanese stock exchanges, however, shares constituting less than one unit do not comprise a trading
unit, except in limited circumstances, and accordingly may not be sold on the Japanese stock exchanges.
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Voting Rights of a Holder of Shares Constituting Less Than One Unit
A holder of shares constituting less than one unit cannot exercise any voting rights pertaining to those
shares. In calculating the quorum for various voting purposes, the aggregate number of shares constituting less
than one unit will be excluded from the number of outstanding shares. A holder of shares representing one or
more full units will have one vote for each full unit represented.
A holder of shares constituting less than one unit does not have any rights related to voting, such as the
right to participate in a demand for the resignation of a director, the right to participate in a request for the
convocation of a general meeting of shareholders and the right to join with other shareholders to propose a matter
to be included in the agenda of a general meeting of shareholders.
Rights of a Holder of Shares Constituting Less Than One Unit to Require Us to Purchase Shares and to
Sell Shares
Under the Companies Act, a holder of shares constituting less than one full unit may at any time request
that we purchase such shares. In addition, our Articles of Incorporation provide that, pursuant to our Share
Handling Regulations, a holder of shares constituting less than one full unit has the right to request that we sell to
such holder such number of shares constituting less than one full unit which, when added to the shares
constituting less than one full unit currently owned by such holder, will constitute one full unit.
Under the book-entry system, such a request must be made to us through the relevant account managing
institution. The price at which shares of common stock constituting less than one unit will be purchased or sold
by us pursuant to such a request will be equal to (a) the closing price of shares of our common stock reported by
the Tokyo Stock Exchange on the day when the request is received by our transfer agent or (b) if no sale takes
place on the Tokyo Stock Exchange on that day, the price at which the sale of shares of our common stock is
executed on such stock exchange immediately thereafter.
General Meeting of Shareholders
Our ordinary general meeting of shareholders is usually held every June in Osaka, Japan. The record date
for an ordinary general meeting of shareholders is March 31 of each year. In addition, we may hold an
extraordinary general meeting of shareholders whenever necessary by giving at least two weeks’ advance notice
to shareholders.
Notice of convocation of a general meeting of shareholders setting forth the time, place, purpose thereof
and certain other matters set forth in the Companies Act and relevant ordinances must be mailed to each
shareholder having voting rights (or, in the case of a non-resident shareholder, to his or her standing proxy or
mailing address in Japan) at least two weeks prior to the date set for such meeting. Such notice may be given to
shareholders by electronic means, subject to the consent of the relevant shareholders.
Any shareholder or group of shareholders holding at least 3% of the total number of voting rights for a
period of six months or more may require, with an individual shareholder notice (as described in “— Register of
Shareholders”), the convocation of a general meeting of shareholders for a particular purpose. Unless such
general meeting of shareholders is convened without delay or a convocation notice of a meeting which is to be
held not later than eight weeks from the day of such demand is dispatched, the requiring shareholder may, upon
obtaining a court approval, convene such general meeting of shareholders.
Any shareholder or group of shareholders holding at least 300 voting rights or 1% of the total number of
voting rights for a period of six months or more may propose a matter to be included in the agenda of a general
meeting of shareholders, and may propose to describe such matter together with a summary of the proposal to be
submitted by such shareholder in a convocation notice to our shareholders, by submitting a request to a director
at least eight weeks prior to the date set for such meeting, with an individual shareholder notice (as described in
“— Register of Shareholders”).
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The Companies Act enables a company to amend its articles of incorporation in order to loosen the
requirements for the number of shares held and shareholding period, as well as the period required for
dispatching a convocation notice or submission of requests, all of which are required for any shareholder or
group of shareholders to request the convocation of a general meeting of shareholders or to propose a matter to
be included in the agenda of a general meeting of shareholders. Our Articles of Incorporation do not provide for
loosening such requirements.
Voting Rights
A shareholder of record is entitled to one vote per unit (100 shares) of common stock, except that neither
we nor any corporation, partnership or other similar entity in which we hold, directly or indirectly, 25% or more
of the voting rights shall exercise any voting rights in respect of shares held by us or such entity, as the case may
be. Except as otherwise provided by law or by our Articles of Incorporation, a resolution can be adopted at a
general meeting of shareholders by a majority of the voting rights represented at the meeting. Shareholders may
also exercise their voting rights through proxies, provided that the proxy is granted to one of our shareholders
having voting rights. The Companies Act and our Articles of Incorporation provide that the quorum for the
election of directors is one-third of the total number of voting rights. Our Articles of Incorporation provide that
the shares may not be voted cumulatively for the election of directors.
The Companies Act provides that a special resolution of the general meeting of shareholders is required for
certain significant corporate transactions, including:
•
•
•
•
•
•
•
•
•
•
•
•
any amendment to our Articles of Incorporation (except for amendments that may be made without
the approval of shareholders under the Companies Act);
a reduction of share capital, subject to certain exceptions under which a shareholders’ resolution is
not required, such as a reduction of share capital for the purpose of replenishing capital
deficiencies;
transfer of the whole or a part of our equity interests in any of our subsidiaries, subject to certain
exceptions under which a shareholders’ resolution is not required;
a dissolution, merger or consolidation, subject to certain exceptions under which a shareholders’
resolution is not required;
the transfer of the whole or a substantial part of our business, subject to certain exceptions under
which a shareholders’ resolution is not required;
the taking over of the whole of the business of any other corporation, subject to certain exceptions
under which a shareholders’ resolution is not required;
a corporate split, subject to certain exceptions under which a shareholders’ resolution is not
required;
a share exchange (kabushiki kokan) or share transfer (kabushiki iten) for the purpose of establishing
100% parent-subsidiary relationships, subject to certain exceptions under which a shareholders’
resolution is not required;
any issuance of new shares or transfer of existing shares held by us as treasury stock at a “specially
favorable” price and any issuance of stock acquisition rights or bonds with stock acquisition rights
at a “specially favorable” price or on “specially favorable” conditions to any persons other than
shareholders;
any acquisition by us of our own shares from specific persons other than our subsidiaries;
reverse stock split; or
the removal of directors who are audit and supervisory committee members.
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Except as otherwise provided by law or in our Articles of Incorporation, a special resolution of the general
meeting of shareholders requires the approval of the holders of at least two-thirds of the voting rights of all
shareholders present or represented at a meeting where a quorum is present. Our Articles of Incorporation
provide that a quorum exists when one-third of the total number of voting rights is present or represented.
Liquidation Rights
If we are liquidated, the assets remaining after payment of all taxes, liquidation expenses and debts will be
distributed among shareholders in proportion to the number of shares they hold.
Rights to Allotment of Shares
Holders of shares of our common stock have no pre-emptive rights. Authorized but unissued shares may be
issued at the times and on the terms as the board of directors or an individual director to whom the authority to
make such determination has been delegated by resolution of the board of directors determines, so long as the
limitations with respect to the issuance of new shares at “specially favorable” prices (as described in “— Voting
Rights”) are observed. Our board of directors or an individual director to whom the authority to make such
determination has been delegated by resolution of the board of directors may, however, determine that
shareholders shall be given rights to allotment regarding a particular issue of new shares, in which case such
rights must be given on uniform terms to all holders of the shares as of a record date for which not less than two
weeks’ prior public notice must be given. Each shareholder to whom such rights are given must also be given
notice of the expiration date thereof at least two weeks prior to the date on which such rights expire. The rights to
allotment of new shares may not be transferred. However, the Companies Act enables us to allot stock
acquisition rights to shareholders without consideration therefor, and such stock acquisition rights are
transferable. See “— Stock Acquisition Rights” below.
In cases where a particular issuance of new shares (i) violates laws and regulations or our Articles of
Incorporation, or (ii) will be performed in a manner materially unfair, and shareholders may suffer disadvantages
therefrom, such shareholders may file an injunction with a court of law to enjoin such issuance.
Stock Acquisition Rights
Subject to certain conditions and to the limitations on issuances at a “specially favorable” price or on
“specially favorable” conditions described in “— Voting Rights,” we may issue stock acquisition rights
(shinkabu yoyakuken) and bonds with stock acquisition rights (shinkabu yoyakuken-tsuki shasai) by a resolution
of the board of directors or by determination of an individual director to whom the authority to make such
determination has been delegated by resolution of the board of directors. Holders of stock acquisition rights may
exercise their rights to acquire a certain number of shares within the exercise period as set forth in the terms of
their stock acquisition rights. Upon exercise of stock acquisition rights, we will be obligated either to issue the
relevant number of new shares or, alternatively, to transfer the necessary number of shares of treasury stock held
by us.
Record Date
The record date for annual dividends and the determination of shareholders entitled to vote at the ordinary
general meeting of our shareholders is March 31. The record date for interim dividends is September 30.
In addition, by a resolution of the board of directors or by determination of an individual director to whom
the authority to make such determination has been delegated by resolution of the board of directors, we may set a
record date for determining the shareholders entitled to other rights and for other purposes by giving at least two
weeks’ prior public notice.
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Under the rules of JASDEC, we are required to give notice of each record date to JASDEC promptly after
setting such record date. JASDEC is required to promptly give us notice of the names and addresses of the
holders of shares of our common stock, the number of shares of our common stock held by them and other
relevant information as at each record date.
Purchase of Our Own Shares
Under the Companies Act and our Articles of Incorporation, we may acquire our own shares:
•
•
•
by purchase on any stock exchange on which our shares are listed or by way of tender offer,
pursuant to a resolution of our board of directors subject to certain requirements;
by purchase from a specific party other than any of our subsidiaries, pursuant to a special resolution
of a general meeting of shareholders; and
by purchase from any of our subsidiaries, pursuant to a resolution of the board of directors or
determination of an individual director to whom the authority to make such determination has been
delegated by resolution of the board of directors.
If we acquire our own shares from a specific party other than any of our subsidiaries as specified above at a
price higher than the greater of (i) (a) the closing price of the shares at the market trading such shares on the day
immediately preceding the day on which the relevant special resolution of a general meeting of shareholders is
made or (b) if no sale takes place at such market on that day, the price at which the sale of the shares is effected
on such market immediately thereafter and (ii) in the event that such shares are subject to a tender offer, the price
set in the contract regarding such tender offer on that day, shareholders may request that we include him or her as
the seller of his or her shares in the proposed purchase. Any such acquisition of shares must satisfy certain
requirements, such as that we may only acquire our own shares in an aggregate amount up to the amount that we
may distribute as Surplus. See “— Distribution of Surplus” above for more details regarding this amount.
Our own shares acquired by us may be held by us as treasury stock for any period or may be cancelled by
resolution of the board of directors or by determination of an individual director to whom the authority to make
such determination has been delegated by resolution of the board of directors. We may also transfer the shares
held by us to any person, subject to a resolution of the board of directors or determination of an individual
director to whom the authority to make such determination has been delegated by resolution of the board of
directors, and subject also to other requirements similar to those applicable to the issuance of new shares, as
described in “— Rights to Allotment of Shares” above. We may also utilize our treasury stock (x) for the purpose
of transfer to any person upon exercise of stock acquisition rights or (y) for the purpose of acquiring another
company by way of merger, share exchange, or corporate split through exchange of treasury stock for shares or
assets of the acquired company.
Request by Controlling Shareholder to Sell All Shares
Under the Companies Act and our Articles of Incorporation, in general, a shareholder holding 90% or more
of our voting rights, directly or through wholly-owned subsidiaries, shall have the right to request that all other
shareholders other than us (and all other holders of stock acquisition rights other than us, as the case may be) sell
all shares (and all stock acquisition rights, as the case may be) held by them with our approval, which must be
made by a resolution of the board of directors or by determination of an individual director to whom the authority
to make such determination has been delegated by resolution of the board of directors (kabushiki tou uriwatashi
seikyu or a “Share Sales Request”). In order to make a Share Sales Request, such controlling shareholder will be
required to issue a prior notice to us. If we approve such Share Sales Request, we will be required to make a
public notice to all holders and registered pledgees of shares (and stock acquisition rights, as the case may be) not
later than 20 days before the effective date of such sales.
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Sale by Us of Shares Held by Shareholders Whose Addresses Are Unknown
Under the Companies Act, we are not required to send a notice to a shareholder if notices to such
shareholder fail to arrive for a continuous period of five or more years at the registered address of such
shareholder in the register of our shareholders or at the address otherwise notified to us.
In addition, we may sell or otherwise dispose of the shares held by a shareholder whose location is
unknown. Generally, if
•
•
notices to a shareholder fail to arrive for a continuous period of five or more years at the
shareholder’s registered address in the register of our shareholders or at the address otherwise
notified to us, and
the shareholder fails to receive distribution of Surplus on the shares for a continuous period of five
or more years at the address registered in the register of our shareholders or at the address otherwise
notified to us,
we may sell or otherwise dispose of the shareholder’s shares at the market price after giving at least three
months’ prior public and individual notices, and hold or deposit the proceeds of such sale or disposal for the
shareholder.
Reporting of Substantial Shareholdings
The Financial Instruments and Exchange Law of Japan and its related regulations require any person who
has become beneficially, solely or jointly, a holder of more than 5% of total issued shares of our common stock,
to file with the director of a relevant local finance bureau of the Ministry of Finance within five business days a
report concerning such shareholdings. With certain exceptions, a similar report must also be filed in respect of
any subsequent change of 1% or more in any such holdings or any change in material matters set out in reports
previously filed. For this purpose, shares of our common stock issuable to such person upon exchange of
exchangeable securities, conversion of convertible securities or exercise of warrants or stock acquisition rights
(including those incorporated in bonds with stock acquisition rights) are taken into account in determining both
the number of our shares held by the holder and our total issued shares.
C.
Material Contracts.
ARIAD
In connection with our acquisition of ARIAD, on January 8, 2017, we entered into an Agreement and Plan
of Merger (the “Agreement and Plan of Merger”) with ARIAD and Kiku Merger Co., Inc., a Delaware corporation
and an indirect wholly-owned subsidiary of Takeda (“Merger Sub”). Pursuant to the agreement, Takeda agreed to
cause Merger Sub to commence a tender offer to purchase any and all of the shares of common stock, par value
$0.001 per share, of ARIAD issued and outstanding, at a price per share of $24.00, to the seller in cash, net of
applicable withholding taxes and without interest, on the terms and subject to the conditions in the Agreement and
Plan of Merger. Following consummation of the tender offer, Merger Sub was merged with and into ARIAD, with
ARIAD surviving as an indirect wholly-owned subsidiary of Takeda. The tender offer for all of the outstanding
shares of ARIAD common stock expired as scheduled on February 15, 2017 and Takeda completed its acquisition of
ARIAD without a vote of ARIAD’s shareholders pursuant to Section 251(h) of the Delaware General Corporation
Law on February 16, 2017. The Agreement and Plan of Merger is filed as an exhibit hereto.
For a description of the effect of the acquisition of ARIAD on our financial condition and results of
operations, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Financial
Impact of the ARIAD Acquisition.”
TiGenix NV
In connection with our acquisition of TiGenix NV, on January 5, 2018, we entered into an Offer and
Support Agreement (the “Offer and Support Agreement”) with TiGenix NV, whereby we commenced an all cash
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voluntary and conditional public takeover bid for 100% of the securities with voting rights or giving access to
voting rights of TiGenix NV that are not already owned by Takeda or its affiliates, at a price of €1.78 per share in
cash and an equivalent price for the ADSs, warrants to acquire shares and 9% senior unsecured convertible bonds
due March 6, 2018 of TiGenix NV. On July 31, 2018, we acquired all outstanding ordinary shares as well as the
ADSs and warrants of TiGenix NV following the expiration of the squeeze-out period and TiGenix NV became a
wholly-owned subsidiary of Takeda. The Offer and Support Agreement is filed as an exhibit thereto.
Shire
In connection with the Shire Acquisition, on May 8, 2018, we entered into a Co-operation Agreement with
Shire, governing certain matters leading to the closing of the Shire Acquisition. On the same date, we entered into the
Bridge Credit Agreement totaling commitments of $30.85 billion with, among others, JPMorgan Chase Bank N.A.,
Sumitomo Mitsui Banking Corporation and MUFG Bank, Ltd. On June 8, 2018, we entered into the Term Loan Credit
Agreement for an aggregate principal amount of $7.5 billion with, among others, JPMorgan Chase Bank N.A.,
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd. and Mizuho Bank, Ltd., and on the same date entered into
Amendment No. 1 to the Bridge Credit Agreement to make certain technical changes thereto. On October 26, 2018, we
entered into the SSTL with an aggregate commitment of ¥500.0 billion, with Sumitomo Mitsui Banking Corporation,
MUFG Bank, Ltd., Mizuho Bank, Ltd., The Norinchukin Bank and Sumitomo Mitsui Trust Bank, Limited, and on the
same date entered into Amendment No. 2 to the Bridge Credit Agreement to make certain technical changes thereto.
On October 26, 2018, we also entered into the Subordinated Loan Agreement, with aggregate commitments of
¥500.0 billion, with Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd., Mizuho Bank, Ltd., The Norinchukin
Bank and Sumitomo Mitsui Trust Bank, Limited, which may be used, at our option to refinance all or a portion of the
borrowings under the SSTL following the completion of the Shire Acquisition. On November 21, 2018, we entered
into a Fiscal Agency Agreement with MUFG Bank, Ltd., as Fiscal Agent, under which we issued a total aggregate
principal amount of €7.5 billion of senior notes on the same day. On November 26, 2018, we entered into an Indenture
with MUFG Union Bank, N.A., as Trustee, under which we issued a total aggregate principal amount of $5.5 billion of
senior notes on the same day. On December 3, 2018, we entered into the JBIC Loan with the Japan Bank for
International Cooperation, for an aggregate principal amount of up to $3.7 billion.
The Co-operation Agreement, the Bridge Credit Agreement, Amendments No. 1 and 2 thereto, the Term
Loan Credit Agreement, the SSTL, the Fiscal Agency Agreement, the Indenture and the JBIC Loan are filed as
exhibits hereto. An English-language translation of the Subordinated Loan Agreement is also filed as an exhibit hereto.
For a description of the agreements mentioned above as well as the effect of the Shire Acquisition on
our financial condition and results of operations, see “Item 5. Operating and Financial Review and Prospects—A.
Operating Results—Financial Impact of the Shire Acquisition.”
Licensing and Collaboration Agreements
In the ordinary course of our business, we enter into agreements for licensing or collaboration in the
development and commercialization of products. Our business does not materially depend on any one of these
agreements. Instead, they overall form a portion of our strategy to leverage a mix of internal and external
resources to develop and commercialize new products. Certain of the agreements which have led to successful
commercialization to date are summarized in “Item 4. Information on the Company—B. Business Overview—
Clinical Development Programs—Licensing and Collaboration Agreements.” Our Licensing and Collaboration
Agreement with Seattle Genetics, Inc. is filed as an exhibit hereto to provide investors with an example of one
such agreement. We believe this agreement is representative of our licensing and collaboration agreements for
marketed products in that it provides for the payment of development and commercial milestone payments and
sales-based royalties and sets forth the parties’ responsibilities relating to the terms of co-development, co-
manufacturing and co-marketing efforts, as well as providing for geographic limitations and limitations on term
for the relevant licensing and collaboration efforts. The specific terms of each of our licensing or collaboration
agreements are negotiated individually. Agreements for compounds still in development may have additional
terms governing, for example, equity investments or other capital relationships.
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D.
Exchange Controls.
The Foreign Exchange and Foreign Trade Act of Japan and related cabinet orders and ministerial
ordinances, which we refer to collectively as the Foreign Exchange Regulations, govern certain aspects relating
to the acquisition and holding of shares by “exchange non-residents” and by “foreign investors” (as these terms
are defined below). It also applies in some cases to the acquisition and holding of ADSs representing shares of
our common stock acquired and held by exchange non-residents and by foreign investors. In general, the Foreign
Exchange Regulations currently in effect do not affect transactions between exchange non-residents to purchase
or sell shares or ADSs outside Japan using currencies other than Japanese yen.
Exchange residents are defined in the Foreign Exchange Regulations as:
(i)
(ii)
individuals who reside within Japan; or
corporations whose principal offices are located within Japan.
Exchange non-residents are defined in the Foreign Exchange Regulations as:
(i)
(ii)
individuals who do not reside in Japan; or
corporations whose principal offices are located outside Japan.
Generally, branches and other offices of non-resident corporations located within Japan are regarded as
exchange residents. Conversely, branches and other offices of Japanese corporations located outside Japan are
regarded as exchange non-residents.
Foreign investors are defined in the Foreign Exchange Regulations as:
(i)
(ii)
(iii)
(iv)
individuals who do not reside in Japan;
corporations or other entities organized under the laws of foreign countries or whose principal
offices are located outside Japan;
corporations of which 50% or more of the total voting rights are held, directly or indirectly, by
individuals and/or corporations falling within (i) and/or (ii) above; or
corporations or other entities having a majority of either (A) directors or other persons equivalent
thereto or (B) directors or other persons equivalent thereto having the power of representation who
are non-resident individuals.
Acquisition of Shares
Acquisition by an exchange non-resident of shares of a Japanese corporation from an exchange resident
requires post facto reporting by the exchange resident to the Minister of Finance of Japan through the Bank of
Japan. No such reporting requirement is imposed, however, if:
(i)
(ii)
the aggregate purchase price of the relevant shares is ¥100 million or less;
the acquisition is effected through any bank, financial instruments business operator or other entity
prescribed by the Foreign Exchange Regulations acting as an agent or intermediary; or
(iii)
the acquisition constitutes an “inward direct investment” described below.
Inward Direct Investment in Shares of Listed Corporations
If a foreign investor acquires shares of a Japanese company that is listed on a Japanese stock exchange,
such as the shares of our common stock, or that is traded on an over-the-counter market in Japan and, as a result
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of the acquisition, the foreign investor, in combination with any existing holdings, directly or indirectly holds
10% or more of the issued shares of the relevant company, such acquisition constitutes an “inward direct
investment” and the foreign investor in general must file a report of the acquisition with the Minister of Finance
and any other competent Ministers having jurisdiction over that Japanese company by the 15th day of the month
immediately following the month to which the date of such acquisition belongs. In limited circumstances, such as
where the foreign investor is in a country that is not listed on an exemption schedule in the Foreign Exchange
Regulations, or where that Japanese company is engaged in certain businesses designated by the Foreign
Exchange Regulations (including the manufacturing of biological preparations), a prior notification of the
acquisition must be filed with the Minister of Finance and any other competent Ministers (including the Minister
of Health, Labour and Welfare). The proposed acquisition may not be consummated until 30 days have passed
from the date of filing of such notification, although this period will be shortened to two weeks unless such
Ministers deem it necessary to review the proposed acquisition. The relevant Ministers may extend the screening
period up to five months if they deem it necessary to review the proposed acquisition and may recommend any
modification or abandonment of the proposed acquisition and, if such recommendation is not accepted, they may
order the modification or abandonment of such acquisition.
Acquisition of shares by foreign investors by way of stock split is not subject to any of the foregoing
notification or reporting requirements.
Dividends and Proceeds of Sale
Under the Foreign Exchange Regulations, dividends paid on, and the proceeds from sales in Japan of,
shares held by exchange non-residents may generally be converted into any foreign currency and repatriated
abroad.
E. Taxation.
Material U.S. Federal Income Tax Consequences
This section describes the material United States federal income tax consequences of owning ADSs. It
applies to you only if you are a U.S. holder (as defined below) and you hold your ADSs as capital assets for tax
purposes. This discussion addresses only United States federal income taxation and does not discuss all of the tax
consequences that may be relevant to you in light of your individual circumstances, including foreign, state or
local tax consequences, estate and gift tax consequences, and tax consequences arising under the Medicare
contribution tax on net investment income or the alternative minimum tax. This section does not apply to you if
you are a member of a special class of holders subject to special rules, including:
•
•
•
•
•
•
•
•
a dealer in securities,
a trader in securities that elects to use a mark-to-market method of accounting for securities holdings,
a tax-exempt organization,
a life insurance company,
a person that actually or constructively owns 10% or more of the combined voting power of our voting
stock or of the total value of our stock,
a person that holds ADSs as part of a straddle or a hedging or conversion transaction,
a person that purchases or sells ADSs as part of a wash sale for tax purposes, or
a person whose functional currency is not the U.S. dollar.
This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing
and proposed regulations, published rulings and court decisions, all as currently in effect, as well as on the
Convention Between the Government of the United States of America and the Government of Japan for the
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Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the
“Treaty”). These laws are subject to change, possibly on a retroactive basis. In addition, this section is based in
part upon the assumption that each obligation in the deposit agreement will be performed in accordance with its
terms.
If an entity or arrangement that is treated as a partnership for United States federal income tax purposes
holds the ADSs, the United States federal income tax treatment of a partner will generally depend on the status of
the partner and the tax treatment of the partnership. A partner in a partnership holding the ADSs should consult
its tax advisor with regard to the United States federal income tax treatment of an investment in the ADSs.
You are a U.S. holder if you are a beneficial owner of ADSs and you are for United States federal
income tax purposes:
•
•
•
•
a citizen or resident of the United States,
a domestic corporation,
an estate whose income is subject to United States federal income tax regardless of its source, or
a trust if a United States court can exercise primary supervision over the trust’s administration and
one or more United States persons are authorized to control all substantial decisions of the trust.
You should consult your own tax advisor regarding the United States federal, state and local tax
consequences of owning and disposing of ADSs in your particular circumstances.
In general, and taking into account the earlier assumptions, for United States federal income tax
purposes, if you hold ADRs evidencing ADSs, you will be treated as the owner of the shares represented by those
ADRs. Exchanges of shares for ADRs, and ADRs for shares, generally will not be subject to United States
federal income tax.
The tax treatment of your ADSs will depend in part on whether or not we are classified as a passive
foreign investment company, or PFIC, for United States federal income tax purposes. Except as discussed below
under “—PFIC Rules”, this discussion assumes that we are not classified as PFIC for United States federal
income tax purposes.
Distributions. Under the United States federal income tax laws, if you are a U.S. holder, the gross
amount of any distribution we pay out of our current or accumulated earnings and profits (as determined for
United States federal income tax purposes), other than certain pro-rata distributions of our shares, will be treated
as a dividend that is subject to United States federal income taxation. If you are a noncorporate U.S. holder,
dividends that constitute qualified dividend income will be taxable to you at the preferential rates applicable to
long-term capital gains provided that you hold the ADSs for more than 60 days during the 121-day period
beginning 60 days before the ex-dividend date and meet other holding period requirements. Dividends that we
distribute with respect to the ADSs will be qualified dividend income if the ADSs are readily tradable on an
established securities market in the United States in the year that we distribute the dividend. Our ADSs will be
listed on the NYSE, in which case the ADSs will be treated as readily tradable on an established securities
market in the United States. We therefore expect that dividends that we distribute on our ADSs will be qualified
dividend income.
You must include any Japanese tax withheld from the dividend payment in this gross amount even
though you do not in fact receive it. The dividend is taxable to you when the depositary receives the dividend,
actually or constructively. The dividend will not be eligible for the dividends-received deduction generally
allowed to United States corporations in respect of dividends received from other United States corporations. The
amount of the dividend distribution that you must include in income will be the U.S. dollar value of the yen
payments made, determined at the spot yen/U.S. dollar rate on the date the depositary actually or constructively
receives the dividend, even if the depositary (a) converts the yen into U.S. dollars at a different rate or (b) does
not convert the dividend payment into U.S. dollars. If the depositary converts the yen into U.S. dollars at a
different rate, then you will recognize U.S. source ordinary income (that would not be treated as qualified
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dividends) or loss equal to the difference between the U.S. dollars that you receive and the U.S. dollar amount
that you included as dividend income. If the depositary does not convert the dividend payment into U.S. dollars,
then you will recognize U.S. source ordinary income (that would not be treated as qualified dividends) or loss
upon a conversion of the yen into U.S. dollars equal to the difference between the U.S. dollars that you receive in
the conversion and the U.S. dollar amount that you included as dividend income.
Distributions in excess of current and accumulated earnings and profits, as determined for United States
federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the
ADSs and thereafter as capital gain. However, we do not expect to calculate earnings and profits in accordance
with United States federal income tax principles. Accordingly, you should expect to generally treat distributions
we make as dividends.
Subject to certain limitations, the Japanese tax withheld in accordance with the Treaty and paid over to
Japan will be creditable or deductible against your United States federal income tax liability. Special rules apply
in determining the foreign tax credit limitation with respect to dividends that are subject to the preferential tax
rates. To the extent a reduction or refund of the tax withheld is available to you under Japanese law or under the
Treaty, the amount of tax withheld that could have been reduced or that is refundable will not be eligible for
credit against your United States federal income tax liability.
Dividends will generally be income from sources outside the United States and will generally be
“passive” income for purposes of computing the foreign tax credit allowable to you. However, if (a) we are 50%
or more owned, by vote or value, by United States persons and (b) at least 10% of our earnings and profits are
attributable to sources within the United States, then for foreign tax credit purposes, a portion of our dividends
would be treated as derived from sources within the United States. With respect to any dividend paid for any
taxable year, the United States source ratio of our dividends for foreign tax credit purposes would be equal to the
portion of our earnings and profits from sources within the United States for such taxable year, divided by the
total amount of our earnings and profits for such taxable year.
Distributions of additional shares to you with respect to ADSs that are made as part of a pro rata
distribution to all of our shareholders generally will not be subject to United States federal income tax.
Capital Gains. If you are a U.S. holder and you sell or otherwise dispose of your ADSs, you will
recognize capital gain or loss for United States federal income tax purposes equal to the difference between the
U.S. dollar value of the amount that you realize and your tax basis, determined in U.S. dollars, in your ADSs.
Capital gain of a noncorporate U.S. holder is generally taxed at preferential rates where the property is held for
more than one year. The gain or loss will generally be income or loss from sources within the United States for
foreign tax credit limitation purposes.
PFIC Rules. We believe that ADSs should not currently be treated as stock of a PFIC for United States
federal income tax purposes and we do not expect to become a PFIC in the foreseeable future. However, this
conclusion is a factual determination that is made annually and thus may be subject to change. It is therefore
possible that we could become a PFIC in a future taxable year.
In general, if you are a U.S. holder, we will be a PFIC with respect to you if for any taxable year in
which you held our ADSs:
•
•
at least 75% of our gross income for the taxable year is passive income or
at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable
to assets that produce or are held for the production of passive income.
“Passive income” generally includes dividends, interest, gains from the sale or exchange of investment
property, rents and royalties (other than certain rents and royalties derived in the active conduct of a trade or
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business) and certain other specified categories of income. If a foreign corporation owns at least 25% by value of
the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its
proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the
other corporation’s income.
If we are treated as a PFIC, and you are a U.S. holder that did not make a mark-to-market election, as
described below, you will generally be subject to special rules with respect to:
•
•
any gain you realize on the sale or other disposition of your ADSs and
any excess distribution that we make to you (generally, any distributions to you during a single
taxable year, other than the taxable year in which your holding period in the ADSs begins, that are
greater than 125% of the average annual distributions received by you in respect of the ADSs
during the three preceding taxable years or, if shorter, your holding period for the ADSs that
preceded the taxable year in which you receive the distribution).
Under these rules:
•
•
•
•
the gain or excess distribution will be allocated ratably over your holding period for the ADSs,
the amount allocated to the taxable year in which you realized the gain or excess distribution or to
prior years before the first year in which we were a PFIC with respect to you will be taxed as
ordinary income,
the amount allocated to each other prior year will be taxed at the highest tax rate in effect for that
year, and
the interest charge generally applicable to underpayments of tax will be imposed in respect of the
tax attributable to each such year.
Special rules apply for calculating the amount of the foreign tax credit with respect
to excess
distributions by a PFIC.
If we are a PFIC in a taxable year and our ADSs are treated as “marketable stock” in such year, you may
make a mark-to-market election with respect to your ADSs. If you make this election, you will not be subject to
the PFIC rules described above. Instead, in general, you will include as ordinary income each year the excess, if
any, of the fair market value of your ADSs at the end of the taxable year over your adjusted basis in your ADSs.
You will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of your
ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of
previously included income as a result of the mark-to-market election). Your basis in the ADSs will be adjusted
to reflect any such income or loss amounts. Any gain that you recognize on the sale or other disposition of your
ADSs would be ordinary income and any loss would be an ordinary loss to the extent of the net amount of
previously included income as a result of the mark-to-market election and, thereafter, a capital loss.
Your ADSs will generally be treated as stock in a PFIC if we were a PFIC at any time during your
holding period in your ADSs, even if we are not currently a PFIC.
In addition, notwithstanding any election you make with regard to the ADSs, dividends that you receive
from us will not constitute qualified dividend income to you if we are a PFIC (or are treated as a PFIC with
respect to you) either in the taxable year of the distribution or the preceding taxable year. Dividends that you
receive that do not constitute qualified dividend income are not eligible for taxation at the preferential rates
applicable to qualified dividend income. Instead, you must include the gross amount of any such dividend paid
by us out of our accumulated earnings and profits (as determined for United States federal income tax purposes)
in your gross income, and it will be subject to tax at rates applicable to ordinary income.
If you own ADSs during any year that we are a PFIC with respect to you, you may be required to file
Internal Revenue Service (“IRS”) Form 8621.
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Japanese Taxation
The following is a general summary of the principal Japanese tax consequences (limited to national tax) to
owners of shares of our common stock, in the form of shares or ADSs, who are non-resident individuals of Japan
or who are non-Japanese corporations without a permanent establishment in Japan, collectively referred to in this
section as non-resident holders. The statements below regarding Japanese tax laws are based on the laws and
treaties in force and as interpreted by the Japanese tax authorities as of the date of this registration statement, and
are subject
tax treaties, conventions or agreements, or in the
interpretation of them, occurring after that date. This summary is not exhaustive of all possible tax considerations
that may apply to a particular investor, and potential investors are advised to satisfy themselves as to the overall
tax consequences of the acquisition, ownership and disposition of shares of our common stock, including,
specifically, the tax consequences under Japanese law, under the laws of the jurisdiction of which they are
resident and under any tax treaty, convention or agreement between Japan and their country of residence, by
consulting their own tax advisors.
to changes in applicable Japanese laws,
For the purpose of Japanese tax law and the tax treaty between the United States and Japan, a U.S. holder
of ADSs will generally be treated as the owner of the shares underlying the ADSs evidenced by the ADRs.
Generally, a non-resident holder of shares or ADSs will be subject to Japanese income tax collected by way
of withholding on dividends (meaning in this section distributions made from our retained earnings for the
Companies Act purposes) we pay with respect to shares of our common stock and such tax will be withheld prior
to payment of dividends. Stock splits generally are not subject to Japanese income or corporation taxes.
In the absence of any applicable tax treaty, convention or agreement reducing the maximum rate of
Japanese withholding tax or allowing exemption from Japanese withholding tax, the rate of the Japanese
withholding tax applicable to dividends paid by Japanese corporations on their shares of stock to non-resident
holders is generally 20.42% (or 20% for dividends due and payable on or after January 1, 2038) under Japanese
tax law. However, with respect to dividends paid on listed shares issued by a Japanese corporation (such as
shares or ADSs) to non-resident holders, other than any individual shareholder who holds 3% or more of the total
number of shares issued by the relevant Japanese corporation (to whom the aforementioned withholding tax rate
will still apply), the aforementioned withholding tax rate is reduced to (i) 15.315% for dividends due and payable
up to and including December 31, 2037 and (ii) 15% for dividends due and payable on or after January 1, 2038.
The withholding tax rates described above include the special reconstruction surtax (2.1% multiplied by the
original applicable withholding tax rate, i.e., 15% or 20%, as the case may be), which is imposed during the
period from and including January 1, 2013 to and including December 31, 2037, to fund the reconstruction from
the Great East Japan Earthquake.
If distributions were made from our capital surplus, rather than retained earnings, for the Companies Act
purposes, the portion of such distributions in excess of the amount corresponding to a pro rata portion of return of
capital as determined under Japanese tax laws would be deemed dividends for Japanese tax purposes, while the
rest would be treated as return of capital for Japanese tax purposes. The deemed dividend portion, if any, would
generally be subject to the same tax treatment as dividends as described above, and the return of capital portion
would generally be treated as proceeds derived from the sale of shares and subject to the same tax treatment as
sale of shares of our common stock as described below. Distributions made in consideration of repurchase by us
of our own shares or in connection with certain reorganization transactions will be treated substantially in the
same manner.
Japan has income tax treaties whereby the withholding tax rate (including the special reconstruction surtax)
may be reduced, generally to 15%, for portfolio investors, with, among others, Belgium, Canada, Denmark,
Finland, Germany, Ireland, Italy, Luxembourg, New Zealand, Norway, Singapore and Spain, while the income
tax treaties with, among others, Australia, France, Hong Kong, the Netherlands, Portugal, Sweden, Switzerland,
the United Arab Emirates, the United Kingdom and the United States generally reduce the withholding tax rate to
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10% for portfolio investors. In addition, under the income tax treaty between Japan and the United States,
dividends paid to pension funds which are qualified U.S. residents eligible to enjoy treaty benefits are exempt
from Japanese income taxation by way of withholding or otherwise unless the dividends are derived from the
carrying on of a business, directly or indirectly, by the pension funds. Similar treatment is applicable to dividends
paid to pension funds under the income tax treaties between Japan and the Netherlands, Switzerland and the
United Kingdom. Under Japanese tax law, any reduced maximum rate applicable under a tax treaty shall be
available when such maximum rate is below the rate otherwise applicable under the Japanese tax law referred to
in the second preceding paragraph with respect to the dividends to be paid by us on our shares or ADSs.
Non-resident holders of our shares who are entitled under an applicable tax treaty to a reduced rate of, or
exemption from, Japanese withholding tax on any dividends on our shares, in general, are required to submit,
through the withholding agent to the relevant tax authority prior to the payment of dividends, an Application
Form for Income Tax Convention regarding Relief from Japanese Income Tax and Special Income Tax for
Reconstruction on Dividends together with any required forms and documents. A standing proxy for a
non-resident holder of shares of our common stock or ADSs may be used in order to submit the application on a
non-resident holder’s behalf. In this regard, a certain simplified special filing procedure is available for
non-resident holders to claim treaty benefits of reduction of or exemption from Japanese withholding tax, by
submitting a Special Application Form for Income Tax Convention regarding Relief from Japanese Income Tax
and Special Income Tax for Reconstruction on Dividends of Listed Stock, together with any required forms or
documents. If the depositary needs investigation to identify whether any non-resident holders of ADSs are
entitled to claim treaty benefits of exemption from or reduction of Japanese withholding tax, the depositary or its
agent submits an application form before payment of dividends so that the withholding cannot be made in
connection with such holders for eight months after the record date concerning such payment of dividends. If it is
proved that such holders are entitled to claim treaty benefits of exemption from or reduction of Japanese
withholding tax within the foregoing eight-month period, the depositary or its agent submits another application
form together with certain other documents so that such holder can be subject to exemption from or reduction of
Japanese withholding tax. To claim this reduced rate or exemption, such non-resident holder of ADSs will be
required to file a proof of taxpayer status, residence and beneficial ownership, as applicable, and to provide other
information or documents as may be required by the depositary. Non-resident holders who are entitled, under any
applicable tax treaty, to a reduced rate of Japanese withholding tax below the rate otherwise applicable under
Japanese tax law, or exemption therefrom, as the case may be, but fail to submit the required application in
advance may nevertheless be entitled to claim a refund from the relevant Japanese tax authority of withholding
taxes withheld in excess of the rate under an applicable tax treaty (if such non-resident holders are entitled to a
reduced treaty rate under the applicable tax treaty) or the full amount of tax withheld (if such non-resident
holders are entitled to an exemption under the applicable tax treaty), as the case may be, by complying with a
certain subsequent filing procedure. We do not assume any responsibility to ensure withholding at the reduced
treaty rate, or exemption therefrom, for shareholders who would be eligible under an applicable tax treaty but
who do not follow the required procedures as stated above.
Gains derived from the sale of our shares or ADSs outside Japan by a non-resident holder that is a portfolio
investor will generally not be subject to Japanese income or corporation taxes. Japanese inheritance and gift
taxes, at progressive rates, may be payable by an individual who has acquired from another individual our shares
or ADSs as a legatee, heir or donee, even if none of the acquiring individual, the decedent or the donor is a
Japanese resident.
F.
Dividends and Paying Agents.
Under our Articles of Incorporation, the record date for annual dividends is March 31 and the record
date for interim dividends is September 30. Annual dividends and interim dividends can be declared through the
resolutions of the board of directors.
Dividends payable to non-resident
individuals of Japan or non-Japanese corporations without a
permanent establishment in Japan are generally subject to Japanese withholding tax. See “Item 10. Additional
Information–E. Taxation–Japanese Taxation.”
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G.
Statement by Experts.
The consolidated financial statements of Takeda as of March 31, 2018 and 2017, and for each of the
years in the three-year period ended March 31, 2018, have been included in this registration statement in reliance
upon the report of KPMG AZSA LLC, independent registered public accounting firm, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and auditing. See also Item 1. C and Exhibit
15.1 to this registration statement.
The consolidated financial statements of Shire plc as of December 31, 2017 and 2016, and for each of
the three years in the period ended December 31, 2017, included in this registration statement, and the related
financial statement schedule, have been audited by Deloitte LLP, an independent registered public accounting
firm, as stated in their report appearing herein and elsewhere in this registration statement. Such financial
statements and financial statement schedule have been so included in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing. See also Exhibit 15.2 to this registration statement.
Independence of KPMG AZSA LLC
During the fiscal year ended March 31, 2018, member firms of KPMG International Cooperative
provided legal services, corporate secretarial services and human resources services to certain of our subsidiaries
as well as otherwise permissible non-audit services under a contingent fee arrangement to one of our subsidiaries,
which are prohibited under SEC independence rules. Such services and contingent fee arrangement were
terminated before the engagement letter for the PCAOB audit was executed. Fees for these services were
teams that performed the
insignificant
impermissible services and services that had an impermissible fee arrangement did not participate in the audit of
our consolidated financial statements.
to the respective entities and to KPMG. The KPMG engagement
While providing these non-audit services is not permitted under SEC independence rules, KPMG AZSA
LLC has advised our management and our audit and supervisory committee that these services do not impact the
firm’s ability to apply objective and impartial judgment on all matters encompassed within its audit of us for the
fiscal year ended March 31, 2018. Our audit and supervisory committee concurs that these non-audit services do
not impact the firm’s ability to apply objective and impartial judgment on all matters encompassed within its
audit of us for the fiscal year ended March 31, 2018.
H.
Documents on Display.
We have filed with the SEC on this registration statement on Form 20-F under the Exchange Act with
respect to the ADSs. You may review a copy of this registration statement without charge at the SEC’s public
reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also get copies of all or
any portion of this registration statement from the public reference room, the regional offices or by calling the
SEC at 1-800-SEC-0330 or by writing the SEC upon payment of a prescribed fee.
Upon effectiveness of this registration statement, we will be subject to the information requirements of
the Exchange Act and, in accordance therewith, we will file annual reports on Form 20-F and furnish other
reports and information on Form 6-K with the SEC. These reports and other information can be inspected at the
public reference room at the SEC listed above. You can also obtain copies of such material from the public
reference room, the regional offices or by calling or writing the SEC upon payment of a prescribed fee. The SEC
also maintains a web site at www.sec.gov that contains reports and other information regarding registrants that
file electronically with the SEC. As a foreign private issuer, we are exempt from the rules under the Exchange
Act prescribing the furnishing and content of proxy statements to shareholders.
I.
Subsidiary Information.
Not applicable.
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Item 11. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks primarily from changes in foreign currency exchange rates, interest rate
changes and changes in the value of our investment securities. The information required under this Item 11 is set
forth in Note “27. Financial Instruments” to the accompanying consolidated financial statements of Takeda.
Item 12. Description of Securities Other Than Equity Securities
A.
Debt Securities
Not applicable.
B.
Warrants and Rights
Not applicable.
C.
Other Securities
Not applicable.
D.
American Depositary Shares
The Bank of New York Mellon, as depositary, will register and deliver the ADSs. Each ADS represents
one-half of one share of our common stock deposited with Sumitomo Mitsui Banking Corporation, as custodian
for the depositary in Japan. Each ADS will also represent any other securities, cash or other property which may
be held by the depositary from time to time. The deposited shares of our common stock, together with any other
securities, cash or other property held by the depositary are referred to as the “deposited securities.” The
depositary’s office at which the ADSs will be administered and its principal executive office are located at 240
Greenwich Street, New York, New York 10286.
Holders of ADSs may hold ADSs either: (i) directly (a) by having an ADR, which is a certificate
evidencing a specific number of ADSs, registered in their name, or (b) by having uncertificated ADSs registered
in their name; or (ii) indirectly by holding a security entitlement in ADSs through a broker or other financial
institution that is a direct or indirect participant in DTC. Holders of ADSs who hold ADSs directly are registered
ADS holders, also referred to as “ADS holders.” This description applies to such registered ADS holders only. If
a holder of ADSs holds the ADSs indirectly, he or she must rely on the procedures of his or her broker or other
financial institution to assert the rights of ADS holders described herein. Holders of ADSs who hold their ADSs
indirectly should consult with their respective brokers or financial
those
procedures are.
institutions to determine what
ADS holders who hold uncertificated ADSs will receive statements from the depositary confirming their
holdings.
We will not
treat ADS holders as shareholders (for non-tax purposes), and they will not have
shareholder rights. Japanese law governs the shareholder rights attached to the shares of our common stock. The
depositary will be treated as the holder of the shares of our common stock underlying the ADSs. The deposit
agreement between us, the depositary, ADS holders and all other persons indirectly or beneficially holding ADSs
will set out the rights of ADS holders as well as the rights and obligations of the depositary. New York law
governs the deposit agreement and the ADSs.
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The following is a summary of the material provisions of the deposit agreement. For more complete
information, see the form of which is included as an exhibit to this registration statement.
Dividends and other distributions
How will holders of ADSs receive dividends and other distributions on the shares of our common stock?
The depositary has agreed to pay or distribute to ADS holders the cash dividends or other distributions it
or the custodian receives on the shares of our common stock or other deposited securities, upon payment or
deduction of its fees and expenses. ADS holders will receive these distributions in proportion to the number of
shares of our common stock their ADSs represent.
Cash. The depositary will convert any cash dividend or other cash distribution we pay on the shares of our
common stock into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the
United States. If that is not possible or if any government approval is needed and cannot be obtained, the
deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to
whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS
holders who have not been paid. It will not invest the foreign currency and it will not be liable for any
interest.
Before making a distribution, any withholding taxes or other governmental charges that must be paid will be
deducted. See “Item 10. Additional Information—E. Taxation.” The depositary will distribute only whole
U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates
fluctuate during a time when the depositary cannot convert the foreign currency, ADS holders may lose
some of the value of the distribution.
Shares of our common stock. The depositary may distribute additional ADSs representing any shares of
our common stock distributed by us as a dividend or free distribution. The depositary will only distribute
whole ADSs. It will sell shares of our common stock which would require it to deliver a fraction of an ADS
(or ADSs representing those shares of our common stock) and distribute the net proceeds in the same way as
it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also
represent the new shares of our common stock. The depositary may sell a portion of the distributed shares of
our common stock (or ADSs representing those shares of our common stock) sufficient to pay its fees and
expenses in connection with that distribution.
Rights to purchase additional shares of our common stock. If we offer holders of shares of our common
stock any rights to subscribe for additional shares of our common stock or any other rights, the depositary
may: (i) exercise those rights on behalf of ADS holders; (ii) distribute those rights to ADS holders; or (iii)
sell those rights and distribute the net proceeds to ADS holders, in each case after deduction or upon
payment of its fees and expenses. To the extent the depositary does not do any of those things, it will allow
the rights to lapse. In that case, ADS holders will receive no value for them. The depositary will exercise or
distribute rights only if we ask it to and provides satisfactory assurances to the depositary that it is lawful to
do so. If the depositary will exercise rights, it will purchase the securities to which the rights relate and
distribute those securities or, in the case of new shares of our common stock, new ADSs representing the
new shares of our common stock to subscribing ADS holders, but only if ADS holders have paid the
exercise price to the depositary. U.S. securities laws may restrict the ability of the depositary to distribute
rights or ADSs or other securities issued on exercise of rights to all or certain ADS holders, and the
securities distributed may be subject to restrictions on transfer.
Other Distributions. The depositary will send to ADS holders anything else we distribute on deposited
securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the
depositary has a choice either: (i) to sell what we distributed and distribute the net proceeds, in the same
way as it does with cash; or (ii) to hold what we distributed, in which case ADSs will also represent the
newly distributed property. However, the depositary is not required to distribute any securities (other than
ADSs) to ADS holders unless it receives satisfactory evidence from us that it is lawful to make that
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distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its
fees and expenses in connection with that distribution. U.S. securities laws may restrict the ability of the
depositary to distribute securities to all or certain ADS holders, and the securities distributed may be subject
to restrictions on transfer.
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution
available to any ADS holders. We have no obligation to register ADSs, shares of our common stock, rights
or other securities under the U.S. Securities Act. We also have no obligation to take any other action to
permit the distribution of ADSs, shares of our common stock, rights or anything else to ADS holders. This
means that ADS holders may not receive the distributions we make on shares of our common stock or any
value for them if it is illegal or impractical for us to make them available to the holders of ADSs.
Deposit, withdrawal and cancellation
How are ADSs issued?
The depositary will deliver ADSs if holders of shares of our common stock or their respective brokers
deposit shares of our common stock with the custodian. Upon payment of its fees and expenses and of any taxes
or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number
of ADSs in the names such holder requests and will deliver the ADSs to or upon the order of the person or
persons that made the deposit.
How can ADS holders withdraw the deposited securities?
ADS holders may surrender their ADSs to the depositary for the purpose of withdrawal. Upon payment
of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the
depositary will deliver the shares of our common stock and any other deposited securities underlying the ADSs to
the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at the request, risk and
expense of the requesting ADS holder, the depositary will deliver the deposited securities at its office, if feasible.
However, the depositary is not required to accept surrender of ADSs to the extent it would require delivery of a
fraction of a deposited share or other security. The depositary may charge ADS holders a fee and its expenses for
instructing the custodian regarding delivery of deposited securities.
How do ADS holders interchange between certificated ADSs and uncertificated ADSs?
An ADS holder may surrender his or her ADR to the depositary for the purpose of exchanging his or her
ADR for uncertificated ADSs. The depositary will cancel that ADR and will send to the ADS holder a statement
confirming that the ADS holder is the registered holder of uncertificated ADSs. Upon receipt by the depositary of
a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated
ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder a ADR evidencing those
ADSs.
Voting rights
How do ADS holders vote?
ADS holders may instruct the depositary how to vote the number of deposited shares of our common stock
their ADSs represent. If we request the depositary to solicit the voting instructions of the ADS holders (however, we
are not required to do so), the depositary will notify ADS holders of a shareholders’ meeting and send or make
voting materials available to them. Those materials will describe the matters to be voted on and explain how ADS
holders may instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a
date set by the depositary. The depositary will endeavor, as far as practical, subject to the laws of Japan and the
provisions of the our Articles of Incorporation or similar documents, to vote or to have its agents vote the shares of
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our common stock or other deposited securities as instructed by ADS holders. If we do not request the depositary to
solicit the voting instructions of the ADS holders, ADS holders can still send voting instructions and, in that case,
the depositary may try to vote as the ADS holders instruct, but it is not required to do so.
Except by instructing the depositary as described above, ADS holders will not be able to exercise voting
rights unless they surrender their ADSs and withdraw the underlying shares of our common stock. However, ADS
holders may not know about the meeting enough in advance to withdraw the underlying shares of our common
stock. In any event, the depositary will not exercise any discretion in voting deposited securities and it will only
vote or attempt to vote as instructed or as described in the following sentence. If: (i) we asked the depositary to
solicit the instructions of the ADS holders at least 28 days before the meeting date; (ii) the depositary does not
receive voting instructions from an ADS holder by the specified date; and (iii) we confirm to the depositary that,
as of the instruction cut-off date:
•
•
•
we wish to receive a proxy to vote uninstructed shares of our common stock;
we reasonably do not know of any substantial shareholder opposition to a particular question; and
the particular question is not materially adverse to the interests of shareholders,
the depositary will consider such ADS holder to have authorized and directed it to give, and it will give, a
discretionary proxy to a person designated by us to vote the number of deposited securities represented by the
ADSs of such ADS holder as to that question. However, such discretionary proxy will not apply in relation to any
ADSs held by CREST Depository Limited and represented by CREST depository interests (“CDIs”).
We cannot assure ADS holders that they will receive the voting materials in time to ensure that they can
instruct the depositary to vote their shares of our common stock. In addition, the depositary and its agents are not
responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This
means that ADS holders may not be able to exercise voting rights and there may be nothing ADS holders can do
if their shares of our common stock are not voted as requested.
Holders of CDIs representing ADSs may not receive notices of our shareholder meetings and will not be
able to instruct the depositary how to vote.
If we will request the depositary to send a notice regarding a shareholder meeting, we will endeavor to
give the depositary at least 30 days’ prior notice of the shareholder meeting and the details of the matters to be
voted upon, unless such advance notice is not possible because less than 30 days’ notice of the meeting has been
given in accordance with our Articles of Incorporation and Japanese law, in which case we will provide to the
depositary such advance notice of the shareholder meeting as may be possible under the circumstances.
Fees and expenses
Persons depositing or withdrawing shares of our common
stock or ADS holders must pay:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
For:
Issue of ADSs,
including issues resulting from a
distribution of shares of our common stock or rights
or other property
Cancellation of ADSs for the purpose of withdrawal,
including if the deposit agreement terminates
$0.05 (or less) per ADS
Any cash distribution to ADS holders
A fee equivalent to the fee that would be payable if
securities distributed to ADS holders had been shares of
our common stock and the shares of our common stock
had been deposited for issuance of ADSs
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Distribution of securities distributed to holders of
deposited securities
are
distributed by the depositary to ADS holders
(including rights)
that
Persons depositing or withdrawing shares of our common
stock or ADS holders must pay:
For:
$0.05 (or less) per ADS per calendar year
Depositary services
Registration or transfer fees
Expenses of the depositary
Transfer and registration of shares of our common
stock on our share register to or from the name of the
depositary or its agent when persons deposit or
withdraw shares of our common stock
Cable and facsimile transmissions (when expressly
provided in the deposit agreement)
Converting foreign currency to U.S. dollars
Taxes and other governmental charges the depositary or
the custodian has to pay on any ADSs or shares of our
common stock underlying ADSs, such as stock transfer
taxes, stamp duty or withholding taxes
As necessary
Any charges incurred by the depositary or its agents for
servicing the deposited securities
As necessary
The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing
shares of our common stock or surrendering ADSs for the purpose of withdrawal or from intermediaries acting
for them. The depositary collects fees for making distributions to investors by deducting those fees from the
amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect
its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by
charging the book-entry system accounts of participants acting for them. The depositary may collect any of its
fees by deduction from any cash distribution payable (or by selling a portion of securities or other property
distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide
fee-attracting services until its fees for those services are paid.
From time to time, the depositary may make payments to us to reimburse us for costs and expenses
generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for
services provided to us by the depositary or share revenue from the fees collected from ADS holders. In
performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency
dealers or other service providers that are owned by or affiliated with the depositary and that may earn or share
fees, spreads or commissions.
The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as
principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and
earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The
revenue is based on, among other things, the difference between the exchange rate assigned to the currency
conversion made under the deposit agreement and the rate that the depositary or its affiliate receives when
buying or selling foreign currency for its own account. The depositary makes no representation that the exchange
rate used or obtained in any currency conversion under the deposit agreement will be the most favourable rate
that could be obtained at the time or that the method by which that rate will be determined will be the most
favourable to ADS holders, subject
the deposit agreement. The
methodology used to determine exchange rates used in currency conversions is available upon request.
to the depositary’s obligations under
Payment of taxes
ADS holders will be responsible for any taxes or other governmental charges payable on their ADSs or
on the deposited securities represented by any of their ADSs. The depositary may refuse to register any transfer
of ADSs or allow an ADS holder to withdraw the deposited securities represented by his or her ADSs until those
taxes or other charges are paid. It may apply payments owed to such ADS holder or sell deposited securities
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represented by such ADS holder’s ADSs to pay any taxes owed and such ADS holder will remain liable for any
deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to
reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has
paid the taxes.
Tender and exchange offers; redemption, replacement or cancellation of deposited securities
The depositary will not tender deposited securities in any voluntary tender or exchange offer unless
instructed to do so by an ADS holder surrendering ADSs and subject to any conditions or procedures the
depositary may establish.
If deposited securities are redeemed for cash in a transaction that is mandatory for the depositary as a
holder of deposited securities, the depositary will call for surrender of a corresponding number of ADSs and
distribute the net redemption money to the holders of called ADSs upon surrender of those ADSs.
If there is any change in the deposited securities such as a sub-division, combination or other
reclassification, or any merger, consolidation, recapitalisation or reorganisation affecting the issuer of deposited
securities in which the depositary receives new securities in exchange for or in lieu of the old deposited
securities,
the depositary will hold those replacement securities as deposited securities under the deposit
agreement. However, if the depositary decides it would not be lawful and practical to hold the replacement
securities because those securities could not be distributed to ADS holders or for any other reason, the depositary
may instead sell the replacement securities and distribute the net proceeds upon surrender of the ADSs.
If there is a replacement of the deposited securities and the depositary will continue to hold the
replacement securities, the depositary may distribute ADSs representing the new deposited securities or ask
holders of ADRs to surrender their outstanding ADRs in exchange for new ADRs identifying the new deposited
securities.
If there are no deposited securities underlying the ADSs, including if the deposited securities are
cancelled, or if the deposited securities underlying the ADSs have become apparently worthless, the depositary
may call for the surrender of those ADSs or cancel those ADSs upon notice to the ADS holders.
Amendment and termination
How may the deposit agreement be amended?
We may agree with the depositary to amend the deposit agreement and the ADRs without the consent of
ADS holders for any reason. If an amendment adds or increases fees or charges, except for taxes and other
governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or
similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs
until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes
effective, ADS holders will be considered, by continuing to hold their ADSs, to agree to the amendment and to
be bound by the ADRs and the deposit agreement as amended.
How may the deposit agreement be terminated?
The depositary will initiate termination of the deposit agreement if we instruct it to do so. The
depositary may initiate termination of the deposit agreement if:
•
90 days have passed since the depositary told us it wants to resign but a successor depositary has
not been appointed and accepted its appointment;
• We delist ADSs from an exchange on which they were listed and do not list the ADSs on another
exchange;
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• We appear to be insolvent or enters insolvency proceedings;
•
•
•
all or substantially all the value of the deposited securities has been distributed either in cash or in
the form of securities;
there are no deposited securities underlying the ADSs or the underlying deposited securities have
become apparently worthless; or
there has been a replacement of deposited securities.
If the deposit agreement will terminate, the depositary will notify ADS holders at least 90 days before
the termination date. At any time after the termination date, the depositary may sell the deposited securities and
the depositary will hold the proceeds it received from such sale, as well as any other cash it is holding under the
deposit agreement, and without liability for interest, for the pro rata benefit of the ADS holders that have not
surrendered their ADSs. Normally, the depositary will sell the deposited securities as soon as practicable after the
termination date.
After the termination date and before the depositary sells the deposited securities, ADS holders can still
surrender their ADSs and receive delivery of deposited securities, except that the depositary may refuse to accept
a surrender for the purpose of withdrawing deposited securities or reverse previously accepted surrenders of that
kind if it would interfere with the selling process. The depositary may refuse to accept a surrender for the purpose
of withdrawing sale proceeds until all the deposited securities have been sold. The depositary will continue to
collect distributions on deposited securities, but, after the termination date, the depositary is not required to
register any transfer of ADSs or distribute any dividends or other distributions on deposited securities to the ADS
holders (until they surrender their ADSs) or give any notices or perform any other duties under the deposit
agreement except as described in this paragraph.
Limitations on obligations and liability
Limits on our obligations and the obligations of the depositary; Limits on liability to ADS holders
The deposit agreement expressly limits our obligations and the obligations of the depositary. It also
limits our liability and the liability of the depositary. We and the depositary:
•
•
•
•
•
are only obligated to take the actions specifically set forth in the deposit agreement without
negligence or bad faith, and the depositary will not be a fiduciary or have any fiduciary duty to
holders of ADSs;
are not liable if we or the depositary is prevented or delayed by law or by events or circumstances
beyond our or the depositary’s ability to prevent or counteract with reasonable care or effort from
performing our or the depositary’s obligations under the deposit agreement;
are not liable if we or the depositary exercises discretion permitted under the deposit agreement;
are not liable for the inability of any ADS holder to benefit from any distribution on deposited
securities that is not made available to ADS holders under the terms of the deposit agreement, or for
any special, consequential or punitive damages for any breach of the terms of the deposit
agreement;
have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the
deposit agreement on behalf of ADS holders or on behalf of any other person;
• may rely upon any documents we believe or the depositary believes in good faith to be genuine and
to have been signed or presented by the proper person;
•
are not liable for the acts or omissions of any securities depository, clearing agency or settlement
system; and
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•
the depositary has no duty to make any determination or provide any information as to our tax
status, or any liability for any tax consequences that may be incurred by ADS holders as a result of
owning or holding ADSs or be liable for the inability or failure of an ADS holder to obtain the
benefit of a foreign tax credit, reduced rate of withholding or refund of amounts withheld in respect
of tax or any other tax benefit.
In the deposit agreement, we and the depositary agree to indemnify each other under certain
circumstances.
Jury Trial Waiver
The deposit agreement provides that, to the extent permitted by law, ADS holders waive the right to a
jury trial of any claim they may have against us or the depositary arising out of or relating to our shares, the
ADSs or the deposit agreement, which may include any claim under the U.S. federal securities laws. See “Item 3.
Key Information—D. Risk Factors—Risks Relating to the ADSs—ADS holders may not be entitled to a jury trial
with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the
plaintiff(s) in any such action.”
Requirements for depositary actions
Before the depositary will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit
withdrawal of shares of our common stock, the depositary may require:
•
•
•
payment of stock transfer or other taxes or other governmental charges and transfer or registration
fees charged by third parties for the transfer of any shares of our common stock or other deposited
securities;
satisfactory proof of the identity and genuineness of any signature or other information it deems
necessary; and
compliance with regulations it may establish, from time to time, consistent with the deposit
agreement, including presentation of transfer documents.
The depositary may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the
depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so.
Rights of ADS holders to receive the shares of our common stock underlying their ADSs
ADS holders have the right to cancel their ADSs and withdraw the underlying shares of our common
stock at any time except:
•
•
•
when temporary delays arise because: (i) the depositary has closed its transfer books or we have
closed our transfer books; (ii) the transfer of shares of our common stock is blocked to permit
voting at a shareholders’ meeting; or (iii) we are paying a dividend on shares of our common stock;
when withdrawing ADS holders owe money to pay fees, taxes and similar charges; or
when it is necessary to prohibit withdrawals in order to comply with any laws or governmental
regulations that apply to ADSs or to the withdrawal of shares of our common stock or other
deposited securities.
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Direct Registration System
In the deposit agreement, all parties to the deposit agreement acknowledge that the Direct Registration
System, also referred to as DRS, and Profile Modification System, also referred to as Profile, will apply to the
ADSs. DRS is a system administered by DTC that facilitates interchange between registered holding of
uncertificated ADSs and holding of security entitlements in ADSs through DTC and a DTC participant. Profile is
a feature of DRS that allows a DTC participant, claiming to act on behalf of a registered holder of uncertificated
ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those
ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorisation from
the ADS holder to register that transfer.
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In connection with and in accordance with the arrangements and procedures relating to the DRS/Profile
system, the parties to the deposit agreement understand that the depositary will not determine whether the DTC
participant that is claiming to be acting on behalf of an ADS holder in requesting registration of transfer and
delivery as described in the paragraph above has the actual authority to act on behalf of the ADS holder
(notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties
agree that the depositary’s reliance on and compliance with instructions received by the depositary through the
DRS/Profile system and in accordance with the deposit agreement will not constitute negligence or bad faith on
the part of the depositary.
Shareholder communications; inspection of register of holders of ADSs
The depositary will make available for the inspection of ADS holders at its office all communications
that it receives from us as a holder of deposited securities that we make generally available to holders of
deposited securities. The depositary will send ADS holders copies of those communications or otherwise make
those communications available to ADS holders if we ask it to. ADS holders have a right to inspect the register
of ADS holders, but not for the purpose of contacting those holders about a matter unrelated to our business or
the ADSs.
Item 13. Defaults, Dividend Arrearages and Delinquencies.
Not applicable.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
Not applicable.
Item 15. Controls and Procedures.
Not applicable.
Item 16A. Audit Committee Financial Expert.
Not applicable.
Item 16B. Code of Ethics.
Not applicable.
Item 16C. Principal Accountant Fees and Services.
Not applicable.
Item 16D. Exemptions from the Listing Standards for Audit Committees.
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
Not applicable.
Item 16F. Change in Registrant’s Certifying Accountant.
Not applicable.
187
Item 16G. Corporate Governance.
Not applicable.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 17. Financial Statements
In lieu of responding to this item, we have responded to Item 18 of this registration statement.
Item 18. Financial Statements
The information required by this item is set forth in our consolidated financial statements and the
consolidated financial statements of Shire included in this registration statement.
Item 19. Exhibits
Exhibit
No.
Exhibit
Exhibit 1.1
Exhibit 1.2
Exhibit 1.3
Exhibit 2.1
Exhibit 8.1
Exhibit 10.1*
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 10.6
Articles of Incorporation of Takeda Pharmaceutical Company Limited (English Translation)
Regulations of the Board of Directors of Takeda Pharmaceutical Company Limited (English
Translation)
Share Handling Regulations of Takeda Pharmaceutical Company Limited (English
Translation)
Form of Amended and Restated Deposit Agreement among the Takeda Pharmaceutical
Company Limited, The Bank of New York Mellon, as Depositary, and all Owners and Holders
from time to time of American Depositary Shares issued thereunder
List of subsidiaries of Takeda Pharmaceutical Company Limited, as of March 31, 2018: See
“Item 4. Information on the Company—C. Organizational Structure.”
Collaboration Agreement dated December 14, 2009 by and between Seattle Genetics, Inc. and
Millennium Pharmaceuticals, Inc.
and Plan of Merger between ARIAD Pharmaceuticals,
Inc., Takeda
Agreement
Pharmaceutical Company Limited and Kiku Merger Co., Inc., dated January 8, 2017
(incorporated by reference to Exhibit 2.1 to the Current Report of ARIAD Pharmaceuticals,
Inc. on Form 8-K filed with the SEC on January 10, 2017)
Offer and Support Agreement between Takeda Pharmaceutical Company Limited and TiGenix
NV, dated January 5, 2018 (incorporated by reference to Exhibit 4.23 to the Annual Report on
Form 20-F of TiGenix NV for the fiscal year ended December 31, 2017, filed with the SEC on
April 16, 2018)
Co-operation Agreement between Takeda Pharmaceutical Company Limited and Shire plc,
dated May 8, 2018 (incorporated by reference to Exhibit 2.1 to the Current Report of Shire plc
on Form 8-K filed with the SEC on May 9, 2018)
364-Day Bridge Credit Agreement among Takeda Pharmaceutical Company Limited, as
Borrower, Various Financial Institutions, as Lenders, and JPMorgan Chase Bank, N.A., as
Administrative Agent, dated as of May 8, 2018
Amendment No. 1, dated as of June 8, 2018, to the 364-Day Bridge Credit Agreement among
Takeda Pharmaceutical Company Limited, as Borrower, Various Financial Institutions, as
Lenders, and JPMorgan Chase Bank, N.A., as Administrative Agent, dated as of May 8, 2018
188
Exhibit
No.
Exhibit 10.7
Exhibit 10.8
Exhibit 10.9
Exhibit 10.10
Exhibit 10.11
Exhibit 10.12
Exhibit 10.13
Exhibit
Term Loan Credit Agreement among Takeda Pharmaceutical Company Limited, as Borrower,
Various Financial Institutions, as Lenders, and JPMorgan Chase Bank, N.A., as Administrative
Agent, dated as of June 8, 2018
Amendment No. 2, dated as of October 26, 2018, to the 364-Day Bridge Credit Agreement
among Takeda Pharmaceutical Company Limited, as Borrower, Various Financial Institutions,
as Lenders, and JPMorgan Chase Bank, N.A., as Administrative Agent, dated as of May 8,
2018
Senior Short-Term Loan Facility Agreement, dated as of October 26, 2018, among Takeda
Pharmaceutical Company Limited, as Borrower, Various Financial Instituions, as Lenders, and
Sumitomo Mitsui Banking Corporation, as Administrative Agent
English translation of Subordinated Syndicated Loan Agreement, dated as of October 26,
2018, among Takeda Pharmaceutical Company Limited, as Borrower, Mizuho Bank, Ltd., as
Arranger and Bookrunner, The Norinchukin Bank and Sumitomo Mitsui Trust Bank, Limited,
as Arrangers, Various Financial Institutions, as Lenders, and Sumitomo Mitsui Banking
Corporation, as Administrative Agent.
Fiscal Agency Agreement, dated as of November 21, 2018, between Takeda Pharmaceutical
Company Limited and MUFG Bank, Ltd., as Fiscal Agent.
Indenture, dated as of November 26, 2018, between Takeda Pharmaceutical Company Limited
and MUFG Union Bank, N.A., as Trustee.
Registration Rights Agreement, dated as of November 26, 2018, among Takeda
Pharmaceutical Company Limited, J.P. Morgan Securities LLC, SMBC Nikko Securities
America, Inc., Morgan Stanley MUFG Securities Co., Ltd., Mizuho Securities USA LLC and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several initial
purchasers.
Exhibit 10.14
Loan Agreement, dated December 3, 2018, between Takeda Pharmaceutical Company Limited
and Japan Bank for International Cooperation.
Exhibit 15.1
Consent of KPMG AZSA LLC
Exhibit 15.2
Consent of Deloitte LLP
Exhibit 99.1
Unaudited Condensed Interim Consolidated Financial Statements of Takeda Pharmaceutical
Company Limited as of March 31, 2018 and September 30, 2018 and for the three months and
six months periods ended September 30, 2017 and 2018
*
Pursuant to a request for confidential treatment, portions of this Exhibit have been redacted from the
publicly filed document and have been furnished separately to the SEC as required by Rule 24b-2 under the
Securities Exchange Act of 1934.
189
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it
has duly caused and authorized the undersigned to sign this registration statement on its behalf.
SIGNATURES
TAKEDA PHARMACEUTICAL COMPANY LIMITED
By: /s/ Costa Saroukos
Name: Costa Saroukos
Title: Chief Financial Officer
Date: December 17, 2018
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND OTHER FINANCIAL
INFORMATION
Audited Consolidated Financial Statements of Takeda Pharmaceutical Company Limited . . . . . . . . .
Audited Consolidated Financial Statements of Shire plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unaudited Consolidated Financial Statements of Shire plc
Unaudited Pro Forma Condensed Combined Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-2
S-1
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1
P-1
Page
F-1
TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIES
Index
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income for the Years ended March 31, 2016, 2017 and 2018 . . . . . . . . . .
Consolidated Statements of Income and Other Comprehensive Income for the Years ended
March 31, 2016, 2017 and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Financial Position as of March 31, 2017 and 2018 . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Equity for the Years ended March 31, 2016, 2017 and
Page
F-3
F-4
F-5
F-6-F-7
F-8-F-10
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Years ended March 31, 2016, 2017 and 2018 . . . . . .
F-11
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12-F-77
F-2
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Takeda Pharmaceutical Company Limited:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Takeda Pharmaceutical
Company Limited and subsidiaries (the “Company”) as of March 31, 2018 and 2017, the related consolidated
statements of income, income and other comprehensive income, changes in equity, and cash flows for each of the
years in the three-year period ended March 31, 2018, and the related notes (collectively, the consolidated
financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company as of March 31, 2018 and 2017, and the results of its operations and its
cash flows for each of the years in the three-year period ended March 31, 2018, in conformity with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these consolidated financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing
standards generally accepted in the United States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for
our opinion.
/s/ KPMG AZSA LLC
We have served as the Company’s auditor since 2007.
Tokyo, Japan
September 10, 2018
F-3
TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIES
Consolidated Statements of Income for the Year Ended March 31,
Note
2016
2017
2018
JPY (millions)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . .
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . .
Amortization and impairment losses on intangible
assets associated with products . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share of loss of investments accounted for using the equity
4
12
5
5
6
6
¥1,807,378
(535,180)
(650,770)
(335,772)
¥1,732,051
(558,755)
(619,061)
(312,303)
¥1,770,531
(495,921)
(628,106)
(325,441)
(131,787)
21,345
(44,386)
130,828
21,645
(31,931)
(156,717)
143,533
(72,881)
155,867
12,274
(23,249)
(122,131)
169,412
(126,555)
241,789
39,543
(31,928)
method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
(3)
(1,546)
(32,199)
Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attributable to:
Owners of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share (JPY)
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
8
8
8
8
8
¥
¥
¥
¥
120,539
(37,059)
143,346
(27,833)
217,205
(30,497)
83,480
¥ 115,513
¥ 186,708
80,166
3,314
¥ 114,940
573
¥ 186,886
(178)
83,480
¥ 115,513
¥ 186,708
102.26
101.71
¥
147.15
146.26
¥
239.35
237.56
See accompanying notes to consolidated financial statements.
F-4
TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIES
Consolidated Statements of Income and Other Comprehensive Income for the Year Ended March 31,
Net profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss)
Items that will not be reclassified to profit or loss:
JPY (millions)
Note
2016
2017
2018
¥ 83,480
¥115,513
¥186,708
Re-measurement (loss) gain on defined benefit plans . . . . .
9
Items to be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes on revaluation of available-for-sale financial
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share of other comprehensive (loss) income of investments
accounted for using the equity method . . . . . . . . . . . . . . .
9
9
9
(18,140)
(18,140)
15,554
15,554
724
724
(85,496)
(51,820)
46,611
(17,313)
(1,867)
9,521
4,412
9, 14
(266)
(38)
(104,942)
(37,925)
4,714
3,525
382
55,232
55,956
Other comprehensive income (loss) for the year, net of tax . . . . . . . . .
9
(123,082)
(22,371)
Total comprehensive income (loss) for the year . . . . . . . . . . . . . . . . . .
¥ (39,602) ¥ 93,142
¥242,664
Attributable to:
Owners of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (40,334) ¥ 93,552
(410)
732
¥242,444
220
Total comprehensive income (loss) for the year . . . . . . . . . .
¥ (39,602) ¥ 93,142
¥242,664
See accompanying notes to consolidated financial statements.
F-5
TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIES
Consolidated Statements of Financial Position as of March 31,
Non-current assets:
Assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments accounted for using the equity method . . . . . . . . . . . . . . . . . . .
Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current assets:
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY (millions)
Note
2017
2018
10
11
12
14
15
7
16
17
15
18
19
¥ 527,344
1,019,574
1,063,037
126,411
176,636
54,408
118,968
¥ 536,801
1,029,248
1,014,264
107,949
196,436
77,977
64,980
3,086,378
3,027,655
226,048
423,405
56,683
21,373
75,146
319,455
138,306
212,944
420,247
80,646
8,545
57,912
294,522
3,992
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,260,416
1,078,808
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥4,346,794
¥4,106,463
F-6
Liabilities:
Non-current liabilities:
Liabilities and Equity
Bonds and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net defined benefit liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities:
Bonds and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20
21
22
23
24
7
20
25
21
23
24
19
JPY (millions)
Note
2017
2018
¥ 599,862
81,778
80,902
38,108
77,437
153,396
¥ 985,644
91,223
87,611
28,042
68,300
90,725
1,031,483
1,351,545
545,028
240,623
28,898
70,838
135,796
256,507
88,656
18
240,259
29,613
67,694
132,781
263,930
3,214
737,509
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,366,346
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,397,829
2,089,054
Equity:
Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other components of equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,203
74,973
(48,734)
1,511,817
291,002
77,914
90,740
(74,373)
1,557,307
350,631
Other comprehensive income related to assets held for sale . . . . . . . .
—
(4,795)
Equity attributable to owners of the company . . . . . . . . . . . . . . .
1,894,261
1,997,424
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
54,704
19,985
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,948,965
2,017,409
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥4,346,794
¥4,106,463
(*) Takeda revised the provisional fair value for the assets acquired and the liabilities assumed related to
business combinations during the year ended March 31, 2018. Accordingly, the corresponding balances in
the Consolidated Statements of Financial Position as of March 31, 2017 were, retrospectively revised. (refer
to Note 31)
See accompanying notes to consolidated financial statements.
F-7
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T
TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIES
Consolidated Statements of Cash Flows for the Year Ended March 31,
Cash flows from operating activities:
Net profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Loss (gain) on sales and disposal of property, plant and equipment
Gain on divestment of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sales of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on liquidation of foreign operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance income and expenses, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share of loss of associates accounted for using the equity method . . . . . . . . . . . . . . . . . . .
Income tax expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:
Decrease (increase) in trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash generated from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax refunds and interest on tax refunds received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY (millions)
Note
2016
2017
2018
¥ 83,480
182,179
15,202
13,178
1,244
—
(75)
—
(5,636)
10,286
3
37,059
12,372
(6,845)
17,910
(290,650)
(10,579)
59,128
(52,294)
18,657
¥ 115,513
171,426
51,361
15,385
(129)
(115,363)
—
—
(18,441)
10,975
1,546
27,833
(37,315)
3,886
42,557
20,547
12,333
302,114
(53,227)
12,476
¥ 186,708
182,127
13,544
18,610
(434)
(27,481)
(106,619)
41,465
10,523
(7,615)
32,199
30,497
(647)
13,719
6,862
(6,530)
20,809
407,737
(54,874)
24,991
Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,491
261,363
377,854
Cash flows from investing activities:
Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments into time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from withdrawal of time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of property, plant and equipment
Proceeds from sales of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and redemption of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of business, net of cash and cash equivalents acquired . . . . . . . . . . . . . . . . . . .
Proceeds from sales of business, net of cash and cash equivalents divested . . . . . . . . . . . .
Payments into restricted deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31
2,394
3,557
(40,000)
40,000
(48,758)
498
(36,099)
(17)
16,454
(8,269)
1,217
—
(2,185)
2,001
3,674
(70,000)
70,000
(61,660)
2,629
(50,367)
(12,106)
5,268
(589,144)
64,405
—
(20,391)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(71,208)
(655,691)
Cash flows from financing activities:
Net increase (decrease) in short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of long-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of obligations under finance lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27
27
27
27
27
27
(5)
150,000
(30,012)
—
(70,000)
(22,346)
(4,889)
(141,538)
(804)
(4,066)
(1,179)
406,971
260,226
(12,363)
—
(179,400)
(23,117)
(6,971)
(141,688)
(4,822)
(4,013)
(4,927)
2,412
7,699
—
—
(67,005)
2,965
(61,257)
(16,883)
40,743
(28,328)
85,080
(71,774)
13,006
(93,342)
(403,931)
337,154
(80,000)
56,299
(60,000)
(18,756)
(8,365)
(141,893)
—
(2,658)
(4,076)
Net cash from (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(124,839)
289,896
(326,226)
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(170,556)
(104,432)
(41,714)
Cash and cash equivalents at the beginning of the year (Consolidated statements of financial
position)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents reclassified back from assets held for sale . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effects of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents reclassified to assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at the end of the year (Consolidated statements of financial
position)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
19
19
18
652,148
3,096
655,244
(33,262)
451,426
—
451,426
—
451,426
(5,742)
341,252
(21,797)
319,455
21,797
341,252
(4,565)
294,973
(451)
¥ 451,426
¥ 319,455
¥ 294,522
See accompanying notes to consolidated financial statements.
F-11
TAKEDA PHARMACEUTICAL COMPANY LIMITED AND ITS SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Reporting Entity
Takeda Pharmaceutical Company Limited (the “Company”) is a public company incorporated in Japan.
The Company and its subsidiaries (collectively, “Takeda”) is a major global pharmaceutical group and is
engaged in the
research, development, manufacturing and marketing of pharmaceutical products,
over-the-counter (“OTC”) medicines and quasi-drug consumer products, and other healthcare products. Takeda’s
principal pharmaceutical products include medicines in the following therapeutic areas: gastroenterology,
oncology and neuroscience.
2. Basis of Preparation
Compliance with International Financial Reporting Standards
Takeda’s consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
The term IFRS also includes International Accounting Standards (“IASs”) and the related interpretations of the
interpretations committees (SIC and IFRIC).
Approval of Financial Statements
The Company’s consolidated financial statements as of and for the year ended March 31, 2018 were
approved on September 10, 2018 by Representative Director, President & Chief Executive Officer (“CEO”)
Christophe Weber and Corporate Officer & Chief Financial Officer Costa Saroukos.
Basis of Measurement
The consolidated financial statements have been prepared on a historical cost basis, except for certain
assets and liabilities recorded at fair value including investments, derivatives, and contingent considerations.
Functional Currency and Presentation Currency
The consolidated financial statements are presented in Japanese yen (“JPY”), which is the functional
currency of the Company. All financial information presented in JPY has been rounded to the nearest million
JPY, except when otherwise indicated.
New Accounting Standards and Interpretations Adopted
During the year ended March 31, 2018, Takeda has adopted the amendments to IAS 12 ‘Income Taxes’,
which requires recognition of deferred tax assets for unrealized losses. Takeda has also adopted the amendments
to IAS 7 ‘Statement of Cash Flows’ Disclosure Initiative which requires additional disclosures about changes in
liabilities arising from financing activities. The adoption of these standards did not have a material impact on
Takeda’s consolidated financial statements.
New Accounting Standards and Interpretations Issued and Not Yet Adopted
New or amended accounting standards and interpretations that have been issued as of the date of
approval of the consolidated financial statements but are not effective and have not yet been adopted by Takeda
as of March 31, 2018 are discussed below:
IFRS 15 ‘Revenue from Contracts with Customers’ (“IFRS 15”) was issued in May 2014 and has been
implemented by Takeda on April 1, 2018. IFRS 15 provides a single, principles-based approach to the
F-12
recognition of revenue from all contracts with customers. The standard focuses on the identification of
performance obligations in a contract and requires revenue to be recognized when or as those performance
obligations are met. The standard also updates revenue disclosure requirements. IFRS 15 is not expected to have
a material impact on the amount or timing of revenue recognition from the sale of goods and associated
provisions for rebates and returns. In addition, our current accounting for royalty and service revenue under
IAS 18 ‘Revenue’ includes an analysis of the performance obligations under the arrangement and up-front
revenue recognition requires the transfer of substantive rights, for example, a license to use our intellectual
property and an appropriate allocation of revenue to the remaining performance obligations. While the basis for
such allocation is different in IFRS 15, the impact of the adoption of the new standard on our historical
allocations is not material. In our financial statements for the year ended March 31, 2019, Takeda will adopt
IFRS 15 applying the modified retrospective approach and will record a cumulative adjustment to equity at
April 1, 2018. As a result of the adoption of IFRS 15, opening retained earnings as of April 1, 2018 will increase
by 1,328 million JPY. In accordance with the requirements of IFRS 15 where the modified retrospective
approach is adopted, prior year results will not be restated. As the result of implementing IFRS 15, Takeda will
provide additional disclosure regarding revenue in its financial statements.
IFRS 9 ‘Financial instruments’ (“IFRS 9”) was issued in its final form in July 2014 and has been
implemented by Takeda as of April 1, 2018. IFRS 9 replaces the majority requirements of IAS 39 ‘Financial
Instruments: Recognition and Measurement’ and covers the classification, measurement and de-recognition of
financial assets and financial liabilities; introduces a new impairment model for financial assets based on
expected losses rather than incurred losses and provides a new hedge accounting model. The principal impact for
Takeda will be the re-measurement of certain available-for-sale financial instruments to fair value on initial
application on April 1, 2018. As a result, opening balance of retained earnings and other components of equity as
of April 1, 2018 will increase by 14,073 million JPY and 10,257 million JPY, respectively.
IFRS 16 ‘Leases’ (“IFRS 16”) was issued in January 2016 and Takeda is required to adopt the new lease
standard by April 1, 2019. The standard will replace IAS 17 ‘Leases’ and will require lease liabilities and ‘right
of use’ assets to be recognized on the balance sheet for almost all leases. This is expected to result in a significant
increase in both assets and liabilities recognized. The costs of operating leases currently included within cost of
sales, selling, general and administrative expenses, research and development expenses, and other operating
expenses will be disaggregated and the financing element of the expense will be reported within finance
expenses. As a lessee, this standard can be applied retrospectively to each prior reporting period (retrospective
approach) or retrospectively with the cumulative effect of initially applying this standard recognized at the date
of initial application (modified retrospective approach). Takeda is assessing the potential impact of IFRS 16 and
the method of transition.
IFRIC 23 ‘Uncertainty over Income Tax Treatments’ was issued in June 2017 and Takeda is required to
adopt the standard by April 1, 2019. The interpretation clarifies that if it is considered probable that a tax
authority will accept an uncertain tax treatment, the tax charge should be calculated on that basis. If it is not
considered probable, the effect of the uncertainty should be estimated and reflected in the tax charge. In assessing
the uncertainty, it is assumed that the tax authority will have full knowledge of all information related to the
matter. Takeda is continuing to assess the potential impact of the new interpretation.
In addition, the following amendments and interpretations have been issued:
•
•
•
Amendments to IFRS 10 and IAS 28 ‘Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture’. The IASB has deferred these amendments until a date to be determined
by the IASB.
Amendments to IFRS 2 ‘Classification and Measurement of Share-based Payment Transactions’,
effective for periods beginning on or after January 1, 2018.
IFRIC 22 ‘Foreign Currency Transactions and Advance Consideration’, effective for periods
beginning on or after January 1, 2018.
F-13
•
Amendments to IAS 40 ‘Transfers of Investment Property’, effective for periods beginning on or
after January 1, 2018
These additional amendments and interpretations are not expected to have a significant impact on
Takeda’s net results, net assets or disclosures.
Use of Judgments, Estimates, and Assumptions
The preparation of consolidated financial statements in accordance with IFRS requires management to
make certain judgments, estimates, and assumptions that affect the application of accounting policies, the
reported amount of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities. Actual results could differ from these estimates.
These estimates and underlying assumptions are reviewed on a continuous basis. Changes in these
accounting estimates are recognized in the period in which the estimates are revised and in any future periods
affected.
Information about judgments and estimates that have been made in the process of applying accounting
policies and that have significant effects on the amounts reported in the consolidated financial statements and
information about accounting estimates and assumptions that have significant effects on the amounts reported in
the consolidated financial statements are as follows:
•
•
•
Recognition and measurement of taxes based on uncertain tax positions (Note 7)
Recoverability of deferred tax assets (Note 7)
Impairment of property, plant and equipment; goodwill; and other intangible assets (Note 10,
Note 11, and Note 12, respectively)
• Measurement of defined benefit obligations (Note 22)
• Measurement of provisions, including estimation of rebates and return reserves associated with
Takeda’s product sales (Note 23)
•
Valuation assumptions relating to share-based compensation (Note 28)
• Measurement of fair value of assets acquired and liabilities assumed and contingent consideration
in business combinations (Note 31)
•
Probability of an outflow of resources embodying economic benefits on contingent liabilities
(Note 32)
3.
Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries that are
directly or indirectly controlled by the Company. All significant intercompany balances and transactions have
been eliminated in consolidation.
Takeda controls an entity when Takeda is exposed or has rights to variable returns from involvement
with the entity, and has the ability to affect those returns using its power, which is the current ability to direct the
relevant activities, over the entity. To determine whether Takeda controls an entity, status of voting rights or
similar rights, contractual agreements and other specific factors are taken into consideration.
F-14
The financial statements of the subsidiaries are included in the consolidated financial statements from
the date when control is obtained until the date when control is lost. The financial statements of subsidiaries have
been adjusted in order to ensure consistency with the accounting policies adopted by the Company as necessary.
Changes in ownership interest in subsidiaries that do not result in loss of control are accounted for as
equity transactions. Any difference between the adjustment to non-controlling interests and the fair value of
consideration transferred or received, is recognized directly in equity attributable to owners of the Company.
When control over a subsidiary is lost, the investment retained after the loss of control is re-measured at fair
value as of the date when control is lost, and any gain or loss on such re-measurement and disposal of the interest
sold is recognized in profit or loss.
Investments in Associates and Joint Arrangements
Associates are entities over which Takeda has significant influence over the decisions on financial and
operating policies, but does not have control or joint control. Investments in associates are accounted for using
the equity method and recognized at cost on the acquisition date. The carrying amount is subsequently increased
or decreased to recognize Takeda’s share of profit or loss and other comprehensive income of the affiliate. Intra-
group profits on transactions with associates accounted for using the equity method are eliminated against the
investment to the extent of Takeda’s equity interest in the associates. Intra-group losses are eliminated in the
same way as intra-group profits unless there is evidence of impairment.
Joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the
contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require the unanimous consent of the parties sharing control. Takeda classifies joint arrangement into
either joint operations or joint ventures. The classification of a joint arrangement as a joint operation or a joint
venture depends upon the rights and obligations of the parties to the arrangement. Joint operation is a joint
arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and
obligations for the liabilities, relating to the arrangement. Joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the net assets of the arrangement. The assets, liabilities,
revenues and expenses in joint operations are recognized in relation to Takeda’s interest. The investment in joint
ventures is accounted for using the equity method. At each reporting date, the Company determines whether
there is objective evidence that the investment in the associate or joint venture is impaired. If there is such
evidence, the Company calculates the amount of impairment as the difference between the recoverable amount of
the associate or joint venture and its carrying value, and then recognizes the loss within profit or loss.
Business Combinations
Business combinations are accounted for using the acquisition method. The identifiable assets acquired
and the liabilities assumed are measured at the fair values at the acquisition date. Goodwill is measured as the
excess of the sum of the fair value of consideration transferred, the amount of any non-controlling interests in the
acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree less the fair value of
identifiable assets acquired, net of liabilities assumed at the acquisition date.
share of
The consideration transferred for the acquisition of a subsidiary is measured as the fair value of the
assets transferred, the liabilities incurred to former owners of the acquiree, and the equity interests issued by
Takeda. Non-controlling interests is initially measured either at fair value or at the non-controlling interests’
assets on a
proportionate
transaction-by-transaction basis. The consideration for certain acquisitions includes amounts contingent upon
future events, such as the achievement of development milestones and sales targets. Any contingent
consideration included in the consideration payable for a business combination is recorded at fair value at the
date of acquisition. These fair values are generally based on risk-adjusted future cash flows discounted using
appropriate discount rates. The fair values are reviewed at the end of each reporting period. The changes in the
recognized amounts of
identifiable net
acquiree’s
the
the
F-15
fair value based on the time value of money are recognized in “Finance expenses” and the other changes are
recognized in “Other operating income” or “Other operating expenses” in the consolidated statements of income.
Acquisition related costs are recognized as expenses in the period they are incurred. Changes in
Takeda’s ownership interests in subsidiaries arising from transactions between Takeda and non-controlling
interests that do not result in Takeda losing control over a subsidiary are treated as equity transactions and
therefore, do not result in adjustments to goodwill.
Foreign Currency Translations
Foreign Currency Transactions
Foreign currency transactions are translated into the functional currency of each entity within Takeda
using the exchange rates at the dates of the transactions or rates that approximate the exchange rates at the dates
of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the
functional currency using the spot rates of exchange at the end of each reporting period. Non-monetary assets and
liabilities that are measured at fair value in foreign currencies are translated using historical exchange rates at the
date when the fair value was determined. Non-monetary assets and liabilities measured based on historical cost
that are denominated in foreign currencies are translated at the exchange rate at the date of the initial transaction.
Exchange differences arising from the translation or settlement are recognized in profit or loss except when
related to financial assets measured at fair value through other comprehensive income, as well as financial
instruments designated as hedges of net investments in foreign operations and cash flow hedges subsequently
recognized as other comprehensive income. The gain or loss arising from translation of non-monetary items
measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the
item (i.e., translation differences on items whose fair value gain or loss is recognized in other comprehensive
income or profit or loss, are also recognized in other comprehensive income or profit or loss, respectively).
Foreign Operations
The assets and liabilities of foreign operations are translated using the spot exchange rates at the end of
the reporting period, while income and expenses of foreign operations presented in net profit or loss and other
comprehensive income are translated using the exchange rates at the dates of the transactions or rates that
approximate the exchange rates at the dates of the transactions.
Exchange differences arising from translation are recognized as other comprehensive income. In cases
in which foreign operations are disposed of, the cumulative amount of exchange differences related to the foreign
operations is recognized as part of the gain or loss on disposal.
Revenue
Revenue consists primarily of sales of pharmaceutical products, as well as royalty and service income.
Revenue is recognized when significant risks and rewards of ownership have been transferred to a third
party. Product sales are recognized when title passes to the customer, either upon shipment or upon receipt of
goods by the customer, as specified in the sales agreement. Service and royalty income are recognized on an
accrual basis in accordance with the substance of the relevant agreement.
Revenue is reduced by rebates, discounts, and products returned or expected to be returned which vary
by product arrangements, government pricing, and the purchasing organization. In certain areas, Takeda has
arrangements with purchasing organizations, as well as product sales subject to government pricing arrangements
that are dependent upon the submission of claims sometime after the initial recognition of the sale. Provisions are
made at the time of sale for the estimated rebates, discounts, or returns to be made, based on available market
information and historical experience.
F-16
Because the amounts are estimated, they may not fully reflect the final outcome, and the amounts are
subject to change dependent upon, amongst other things, the type of purchasing organization, end consumer, and
product sales mix.
The level of accrual for rebates and returns is reviewed and adjusted regularly in light of contractual and
legal obligations, historical trends, past experience, and projected market conditions. Market conditions are
evaluated using wholesaler and other third-party analysis, market research data, and internally generated
information.
Future events could cause the actual assumptions on which the accruals are based to change, which
could affect the future results of Takeda.
Government Grants
Government grants are recognized when there is reasonable assurance that Takeda will comply with the
conditions attached to them and receive the grants. Government grants for the purchasing of property, plant and
equipment are recognized as deferred income and then recognized as net profit or loss and offset the related
expenses on a systematic basis over the useful lives of the related assets. Government grants for expenses
incurred are recognized as net profit or loss and offset the related expenses over the periods in which Takeda
recognizes costs for which the grants are intended to compensate.
Advertising and Sales Promotion Expenses
Costs of advertising and sales promotion are expensed as incurred. Advertising and sales promotion
expenses were 121,055 million JPY, 112,842 million JPY, and 115,708 million JPY for the years ended
March 31, 2016, 2017 and 2018, respectively.
Research and Development Expenses
Research costs are expensed in the period incurred. Internal development expenditures are capitalized
when the criteria for recognizing an asset are met in accordance with IAS 38 ‘Intangible Assets,’ usually when a
regulatory filing has been made in a major market and approval is considered highly probable. Where regulatory
and other uncertainties are such that the criteria are not met, the expenditures are recognized in the income
statement. Property, plant and equipment used for research and development is capitalized and depreciated in
accordance with IFRS.
Income Taxes
Income taxes consist of current taxes and deferred taxes. Current and deferred taxes are recognized in
profit or loss, except for income taxes resulting from business combinations, and income taxes recognized in
either other comprehensive income or equity related to items that are recognized, in the same or different period,
outside of profit or loss.
Current Taxes
The current tax payable or receivable is based on taxable profit for the year. Taxable profit differs from
reported profit because taxable profit excludes items that are either never taxable or tax deductible or items that
are taxable or tax deductible in a different period. Accrued income taxes and income tax receivable, including
those from prior fiscal years, are measured at the amount that is expected to be paid to or received from the
taxation authorities, reflecting uncertainty related to income taxes, if any. Takeda’s current taxes also include
liabilities related to uncertain tax positions. Takeda’s current tax assets and liabilities are calculated using tax
rates that have been enacted or substantively enacted by the reporting date.
F-17
Deferred Taxes
Deferred taxes are calculated based on the temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes at the end of the
reporting period. Deferred tax assets are recognized for deductible temporary differences, unused tax credits and
unused tax losses to the extent that it is probable that future taxable profit will be available against which the
assets can be utilized. This requires us to evaluate and assess the probability of future taxable profit and our
business plan, which are inherently uncertain. Uncertainty of estimates of future taxable profit could increase due
to changes in economies in which we operate, changes in market conditions, effects of currency fluctuations, or
other factors. Takeda’s deferred taxes also include liabilities related to uncertain tax positions. Deferred tax
liabilities are generally recognized for taxable temporary differences.
Deferred tax assets and liabilities are not recognized for the following temporary differences:
•
•
•
•
Taxable temporary differences arising on the initial recognition of goodwill
The initial recognition of assets and liabilities in transactions that are not business combinations and
affect neither accounting profit nor taxable profit (loss) at the time of the transaction
Deductible temporary differences arising from investments in subsidiaries and associates, when it is
not probable that the temporary differences will reverse in the foreseeable future and that taxable
profit will be available against which the temporary differences can be utilized
Taxable temporary differences arising from investments in subsidiaries and associates when the
timing of the reversal of the temporary differences is controllable and it is not probable that they
will reverse in the foreseeable future
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the periods in
which the temporary differences are expected to reverse based on the tax rates and tax laws that have been enacted
or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against current tax liabilities and the deferred tax assets and
liabilities are for those related to income taxes levied by the same taxation authority on the same taxable entity.
Earnings per Share
Basic earnings per share is calculated by dividing profit or loss for the year attributable to owners of
ordinary shares of the Company, by the weighted-average number of ordinary shares outstanding during the
reporting period, adjusted by the number of treasury shares. Diluted earnings per share is calculated by adjusting
all the effects of dilutive potential ordinary shares.
Property, Plant and Equipment
Property, plant and equipment are measured using the cost model and is stated at cost less accumulated
depreciation and accumulated impairment loss. Acquisition cost includes mainly the costs directly attributable to
the acquisition and the initial estimated dismantlement, removal, and restoration costs associated with the asset.
Except for assets that are not subject to depreciation, such as land and construction in progress, assets are
depreciated mainly using the straight-line method over the estimated useful life of the asset. Leased assets are
depreciated using the straight-line method over the shorter of the lease term or the estimated useful life if it is
reasonably certain that Takeda will obtain ownership by the end of the lease term. The depreciation of these
assets begins when they are available for use.
The estimated useful life of major asset items is as follows:
•
Buildings and structures
• Machinery and vehicles
•
Tools, furniture and fixtures
3 to 50 years
2 to 20 years
2 to 20 years
F-18
Goodwill
Goodwill arising from business combinations is stated at its cost less accumulated impairment losses.
Goodwill is not amortized. Goodwill is allocated to cash-generating units or groups of cash-generating units
based on expected synergies and tested for impairment annually or whenever there is any indication of
impairment. Impairment losses on goodwill are recognized in the consolidated statements of income and no
subsequent reversal will be made.
Intangible Assets Associated with Products
Takeda regularly enters into collaboration and in-license agreements with third parties for products and
compounds for research and development projects. Payments for collaboration agreements generally take the
form of subsequent development milestone payments. Payments for in-license agreements generally take the
form of up-front payments and subsequent development milestone payments.
Up-front payments for in-license agreements are capitalized upon commencement of the in-license
agreements, and development milestone payments are capitalized when the milestone is triggered.
These intangible assets relating to products in development that are not yet available for use are not
amortized. These intangible assets are assessed for impairment on an annual basis, or more frequently if
indicators of a potential
is recorded if the carrying value exceeds the
recoverable amount of the intangible assets. Intangible assets relating to products which fail during development,
or for which development ceases for any reason are written down to their recoverable amount which is typically
nil.
impairment exist. An impairment
If and when Takeda obtains approval for the commercial application of a product in development, the
related in-process research and development assets will be reclassified to intangible assets associated with
products and amortized over its estimated useful life from marketing approval.
An intangible asset associated with a product is amortized on a straight-line basis over the estimated
useful life, which is based on expected exclusivity period, ranging from 3 to 20 years. Amortization of intangible
assets is included in “Amortization and impairment losses on intangible assets associated with products” in the
consolidated statements of income. “Amortization and impairment losses on intangible assets associated with
products” is separately stated in the consolidated statement of income because intangible assets associated with
products have various comprehensive rights and contribute to our ability to sell, manufacture, research, market
and distribute products, compounds and benefit multiple business functions.
Intangible Assets – Software
Software is recognized at cost and amortized on a straight-line basis over the expected useful life. The
useful life used for this purpose is three to seven years. Amortization of intangible assets – software is included
in “Cost of sales,” “Selling, general and administrative expenses,” and “Research and development expenses” in
the consolidated statements of income.
Leases
Leases are classified as finance leases if substantially all the risks and rewards incidental to ownership
are transferred to the lessee. Leases other than finance leases are classified as operating leases.
As Lessee
At the commencement of the lease term, Takeda recognizes finance leases as assets and liabilities in the
consolidated statements of financial position at amounts equal to the fair value of the leased property or, if lower,
the present value of the minimum lease payments, each determined at the inception of the lease. Lease payments
for operating leases are recognized as expenses on a straight-line basis over the lease term, unless another
systematic basis is more representative of the time pattern of the user’s benefit is available.
F-19
Impairment of Non-Financial Assets
Takeda assesses the carrying amounts of non-financial assets at the end of each reporting period,
excluding inventories, deferred tax assets, assets held for sale, and assets arising from employee benefits, to
determine whether there is any indication of impairment. If any such indication exists, or in cases in which an
impairment test is required to be performed each year, the recoverable amount of the asset is estimated. In cases
in which the recoverable amount cannot be estimated for each asset, they are estimated at the cash-generating
unit level. The recoverable amount of an asset or a cash-generating unit is determined at the higher of its fair
value less cost of disposal, or its value in use. In determining the value in use, the estimated future cash flows are
discounted to their present value using a discount rate that reflects the time value of money and the risks specific
to the asset. If the carrying amount of the asset or cash-generating unit exceeds the recoverable amount,
impairment loss is recognized in profit or loss and the carrying amount is reduced to the recoverable amount. An
asset or a cash-generating unit other than goodwill, for which impairment losses were recognized in prior years,
is assessed at the end of the reporting period to determine whether there is any indication that the impairment loss
recognized in prior periods may no longer exist or may have decreased. If any such indication exists, the
recoverable amount of the asset or cash-generating unit is estimated. In cases in which the recoverable amount
exceeds the carrying amount of the asset or cash-generating unit, the impairment loss is reversed up to the lower
of the estimated recoverable amount or the carrying amount that would have been determined if no impairment
loss had been recognized in prior years. The reversal of impairment loss is immediately recognized in profit or
loss.
Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is
determined mainly using the weighted-average cost formula. The cost of inventories includes purchase costs,
costs of conversion, and other costs incurred in bringing the inventories to the present location and condition. Net
realizable value is the estimated selling price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale. Pre-launch inventory is held as an asset when
there is a high probability of regulatory approval for the product. Before that point, a provision is made against
the carrying value to its recoverable amount; the provision is then reversed at the point when a high probability
of regulatory approval is determined.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, demand deposits and short-term, highly liquid
investments that are readily convertible to known amounts of cash and subject to insignificant risk of change in
value and due within three months from the date of acquisition.
Assets Held for Sale
An asset or disposal group for which the cash flows are expected to arise principally from sale rather
than continuing use is classified as an asset held for sale when it is highly probable that the asset or disposal
group will be sold within one year, the asset or disposal group is available for immediate sale in its present
condition, and the management of Takeda is committed to the sale. In such cases, the asset held for sale is
measured at the lower of its carrying amount and fair value less costs to sell.
Property, plant and equipment and intangible assets are not depreciated or amortized once classified as
held for sale. Assets and liabilities classified as held for sale are presented separately as current items in the
consolidated statements of financial position.
F-20
Post-employment Benefit
Takeda sponsors lump-sum payments on retirement, pensions and other plans such as post-retirement
medical care as post- employment benefit plans. They are classified into defined benefit plans and defined
contribution plans.
Defined Benefit Plans
Takeda uses the projected unit credit method to determine the present value, the related current service
cost, and the past service cost by each defined benefit obligation. The discount rate is determined by reference to
market yields on high quality corporate bonds at the end of the reporting period. The net defined benefit
liabilities (assets) in the consolidated statements of financial position are calculated by deducting the fair value of
the plan assets from the present value of the defined benefit obligations. Past service cost defined as the change
in the present value of the defined benefit obligation resulting from a plan amendment or curtailment is
recognized in profit or loss upon occurrence of the plan amendment or curtailment.
Re-measurement of net defined benefit plans is recognized in full as other comprehensive income and
transferred to retained earnings in the period in which they are recognized.
Defined Contribution Plans
The costs for defined contribution plans are recognized as expenses when the employees render the
related service.
Provisions
Provisions are recognized when Takeda has present legal or constructive obligations as a result of past
events, it is probable that outflows of resources embodying economic benefits will be required to settle the
obligations and reliable estimates can be made of the amount of the obligations. Takeda’s provisions consist
primarily of rebates and return reserves, as well as provisions for litigation and restructuring.
Financial Instruments
Takeda’s financial instruments include financial instruments related to lease contracts, trade and other
receivables and payables, liabilities for contingent consideration under business combinations, and rights and
obligations under employee benefit plans, which are dealt with in specific accounting policies.
Financial Assets
Initial Recognition and Measurement
Financial assets are recognized in the consolidated statements of financial position when Takeda
becomes a party to the contractual provisions of the instruments. At the initial recognition, the financial assets are
classified based on the nature and purpose in accordance with the following:
•
•
•
Financial assets at fair value through profit or loss – Either held-for-trading financial assets or
financial assets designated as financial assets at fair value through profit or loss.
Loans and receivables – Non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market.
Available-for-sale financial assets – Non-derivative financial assets and either designated as
available-for-sale financial assets or not classified as (a) financial assets at fair value through profit
or loss, or (b) loans and receivables.
Financial assets, except for financial assets at fair value through profit or loss, are initially measured at
fair value plus transaction costs that are directly attributable to the acquisition.
F-21
Subsequent Measurement
•
•
•
Financial assets at fair value through profit or loss – Financial assets at fair value through profit or
loss are measured at fair value, and any gains or losses arising on re-measurement are recognized in
profit or loss.
Loans and receivables – Loans and receivables are measured at amortized cost using the effective
interest method less any impairment loss. Interest income is recognized principally by applying the
effective interest rate, unless the recognition of interest is immaterial as in the case of short-term
receivables.
Available-for-sale financial assets – Available-for-sale financial assets are measured at fair value as
of the end of the reporting period, and the gains and losses arising from changes in fair value are
recognized in other comprehensive income. Exchange differences on monetary assets are
recognized in profit or loss. Dividends on available-for-sale financial assets (equity instruments) are
recognized in profit or loss in the reporting period when Takeda’s right to receive the dividends is
established.
Impairment
Financial assets, other than financial assets at fair value through profit or loss, are assessed for indicators
of impairment at the end of each reporting period. Financial assets are considered impaired when there is
objective evidence that one or more events occurred after the initial recognition of the financial asset and it is
reasonably anticipated to have had a negative impact on the estimated future cash flows of the asset. For
available-for-sale equity instrument, a significant or prolonged decline in the fair value below its cost is
considered objective evidence of impairment. Even when there is no objective evidence of impairment
individually, certain categories of financial assets, such as trade receivables, are collectively assessed for
impairment. For financial assets measured at amortized cost, the impairment loss is the difference between the
carrying amount of the asset and the present value of the estimated future cash flows discounted at the original
effective interest rate on the asset. In a subsequent period, if the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment was recognized; the previously
recognized impairment loss is reversed through profit or loss. When an available-for-sale financial asset is
determined to be impaired, the cumulative gain or loss that was previously accumulated in accumulated other
comprehensive income (loss) is reclassified to profit or loss in the same period. In respect to available-for-sale
equity investments, impairment loss previously recognized in profit or loss is not reversed through profit or loss.
In respect to available-for-sale debt instruments, if the amount of the fair value increases in a subsequent period
and the increase can be related objectively to an event occurring after the impairment was recognized; the
previously recognized impairment loss is reversed through profit or loss.
Derecognition
Takeda derecognizes a financial asset only when the contractual right to receive the cash flows from the
asset expires or when Takeda transfers the financial asset and substantially all the risks and rewards of ownership
of the asset to another entity. On derecognition of a financial asset, the difference between the carrying amount
and the consideration received or receivable is recognized in profit or loss, and the cumulative gain or loss that
was previously accumulated in accumulated other comprehensive income (loss) is reclassified to profit or loss.
Financial Liabilities
Initial Recognition and Measurement
Financial liabilities are recognized in the consolidated statements of financial position when Takeda
becomes party to contractual provisions of financial instruments. Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value through profit or loss, bonds and loans, or payables.
F-22
Financial liabilities, except for financial liabilities at fair value through profit or loss, are initially
measured at fair value less transaction costs that are directly attributable to the issuance.
Subsequent Measurement
•
•
Financial liabilities at fair value through profit or loss – Financial liabilities at fair value through
profit or loss are measured at fair value, and any gains or losses arising on re-measurement are
recognized in profit or loss.
Other financial liabilities, including bonds and loans – Other financial liabilities are measured at
amortized cost mainly using the effective interest method.
Derecognition
Takeda derecognizes a financial
is
discharged, cancelled, or expires. On derecognition of a financial liability, the difference between the carrying
amount and the consideration paid or payable is recognized in profit or loss.
liability only when the obligation specified in the contract
Derivatives
Takeda hedges the risks arising mainly from their exposure to fluctuations in foreign currency exchange
rates and interest rates using derivative financial instruments such as foreign exchange forward contracts, interest
rate swaps, and currency swaps. Takeda does not enter into derivative transactions for trading or speculative
purposes. Derivatives not qualifying for hedge accounting are classified as financial assets or liabilities at fair
value through profit or loss.
Hedge Accounting
Takeda designates certain derivatives and non-derivatives such as foreign-currency-denominated debt as
cash flow hedges and hedges of net investments in foreign operations, respectively, and applies hedge accounting
to them. Takeda documents the relationship between hedging instruments and hedged items based on the strategy
for undertaking hedge transactions at
the inception of the transaction. Takeda also assesses whether the
derivatives used in hedging transactions are highly effective in achieving offsetting changes in cash flows and
foreign currency of hedged items both at the hedge inception and on an ongoing basis.
Cash flow hedges – the effective portion of changes in the fair value of derivatives designated and
qualifying as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the
ineffective portion is recognized immediately in profit or loss. The cumulative gain or loss that was previously
recognized in other comprehensive income is reclassified to profit or loss in the same period when the cash flows
of the hedged items are recognized in profit or loss and in the same line item in the consolidated statements of
income.
Net investment hedges – the gain or loss on hedging instruments is recognized in other comprehensive
income. At the time of disposal of the foreign operations, the cumulative gain or loss recognized in other
comprehensive income is reclassified to profit or loss.
Hedge accounting is discontinued when Takeda revokes the designation, when the hedging instrument
expires or is sold, terminated or exercised, or when the hedge no longer qualifies for hedge accounting.
Share-based Payments
Takeda has implemented share-based payment programs and provides equity and cash-settled share-
based payments.
F-23
Equity-settled Share-based Payments
Equity-settled share-based payments are granted based on the service performed by the employees,
directors, and senior management. The service received and the corresponding increase in equity are measured at
the fair value of the equity instruments at the grant date. The fair value of the equity instruments granted to
employees, directors, and senior management are recognized as expense over the vesting period of the awards
with a corresponding amount as an increase in equity.
Cash-settled Share-based Payments
Cash-settled share-based payments are granted based on the service performed by the employees,
directors, and senior management. The service received and the corresponding liability are measured at the fair
value of the corresponding liability. The fair value of the liability-classified awards granted to employees,
directors, and senior management are recognized as expense over the vesting period of the awards with a
corresponding amount as an increase in liability. Takeda re-measures the fair value of the liability at the end of
each reporting period and at the date of settlement, and recognize any changes in fair value in profit or loss.
Capital
Ordinary Shares
Proceeds from the issuance of ordinary shares by the Company are included in share capital and share
premium.
Treasury Shares
When the Company acquires treasury shares, the consideration paid is recognized as a deduction from
equity. When the Company sells the treasury shares, the difference between the carrying amount and the
consideration received is recognized in share premium.
4. Operating Segment and Revenue Information
Takeda has historically reported Prescription Drug, Consumer Healthcare, and Other as its three
operating and reportable segments.
In April 2017, Takeda disposed Wako Pure Chemical Industries, Ltd. which represented substantially all
of the Other segment in terms of revenue and operating profit. Further, in March 2018, the Company announced
it was considering an offer to purchase Shire plc (refer to Note 33). In connection with these changes and the
Company’s focus on prescription drug, the Company has reconsidered its segment structure and reporting and
concluded that Takeda comprises one operating segment, consistent with how the financial information is viewed
in allocating resources, measuring performance, and forecasting future periods by the CEO who is Takeda’s
Chief Operating Decision Maker.
As a result, the segment reporting has been changed for the year ended March 31, 2018, and the
historical disclosures in the comparative periods have been restated to present the segments on a consistent basis
for all periods.
Takeda’s revenue is comprised of the following for the years ended March 31:
Sales of pharmaceutical products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalty and service income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,750,910
56,468
¥1,671,911
60,140
¥1,693,838
76,693
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,807,378
¥1,732,051
¥1,770,531
JPY (millions)
2016
2017
2018
F-24
Takeda’s revenue from customers is based in the following geographic locations for the years ended
March 31:
Japan
United
States
Europe
and
Canada
JPY (millions)
Russia/
CIS
Latin
America
Asia
Other
Total
2016 . . . . . . . . . . . .
2017 . . . . . . . . . . . .
2018 . . . . . . . . . . . .
¥688,090
655,344
580,349
¥514,420
520,161
598,341
¥309,270
279,693
313,723
¥61,821
57,550
68,240
¥68,392
72,516
75,658
¥125,961
112,799
104,026
¥39,424
33,988
30,194
¥1,807,378
1,732,051
1,770,531
Other includes the Middle East, Oceania and Africa.
Takeda’s non-current assets are held in the following geographic locations:
JPY (millions)
Japan
United
States
Other
Total
As of March 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥410,606
413,457
¥1,293,798
1,231,051
¥920,316
972,401
¥2,624,720
2,616,909
Non-current assets exclude financial instruments, deferred tax assets and net defined benefit assets.
Balances as of March 31, 2017, are revised to reflect the completed purchase price allocation of ARIAD
Pharmaceutical Inc. (“ARIAD”) acquisition that resulted from adjustments to the provisional fair value of the
acquired net assets (refer to Note 31).
Information Related to Major Customers
Takeda has one customer, Medipal Holdings Corporation and its subsidiaries (collectively, “Medipal
that represents more than 10% of Takeda’s total sales. The sales to the Medipal Group were
Group”),
258,661 million JPY, 265,646 million JPY, and, 220,249 million JPY for the years ended March 31, 2016, 2017
and 2018, respectively, and 56,521 million JPY and 49,565 million JPY of trade receivables at March 31, 2017
and 2018, respectively.
F-25
5. Other Operating Income and Expenses
Other operating income:
Receipt of contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of contingent consideration (Note 31) . . . . . . . . . . . .
Gain on sales of property, plant and equipment and investment property
¥ 4,915
5,636
¥
1,543
18,441
¥
91
—
JPY (millions)
For the Year Ended March 31
2016
2017
2018
(Note 19)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . .
Gain on divestment of business to Teva Takeda Yakuhin (Note 14)
Gain on sale of shares of Wako Pure Chemical Industries, Ltd.
54
—
762
115,363
18,814
27,481
(Note 19)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
10,740
—
7,424
106,337
16,689
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥21,345
¥143,533
¥169,412
Other operating expenses:
Donations and contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring expense (Note 23) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on liquidation of foreign operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of contingent
¥ 2,442
25,760
—
¥
3,763
54,589
—
¥
5,603
44,736
41,465
consideration (Note31) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
16,184
—
14,529
10,523
24,228
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥44,386
¥ 72,881
¥126,555
For the year ended March 31, 2009, Takeda sold a business under terms and conditions that included a
consideration that was contingent upon future events. The receipt of contingent consideration shown above
represents payments received related to this disposal.
Loss on liquidation of foreign operations represents the recognition of the cumulative translation loss in
the consolidated statement of income upon the liquidation of certain foreign operations.
F-26
6.
Finance Income and Expenses
JPY (millions)
For the Year Ended March 31
2016
2017
2018
Finance Income:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sales of available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . .
Gain on foreign currency exchange, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 2,316
3,329
15,051
—
949
¥ 2,019
3,236
3,638
1,897
1,484
¥ 3,282
3,165
30,430
—
2,666
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥21,645
¥12,274
¥39,543
Finance Expenses:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of contingent consideration liabilities (Note 31) . . . . . .
Impairment of available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . .
Loss on derivative financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on foreign currency exchange, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 5,271
7,605
2,332
5,139
8,896
2,688
¥ 7,560
3,693
3,659
5,428
—
2,909
¥10,036
2,261
6,657
—
10,279
2,695
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥31,931
¥23,249
¥31,928
7.
Income Taxes
Income Tax Expenses
The major components of income tax expenses are as follows:
JPY (millions)
For the Year Ended March 31
2016
2017
2018
Current tax expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥45,270
(8,211)
¥ 60,239
(32,406)
¥37,758
(7,261)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥37,059
¥ 27,833
¥30,497
Current tax expenses include the benefits arising from previously unused tax losses, tax credits, and
temporary differences of prior periods. These effects decreased current tax expenses by 614 million JPY,
1,563 million JPY, and 8,005 million JPY for the years ended March 31, 2016, 2017 and 2018, respectively.
Deferred tax expenses include the benefits arising from previously unused tax losses, tax credits, and
temporary differences of prior periods. These effects decreased deferred tax expenses by 26,378 million JPY,
10,915 million JPY, and 2,998 million JPY for the years ended March 31, 2016, 2017 and 2018, respectively.
The Company is mainly subject to income taxes, inhabitant tax, and deductible enterprise tax in Japan.
The statutory tax rate calculated based on these taxes for the years ended March 31, 2016, 2017 and 2018 were
33.0%, 30.8% and 30.8%, respectively. The tax law changed during the periods presented, which resulted in the
reduction in the statutory tax rate for the Company.
F-27
The following is a reconciliation from the Company’s domestic (Japanese) tax rate to the effective tax
rate for the year ended March 31:
(Unit: Percentage)
Company’s domestic (Japanese) tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible expenses for tax purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in unrecognized deferred tax assets and deferred tax liabilities . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Differences in applicable tax rates of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .
Changes in tax effects of undistributed profit of overseas subsidiaries . . . . . . . .
Effect of changes in applicable tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in fair value of contingent consideration . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
33.0
3.4
(13.4)
(22.2)
9.7
(5.7)
7.2
15.3
—
0.7
2.7
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30.7
2017
30.8
4.7
(5.0)
(6.4)
(7.1)
0.5
(1.8)
3.7
2.3
(3.7)
1.4
19.4
2018
30.8
2.6
(0.6)
(4.7)
(5.4)
0.1
(12.6)
2.7
—
1.7
(0.6)
14.0
The Japanese statutory tax rate was reduced from 33.0% to 30.8% beginning April 1, 2016 due to the
enactment of a partial amendment of the Income Tax Act, passed by the National Diet of Japan on March 29,
2016.
In the United States, the Tax Cuts and Jobs Act (“U.S. Tax Reform”) was enacted on December 22,
2017. The federal corporate tax rate was reduced from 35% to 21% beginning January 1, 2018 under the new tax
law. As a consequence of U.S. Tax Reform enactment, Takeda recognized tax benefits of 27,516 million JPY
during the year ended March 31, 2018, primarily from the revaluation of net deferred tax liabilities at lower
future tax rates and the improved recoverability of deferred tax attributes resulting from U.S. Tax Reform
enacted federal law changes. The impacts of U.S. Tax Reform described above are based on information
currently available. As further interpretative guidance and clarification becomes available through legislation,
U.S. Treasury action or other means, the assumptions underlying these estimates could change which could have
a material impact on Takeda’s results.
The decrease in Takeda’s effective tax rate from 30.7% to 19.4% between the years ended March 31,
2016 and 2017, resulted primarily from a lower Japanese statutory tax rate; favorable geographical mix of
earnings (in “Differences in applicable tax rates of subsidiaries”); a non-recurring favorable audit settlement
during the year ended March 31, 2017, (in “Tax contingencies”); and a one-time tax provision during the year
ended March 31, 2016, related to the revaluation of net deferred tax asset in Japan at a lower enacted rate, (in
“Effect of changes in applicable tax rates”), partially offset by a non-recurring unfavorable audit settlement
during the year ended March 31, 2016, (in “Tax contingencies”), and lower tax credits, (in “Tax credits”) and
less subsidiary capital redemption, (in “Changes in unrecorded deferred tax assets and deferred tax liabilities”)
during the year ended March 31, 2017, versus prior year.
The decrease in Takeda’s effective tax rate from 19.4% to 14.0% between the years ended March 31,
2017 and 2018, was primarily due to a one-time tax benefit from the enactment of U.S. Tax Reform principally
related to the revaluation of net deferred tax liability at a lower enacted tax rate and improved recoverability of
deferred tax attributes resulting from U.S. Tax Reform during the year ended March 31, 2018 (in “Effect of
changes in applicable tax rates”), partially offset by tax benefit from subsidiary capital redemption (in “Changes
in unrecorded deferred tax assets and deferred tax liabilities”) during the prior year that did not occur in the
current year.
F-28
Deferred Taxes
Deferred tax assets and liabilities reported in the consolidated statements of financial position are as
follows:
JPY (millions)
As of March 31
2017
2018
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 118,968
(153,396)
¥ 64,980
(90,725)
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (34,428) ¥(25,745)
The major items and changes in deferred tax assets and liabilities are as follows:
JPY (millions)
As of
April 1,
2016
Recognized
in Profit
or (Loss)
Recognized in
Other
Comprehensive
Income
Acquisitions
through
Business
Combinations Others*
As of
March 31,
2017
¥ 60,836
29,565
(41,590)
(173,450)
¥ (8,111)
10,120
884
77,813
¥ —
—
—
—
¥
— ¥ (130) ¥ 52,595
38,452
(98)
(33,574)
1,336
(254,908)
(9,617)
(1,135)
5,796
(149,654)
Research and development
expenses . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . .
Intangible assets . . . . . . . . . . . . . . .
Available-for-sale financial
assets . . . . . . . . . . . . . . . . . . . . .
(25,235)
—
(2,986)
—
(20)
(28,241)
Accrued expenses and
provisions . . . . . . . . . . . . . . . . . .
Defined benefit plans . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . .
Unused tax losses . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . .
Investments in subsidiaries and
associates . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . .
85,493
11,885
18,504
47,543
25,989
(6,047)
386
(1,652)
(26,132)
(872)
(150)
7,914
(35,311)
21,328
—
(7,688)
—
—
—
—
(2,103)
1,482
—
748
43,126
6,469
(662)
232
(38)
(1,651)
(2,023)
80,266
4,815
17,562
62,886
29,563
—
749
—
3,729
(35,461)
31,617
Total . . . . . . . . . . . . . . . . . . . . . . . .
¥ 47,304
¥ 32,406
¥(12,777)
¥ (92,419)
¥(8,942) ¥ (34,428)
F-29
JPY (millions)
As of
April 1,
2017
Recognized
in Profit
or (Loss)
Recognized in
Other
Comprehensive
Income
Acquisitions
through
Business
Combinations Others*
As of
March 31,
2018
Research and development
expenses . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . .
Intangible assets . . . . . . . . . . . . . . .
Available-for-sale financial
¥ 52,595
38,452
(33,574)
(254,908)
¥(34,007)
(6,561)
656
84,254
¥ —
—
—
—
assets . . . . . . . . . . . . . . . . . . . . .
(28,241)
—
4,074
Accrued expenses and
provisions . . . . . . . . . . . . . . . . . .
Defined benefit plans . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . .
Unused tax losses . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . .
Investments in subsidiaries and
associates . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . .
80,266
4,815
17,562
62,886
29,563
(10,373)
(3,032)
709
(16,114)
9,314
—
(432)
—
—
—
(35,461)
31,617
6,762
(24,347)
—
(1,570)
¥—
—
—
—
—
—
—
—
—
—
—
—
¥ (225) ¥ 18,363
31,909
(33,029)
(168,958)
18
(111)
1,696
89
(24,078)
(1,560)
1,027
(503)
915
(2,456)
68,333
2,378
17,768
47,687
36,421
89
371
(28,610)
6,071
Total . . . . . . . . . . . . . . . . . . . . . . . .
¥ (34,428) ¥ 7,261
¥ 2,072
¥—
¥ (650) ¥ (25,745)
* Other consists primarily of foreign currency translation difference and the tax impact relating to assets and
liabilities classified as held for sale.
Balances as of March 31, 2017 are revised to reflect the completed purchase price allocation of ARIAD
acquisition that resulted from adjustments to the provisional fair value of the acquired net assets (refer to
Note 31).
Takeda considers the probability that a portion, or all of the future deductible temporary differences or
unused tax losses can be utilized against future taxable profits upon recognition of deferred tax assets. In
assessing the recoverability of deferred tax assets, Takeda considers the scheduled reversal of taxable temporary
differences, projected future taxable profits, and tax planning strategies. Based on the level of historical taxable
profits and projected future taxable profits during the periods in which the temporary differences become
deductible, Takeda determined that it is probable that the tax benefits can be utilized.
The unused tax losses, deductible temporary differences, and unused tax credits for which deferred tax
assets were not recognized are as follows:
Unused tax losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductible temporary differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unused tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥87,070
984
10,442
¥36,878
11,593
7,954
JPY (millions)
As of March 31
2017
2018
F-30
The unused tax losses and unused tax credits for which deferred tax assets were not recognized will
expire as follows:
Unused tax losses
JPY (millions)
As of March 31
2017
2018
1st year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2nd year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3rd year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4th year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5th year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
After 5th year
¥ — ¥ —
92
8,901
505
301
27,079
—
56
1,599
577
84,838
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥87,070
¥36,878
Unused tax credits
JPY (millions)
As of March 31
2017
2018
Less than 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 years or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 4,114
6,328
¥3,201
4,753
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥10,442
¥7,954
The aggregate amounts of temporary differences associated with investments in subsidiaries for which
deferred tax assets were not recognized were 200,322 million JPY and 140,647 million JPY as of March 31, 2017
and 2018, respectively.
The aggregate amounts of temporary differences associated with investments in subsidiaries for which
deferred tax liabilities were not recognized were 178,529 million JPY, and 157,656 million JPY as of March 31,
2017 and 2018, respectively.
8. Earnings per Share
The basis for calculating basic and diluted earnings per share (“EPS”) (attributable to owners) for the
years ended March 31 is as follows:
2016
2017
2018
Net profit for the year attributable to owners of the Company:
Net profit for the year attributable to owners of the Company JPY
(millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net profit used for calculation of earnings per share JPY (millions) . . . . . . . .
80,166
80,166
114,940
114,940
186,886
186,886
Weighted-average number of ordinary shares outstanding during the year
(thousands of shares) [basic] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive effect (thousands of shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average number of ordinary shares outstanding during the year
783,933
4,235
781,096
4,792
780,812
5,895
(thousands of shares) [diluted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
788,168
785,888
786,707
Earnings per share
Basic (JPY) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted (JPY) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
102.26
101.71
147.15
146.26
239.35
237.56
Basic EPS is calculated by dividing the net profit for the year attributable to owners of the Company,
with the weighted average number of ordinary shares outstanding during the year. This calculation excludes the
average number of treasury shares. Diluted EPS is calculated by dividing the net profit for the year attributable to
F-31
owners of the Company, with the weighted-average number of ordinary shares outstanding during the year plus
the weighted-average number of ordinary shares that would be issued upon conversion of all the dilutive ordinary
shares into ordinary shares.
There were 901 thousand shares, such as stock options that are anti-dilutive, not included in the
calculation of diluted earnings per share for the year ended March 31, 2017. There were no anti-dilutive shares
for the years ended March 31, 2016 and 2018.
9. Other Comprehensive Income (Loss)
Amounts arising during the year, reclassification adjustments to profit or loss, and tax effects for each
component of other comprehensive income (loss) are as follows:
JPY (millions)
For the Year Ended March 31
2016
2017
2018
Re-measurement (loss) or gain on defined benefit plans:
Amounts arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (27,905)
9,765
¥ 23,242
(7,688)
¥ 1,156
(432)
Re-measurement (loss) or gain on defined benefit plans . . . . . . . . . . .
(18,140)
15,554
724
Exchange differences on translation of foreign operations:
Amounts arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification adjustments to (loss) or profit . . . . . . . . . . . . . . .
Before tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange differences on translation of foreign operations . . . . . . . . . .
Net changes in revaluation of available-for-sale financial assets:
Amounts arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification adjustments to (loss) or profit . . . . . . . . . . . . . . .
Before tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes on revaluation of available-for-sale financial assets . . . . .
Cash flow hedges:
Amounts arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification adjustments to profit or (loss) . . . . . . . . . . . . . . .
Before tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(85,326)
(170)
(85,496)
—
(85,496)
(11,083)
(15,036)
(26,119)
8,806
(17,313)
(79,255)
76,533
(2,722)
855
(1,867)
Share of other comprehensive income of investments accounted for
using the equity method:
Amounts arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification adjustments to (loss) or profit . . . . . . . . . . . . . . .
Before tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(265)
(1)
(266)
—
Share of other comprehensive income of investments accounted for
using the equity method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(266)
(51,252)
22
(51,230)
(590)
(51,820)
12,485
22
12,507
(2,986)
9,521
6,933
(418)
6,515
(2,103)
4,412
(38)
—
(38)
—
(38)
8,125
39,964
48,089
(1,478)
46,611
24,413
(23,773)
640
4,074
4,714
1,670
3,425
5,095
(1,570)
3,525
295
87
382
—
382
Total other comprehensive (loss) income for the year . . . . . . . . . . . . .
¥(123,082)
¥(22,371)
¥ 55,956
F-32
10. Property, Plant and Equipment
JPY (millions)
Buildings
and
structures
Machinery
and
vehicles
Tools, furniture,
and fixtures
Land
Construction
in progress
Total
Acquisition cost
As of April 1, 2016 . . . . . . . . . . . . . . . . ¥ 547,039 ¥ 423,357
Additions . . . . . . . . . . . . . . . . . . . . . . .
11,519
Acquisitions through business
14,485
¥ 129,303
5,102
¥ 81,607 ¥ 42,533 ¥1,223,839
72,407
41,301
—
combinations . . . . . . . . . . . . . . . . . .
Transfers . . . . . . . . . . . . . . . . . . . . . . . .
Disposals and other decreases . . . . . . .
Reclassification to assets held for sale
(Note 19)
. . . . . . . . . . . . . . . . . . . . .
Foreign currency translation
2,460
7,347
(9,160)
507
16,289
(12,758)
101
1,501
(7,877)
—
(118)
(229)
—
(25,632)
(271)
3,068
(613)
(30,295)
(40,778)
(46,499)
(18,681)
(10,231)
(844)
(117,033)
(4,584)
differences . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,647)
As of March 31, 2017 . . . . . . . . . . . . . . ¥ 515,202 ¥ 384,184
11,327
Additions . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions through business
(3,806)
(2,385)
19,778
(1,357)
(684)
¥ 107,408
6,288
(529)
(914)
(10,585)
(309)
(6,356)
1,274
¥ 69,586 ¥ 58,052 ¥1,134,432
74,527
37,071
63
combinations . . . . . . . . . . . . . . . . . .
Transfers . . . . . . . . . . . . . . . . . . . . . . . .
Disposals and other decreases . . . . . . .
Reclassification to assets held for sale
(Note 19)
. . . . . . . . . . . . . . . . . . . . .
Foreign currency translation
—
15,741
(864)
—
19,184
(8,459)
—
1,615
(9,564)
(1,830)
(2,066)
(276)
—
72
(77)
(94)
—
(37,382)
(376)
—
(770)
(19,340)
—
(4,266)
5,020
differences . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
(445)
As of March 31, 2018 . . . . . . . . . . . . . . ¥ 548,329 ¥ 408,745
630
(328)
767
313
¥ 106,551
Accumulated depreciation and
accumulated impairment losses
541
(2)
7,584
(769)
¥ 70,089 ¥ 57,684 ¥1,191,398
626
(307)
As of April 1, 2016 . . . . . . . . . . . . . . . . ¥(237,696) ¥(325,977) ¥(107,312) ¥
Depreciation expenses . . . . . . . . . . . . .
Impairment losses . . . . . . . . . . . . . . . . .
Transfers . . . . . . . . . . . . . . . . . . . . . . . .
Disposals and other decreases . . . . . . .
Reclassification to assets held for sale
(20,683)
(723)
425
8,460
(22,241)
(1,840)
(1,604)
11,668
(8,511)
(512)
1,569
7,749
(938) ¥ — ¥ (671,923)
(51,435)
—
(5,848)
(154)
390
—
28,023
146
—
(2,619)
—
—
(Note19) . . . . . . . . . . . . . . . . . . . . . .
23,237
40,691
16,198
—
—
80,126
Foreign currency translation
2,041
2,145
differences . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31, 2017 . . . . . . . . . . . . . . ¥(222,794) ¥(292,117) ¥ (89,197) ¥
Depreciation expenses . . . . . . . . . . . . .
Impairment losses . . . . . . . . . . . . . . . . .
Transfers . . . . . . . . . . . . . . . . . . . . . . . .
Disposals and other decreases . . . . . . .
Reclassification to assets held for sale
(21,357)
(454)
5
7,126
(19,480)
(13,620)
637
701
(6,670)
(9)
90
9,268
1,081
541
3,825
3,361
—
—
6,970
23
562
6,609
(361) ¥ (2,619) ¥ (607,088)
(47,507)
—
(14,220)
—
732
—
17,095
—
—
(137)
—
—
(Note 19)
. . . . . . . . . . . . . . . . . . . . .
525
846
171
—
—
1,542
Foreign currency translation
differences . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31, 2018 . . . . . . . . . . . . . . ¥(254,699) ¥(309,759) ¥ (86,988) ¥
(3,829)
21
(533)
(108)
(774)
106
(5,170)
(34)
—
19
(395) ¥ (2,756) ¥ (654,597)
—
—
Carrying amount
As of April 1, 2016 . . . . . . . . . . . . . . . . ¥ 309,343 ¥ 97,380
92,067
As of March 31, 2017 . . . . . . . . . . . . . .
98,986
As of March 31, 2018 . . . . . . . . . . . . . .
292,408
293,630
¥ 21,991
18,211
19,563
¥ 80,669 ¥ 42,533 ¥ 551,916
527,344
55,433
536,801
54,928
69,225
69,694
F-33
Balances as of March 31, 2017 are revised to reflect the completed purchase price allocation of ARIAD
acquisition that resulted from adjustments to the provisional fair value of the acquired net assets (refer to
Note 31).
Property, plant and equipment includes assets held under finance leases. The carrying amount of these
assets is as follows:
As of April 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY (million)
Buildings
and
structures
¥48,564
61,375
55,941
Machinery
and
vehicles
¥3,948
2,702
1,523
Tools,
furniture
and
fixtures
¥1,044
494
330
Takeda recognized the following impairment losses, which are reflected as follows, in the consolidated
statements of income:
JPY (millions)
For the Year Ended March 31
2016
2017
2018
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
(65)
(434)
(68)
(1,817)
¥(1,079)
—
(678)
(4,091)
¥
(365)
—
—
(13,855)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(2,384)
¥(5,848)
¥(14,220)
Impairment loss for the year ended March 31, 2016 was primarily related to the write down of a
manufacturing plant to fair value less costs to sell upon its classification as held for sale assets. Impairment loss
for the year ended March 31, 2017 was primarily due to the impairment of construction in progress relating to
construction of a facility that was terminated following the decision to discontinue a product to be manufactured
at this facility. Impairment loss for the year ended March 31, 2018 was related primarily to buildings and
structures in research equipment which were deemed as underutilized assets, related to the Research and
Development (“R&D”) transformation strategy.
The carrying amounts of the impaired assets were reduced to the recoverable amounts, which were
measured at the fair value less costs of disposal using values, such as expected sales amounts. This fair value is
classified as Level 3 in the fair value hierarchy.
F-34
11. Goodwill
JPY (millions)
2017
2018
Acquisition cost
As of beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions (Note 31)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deconsolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification to assets held for sale (Note 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 779,316
273,627
—
(32,472)
—
¥1,020,471
3,256
(899)
6,512
(49)
As of end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,020,471
¥1,029,291
Accumulated impairment losses
As of beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deconsolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
— ¥
(903)
—
6
As of end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
(897) ¥
(897)
—
899
(45)
(43)
Carrying amount
As of beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 779,316
1,019,574
¥1,019,574
1,029,248
Goodwill is allocated to the following groups of cash-generating units (“CGU”):
JPY (millions)
As of March 31
2017
2018
Prescription drugs sold worldwide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prescription drugs sold outside of the United States and Japan . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 554,659
391,889
73,026
¥ 527,481
429,363
72,404
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,019,574
¥1,029,248
Balances as of March 31, 2017 are revised to reflect the completed purchase price allocation of ARIAD
acquisition that resulted from adjustments to the provisional fair value of the acquired net assets (refer to
Note 31).
Impairment loss for goodwill is recognized if the recoverable amount of goodwill is less than the
carrying amount. The recoverable amount is the greater of fair value less costs to sell, or value in use. Value in
use is calculated by discounting the estimated future cash flows based on a three-year projection approved by
management using an appropriate growth rate and a discount rate.
The significant assumptions used to calculate the recoverable amount (value in use) are as follows:
Growth Rate
Discount Rate
(Post-tax)
Discount Rate
(Pre-tax)
Based on country/market
specific long-term average
growth rate for the CGU
Based on country/market
specific weighted average
cost of capital
Based on country/market
specific weighted average
cost of capital
March 31, 2016 . . . . . . . . . . . .
March 31, 2017 . . . . . . . . . . . .
March 31, 2018 . . . . . . . . . . . .
1.6% – 2.6%
1.5% – 2.7%
1.5% – 3.2%
5.8% – 13.5%
4.9% – 13.5%
5.6% – 14.4%
8.3% – 16.9%
7.0% – 16.9%
8.0% – 18.0%
F-35
During the year ended March 31, 2017, Takeda recognized a goodwill impairment loss of 903 million
JPY, which is recorded in other operating expenses. There was no impairment recognized during the years ended
March 31, 2016 and 2018.
The value in use substantially exceeds the relevant carrying amount in each group of CGUs, and a
reasonable change in the assumptions would not result in an impairment.
12. Intangible Assets
Acquisition cost
As of April 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . .
Acquisitions through business combinations (Note 31)
Disposals and other decreases . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification to assets held for sale (Note 19)
. . . . . . . . . .
Foreign currency translation differences . . . . . . . . . . . . . . . . .
As of March 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions through business combinations (Note 31)
. . . . .
Disposals and other decreases . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .
Reclassification to assets held for sale (Note 19)
Deconsolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation differences . . . . . . . . . . . . . . . . .
JPY (millions)
Intangible
Assets
Associated
with Products
Other
Total
¥ 1,556,854
62,282
433,047
(47,368)
—
(27,219)
¥ 1,977,596
32,594
41,764
(4,517)
(2,655)
(2,356)
(21,565)
¥ 23,813
463
—
(8)
(1,048)
117
¥ 23,337
1
—
(8)
—
—
(1,126)
¥ 1,642,810
75,735
433,047
(50,528)
(2,822)
(28,155)
¥ 2,070,087
49,529
41,764
(6,500)
(2,813)
(2,356)
(21,861)
Software
¥ 62,143
12,990
—
(3,152)
(1,774)
(1,053)
¥ 69,154
16,934
—
(1,975)
(158)
—
830
As of March 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 84,785
¥ 2,020,861
¥ 22,204
¥ 2,127,850
Accumulated amortization and
accumulated impairment losses
As of April 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals and other decreases . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification to assets held for sale (Note 19)
. . . . . . . . . .
Foreign currency translation differences . . . . . . . . . . . . . . . . .
As of March 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reversal of impairment losses . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals and other decreases . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification to assets held for sale (Note 19)
. . . . . . . . . .
Deconsolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation differences . . . . . . . . . . . . . . . . .
¥(42,871) ¥ (845,242) ¥(11,569) ¥ (899,682)
(119,071)
(44,609)
44,971
1,167
10,174
(112,459)
(44,609)
41,908
—
9,280
(6,312)
—
2,796
657
719
(300)
—
267
510
175
¥(45,011) ¥ (951,122) ¥(10,917) ¥(1,007,050)
(134,194)
(19,168)
23,057
3,645
2,197
2,356
15,571
(126,108)
(19,080)
23,057
2,397
2,079
2,356
15,557
(8,045)
(88)
—
1,242
118
—
(41)
—
—
—
—
13
1
6
As of March 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(51,771) ¥(1,050,864) ¥(10,951) ¥(1,113,586)
Carrying amount
As of April 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 19,272
24,143
33,014
¥
711,612
1,026,474
969,997
¥ 12,244
12,420
11,253
¥
743,128
1,063,037
1,014,264
F-36
There were no material internally generated intangible assets recorded in the consolidated statements of
financial position.
The intangible assets associated with products are comprised of the following:
As of April 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of March 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY (millions)
Marketed
Products
¥617,269
645,449
698,329
In-Process
R&D
¥ 94,343
381,025
271,668
Carrying
amount
¥ 711,612
1,026,474
969,997
Balances as of March 31, 2017 are revised to reflect the completed purchase price allocation of ARIAD
acquisition that resulted from adjustments to the provisional fair value of the acquired net assets (refer to
Note 31).
Marketed products mainly represent license rights associated with commercialized products. These
include intangible assets associated with Pantoprazole acquired through the acquisition of Nycomed, which
represent 340,396 million JPY and 318,281 million JPY as of March 31, 2017 and 2018, respectively, and
intangible assets associated with Brigatinib and ICLUSIG acquired through the acquisition of ARIAD
Pharmaceuticals, Inc., which represent 134,872 million JPY and 204,378 million JPY as of March 31, 2017 and
2018, respectively.
The remaining amortization period is 4 to 9 years as of March 31, 2018 for the assets acquired through
the acquisition of Nycomed and 9 to 13 years for the assets acquired through the acquisition of ARIAD
Pharmaceuticals, Inc.
In-process R&D mainly represents products in development and license rights obtained in connection
with Takeda’s in-licensing and collaboration agreements. These agreements relate to the right to sell products
that are being developed (refer to Note 13). These intangible assets are not subject to amortization. These include
intangible assets associated mainly with Brigatinib acquired through the acquisition of ARIAD Pharmaceuticals,
Inc., which represent 288,189 million JPY and 182,002 million JPY as of March 31, 2017 and 2018, respectively.
Impairment
Takeda’s impairment assessment for intangible assets requires a number of significant judgments to be
made by management to estimate the recoverable amount, including the estimated pricing and costs, likelihood
of regulatory approval, and the estimated market and Takeda’s share of the market. The most significant
assumption for intangible assets associated with marketed products is the product market share of the therapeutic
area and estimated pricing, whereas the most significant assumption with pre-marketed products and In-process
R&D is the probability of regulatory approval. A change in these assumptions may have a significant impact on
the amount, if any, of an impairment charge recorded during a period. For example, negative results from a
clinical trial may change the assumption and result in an impairment. Products in development may be fully
impaired when a trial is unsuccessful and there is no alternative use for the development asset.
losses of 44,609 million JPY, and reversal of impairment
Takeda recorded impairment losses of 10,002 million JPY (net of reversal of previous impairment),
impairment
losses 3,889 million JPY (net of
impairment losses) during the year ended March 31, 2016, 2017, and 2018, respectively. These losses are
primarily recognized in amortization and impairment losses on intangible assets associated with products in the
consolidated statement of income.
During the year ended March 31, 2016, Takeda recorded impairment losses of 18,555 million JPY
resulting from a decision to relinquish its marketing rights for a product that was in-licensed during the prior year
F-37
because of reduced sales of the product. The recoverable amount of the impaired assets amounted to
16,151 million JPY. This was offset by reversal of a previously recorded impairment loss of 8,553 million JPY
related to COLCRYS, which was previously impaired due to a decline in expected profitability caused by the
launch of a competing product. The subsequent sales performance indicated that the impairment loss had
decreased and, therefore, was partially reversed. The recoverable amount of the assets subject to reversal
amounted to 72,884 million JPY.
During the year ended March 31, 2017, Takeda recorded impairment losses of 44,609 million JPY
primarily resulting from a decision to terminate development of certain products and competitive product
launches. The recoverable amount of the impaired assets amounted to 45,275 million JPY. Specifically, during
the year ended March 31, 2017, Takeda recorded an impairment of 16,003 million JPY due to a decline in
expected profitability of COLCRYS, an impairment of 7,889 million JPY due to the termination of development
of an oncology product, and an impairment of 3,359 million JPY due to the termination of development of a
vaccine product.
During the year ended March 31, 2018, Takeda recorded reversal of a previously recorded impairment
loss of 23,057 million JPY mainly related to COLCRYS based on more favorable sales performance. The
recoverable amount of the assets related to the reversal was 49,113 million JPY. This was offset by impairment
losses of 19,168 million JPY primarily resulting from a decision to terminate development of certain products.
The recoverable amount of the impaired assets amounted to 3,185 million JPY.
Impairment losses were calculated by deducting the recoverable amount from the carrying amount.
The significant assumptions used to calculate the recoverable amount (value in use) are as follows:
Discount Rate
(Post-tax)
Discount Rate
(Pre-tax)
March 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.7% – 14.5% 10.6% – 23.4%
8.3% – 16.9%
5.7% – 13.5%
9.4% – 18.5%
6.5% – 14.4%
A part of the recoverable amount was measured at the fair value, less cost of disposal (the amount that
was expected to be received by selling the assets). This fair value is classified as Level 3 in the fair value
hierarchy.
13. Collaborations and Licensing Arrangements
Takeda is party to certain collaborative and licensing arrangements. These agreements generally provide
for commercialization rights to a product or products being developed by the counterparty, and, in exchange,
often resulted in an up-front payment is paid upon execution of the agreement and resulting an obligation that
requires Takeda to make future development, regulatory approval, or commercial milestone payments as well as
royalty payments. In some of these arrangements, Takeda and the licensee are both actively involved in the
development and commercialization of the licensed product, and have exposure to risks and rewards that are
dependent on its commercial success.
Under the terms of these collaboration and licensing arrangements, Takeda made the following
payments during the years ended March 31:
Initial up-front and milestone payments . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of shares of collaboration and in-licensing partners . . . . . . .
¥22,472
1,207
¥62,282
2,480
¥32,594
15,074
JPY (millions)
2016
2017
2018
F-38
As of March 31, 2018, Takeda had the potential to make future payments related to its option when
exercised to acquire the collaboration and in-licensing partners’ equity interest for the future development and
the commercialization of the licensed products. Such potential future payments may total up to approximately
80 billion JPY.
Collaboration and in-licensing arrangements
The following is a description of Takeda’s significant collaboration agreements.
Mersana Therapeutics (“Mersana”)
In March 2014, Takeda entered into an agreement with Mersana related to the development of antibody
drug conjugates, which was expanded in January 2015 and again in February 2016. Under the agreements,
Takeda and Mersana have identified certain product candidates and agreed terms of development and
commercial rights between the parties. The rights vary based on product candidates. Takeda’s rights include
various combination of development rights (exclusive, non-exclusive and development led by Mersana) and
commercialization rights (worldwide and specific geographic regions). The agreement required an up-front
payment, investment in Mersana, future milestone payments and royalties on the future sales of products.
TESARO, Inc. (“TESARO”)
In July 2017, Takeda entered into an exclusive licensing agreement with TESARO for
the
commercialization and clinical development of Niraparib, a novel poly ADP-ribose polymerase inhibitor. The
collaboration agreement grants Takeda the right to develop and commercialize all indications in Japan and all
indications, except prostate cancer, in South Korea, Taiwan, Russia and Australia. Under the terms of this
agreement, Takeda has made an up-front payment and is required to make additional milestone payments upon
the achievement of certain regulatory and commercial goals. TESARO will also be eligible to receive from
Takeda tiered royalties based on a double-digit percentage of net product sales.
Denali Therapeutics (“Denali”)
In January 2018, Takeda entered into a collaboration agreement with Denali
to develop and
commercialize up to three specified therapeutic product candidates for neurodegenerative diseases. Each program
is directed to a genetically validated target for neurodegenerative disorders, including Alzheimer’s disease and
other indications, and incorporates Denali’s Antibody Transport Vehicle platform for increased exposure of
biotherapeutic products in the brain. Under the terms of the agreement, Takeda made an up-front payment in
exchange for certain option rights and the purchase of Denali equity. In addition, Denali is eligible to receive
development and commercial milestone payments. Denali will be responsible for all development activities and
costs prior to Investigational New Drug filing for each of the three programs. Takeda has the option to
co-develop and co-commercialize each of the three programs. If Takeda exercises the option, the parties will then
jointly conduct clinical development and share all costs equally. Denali will lead early clinical development
activities and Takeda will
jointly
commercialize the products in the United States and China, and Takeda will have exclusive commercialization
rights in all other markets. The parties will share global profits equally.
lead late-stage clinical development activities. Takeda and Denali will
Wave Life Sciences Ltd. (“Wave”)
In February 2018, Takeda entered into an agreement with Wave to discover, develop and commercialize
nucleic acid therapies for disorders of the central nervous system (“CNS”) and the agreement became effective in
April 2018 after the receipt of clearance under the Hart-Scott-Rodino Antitrust Improvement Act (HSR Act).
Under the agreement, Wave will provide Takeda the option to co-develop and co-commercialize programs in
areas of Huntington’s disease (HD), amyotrophic lateral sclerosis (ALS), frontotemporal dementia (FTD) and
F-39
spinocerebellar ataxia type 3 (SCA3). In addition, Takeda will have the right to license multiple preclinical
programs targeting CNS disorders, including Alzheimer’s disease and Parkinson’s disease. The agreement
required an up-front payment, investment in Wave and future contingent payments such as development and
commercial milestone payments. Wave will continue to independently advance its activities in neuromuscular
diseases, including its lead clinical program for the treatment of Duchene muscular dystrophy (DMD).
Out-licensing agreements
Takeda has entered into various licensing arrangements where it has licensed certain product or
intellectual property rights for consideration such as equity interests of partners, up-front payments, development
milestones, sales milestones and/or royalty payments.
14. Investments Accounted for Using the Equity Method
Teva Takeda Pharma
Teva Takeda Pharma Ltd. (“Teva Takeda Pharma”) is a business venture of Takeda and Teva
Pharmaceutical Industries Ltd. (“Teva”) headquartered in Israel.
On April 1, 2016, Takeda sold its off-patented and long-listed products business in Japan to Teva
Takeda Yakuhin Ltd. (“Teva Takeda Yakuhin”), a subsidiary of Teva Takeda Pharma, and received 49.0% of
shares of Teva Takeda Pharma as consideration for the business. The remainder of Teva Takeda Pharma is
owned by a subsidiary of Teva. The long-listed products business had a book value of 3,755 million JPY on the
date of disposal. Takeda has significant influence over Teva Takeda Pharma and has applied the equity method.
Takeda accounted for the transaction based on IAS 28 ‘Investments in Associates and Joint Ventures’. Under this
accounting, Takeda recognized a gain for the difference between the fair value consideration received (shares of
Teva Takeda Pharma) and the carrying value of the business to the extent it had disposed of the business and it
deferred the remainder of the gain (49%). The gain on transfer of business recorded in other operating income for
the year ended March 31, 2017 was 115,363 million JPY, which included the gain of 102,899 million JPY
recognized at the date of disposal. The remainder of the gain was deferred and is amortized over 15 years, which
is the same period as the intangible assets identified in the purchase price allocation. The amortization of the gain
is recorded in other operating income.
Teva Takeda Pharma, which continues its generics business, and Teva Takeda Yakuhin, which operates
the long-listed products business and its generics business, are jointly engaged in business in Japan. Takeda
recognizes revenue for product sales of goods related to its supply of the long-listed products, to Teva Takeda
Yakuhin and service revenue for its distribution using its channel to deliver products including generic products
of Teva Takeda Pharma and Teva Takeda Yakuhin, to healthcare providers.
The summarized consolidated financial information of Teva Takeda Pharma and Teva Takeda Yakuhin
is as follows:
JPY (millions)
For the Year Ended March 31
2017
2018
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss for the year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive loss for the year
Total comprehensive loss for the year (49.0%)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥105,547
(4,132)
—
(4,132)
(2,025)
(120)
¥103,719
(66,301)
—
(66,301)
(32,487)
(137)
Takeda’s share of loss for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (2,145)
¥ (32,624)
F-40
JPY (millions)
As of March 31
2017
2018
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥255,179
107,656
(57,412)
(25,019)
¥163,979
97,865
(31,901)
(20,119)
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥280,404
¥209,824
Takeda’s share of equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥137,398
66,094
(86,519)
¥102,814
66,094
(73,554)
Carrying amount of investments accounted for using the equity method . . . . . . . . . .
¥116,973
¥ 95,354
The results of Teva Takeda Pharma and Teva Takeda Yakuhin for the year ended March 31, 2018
included an impairment loss of 104,753 million JPY of which, 35,725 million JPY represents Takeda’s share
which was due to the 2018 revision of the pharmaceutical pricing system in Japan and the resulting changes in
the business environment.
No dividend was received from Teva Takeda Pharma for the year ended March 31, 2017. Takeda
received dividends of 4,159 million JPY from Teva Takeda Pharma for the year ended March 31, 2018. Teva
Takeda Pharma cannot distribute its profits without the consent from the two venture partners.
Associates that are Individually Immaterial to Takeda
Financial information for associates, which are individually immaterial to Takeda, is as follows: These
amounts are based on the shareholding ratio of Takeda.
Net (loss) profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
¥
(3)
(266)
Total comprehensive (loss) income for the year . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(269)
2017
¥599
(38)
¥561
2018
¥425
382
¥807
JPY (millions)
For the Year Ended March 31
The carrying amount of the investments in associates, which are individually immaterial to Takeda, is as
follows:
Carrying amount of investments accounted for using the equity method . . . . . . . . . . . . . . . .
¥9,438
¥12,595
JPY (millions)
As of March 31
2017
2018
F-41
15. Other Financial Assets
JPY (millions)
As of March 31
2017
2018
Derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
2,960
164,490
52,530
1,131
12,208
¥
3,289
171,884
87,381
—
14,528
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥233,319
¥277,082
Non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥176,636
¥ 56,683
¥196,436
¥ 80,646
As of March 31, 2017, and 2018, available-for-sale financial assets included 155,368 million JPY and
163,030 million JPY, respectively, of investments in public companies, and are considered Level 1 in the fair
value hierarchy as defined in Note 27. The remainder of the available-for-sale assets primarily relate to
investments acquired in connection with collaboration and research agreements (refer to Note 13).
The restricted deposits mainly represent cash held as required by the agreements entered into for
anticipated acquisitions. This included cash held at March 31, 2017 for the acquisition of business from
Unipharm, Inc., and at March 31, 2018 primarily for the expected acquisition of TiGenix NV (refer to Note 33).
16. Inventories
JPY (millions)
As of March 31
2017
2018
Finished products and merchandise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 94,281
61,951
69,816
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥226,048
¥ 86,254
63,145
63,545
¥212,944
Balances as of March 31, 2017 are revised to reflect the completed purchase price allocation of ARIAD
acquisition that resulted from adjustments to the provisional fair value of the acquired net assets (refer to
Note 31).
The amount of inventory write-offs recognized as expenses was 10,936 million JPY, 11,621 million
JPY, and 10,292 million JPY for the years ended March 31, 2016, 2017 and 2018 respectively.
17. Trade and Other Receivables
JPY (millions)
As of March 31
2017
2018
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥366,181
66,952
(9,728)
¥369,652
59,414
(8,819)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥423,405
¥420,247
F-42
18. Cash and Cash Equivalents
JPY (millions)
As of March 31
2017
2018
Cash and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥278,488
40,967
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥319,455
¥243,324
51,198
¥294,522
19. Assets and Disposal Groups Held for Sale
Assets Held for Sale
Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tools, furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments accounted for using the equity method . . . . . . . . . . . . . . . . . . . . . . . . . .
¥
2017
349
477
23
227
15,835
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥16,911
2018
¥ 98
—
—
65
—
18
¥181
JPY (millions)
As of March 31
Takeda has classified certain assets as held for sale in the consolidated statement of financial position.
Non-current assets and disposal groups are transferred to assets held for sale when it is expected that their
carrying amounts will be recovered principally through a sale and the sale is considered highly probable. The
assets held for sale are held at the lower of carrying amount or fair value, less costs to sell.
The assets held for sale as of March 31, 2017, represent primarily investment property that was
classified as held for sale during the year based on management’s decision to sell this property. No impairment
was recorded upon classification of the building as held for sale. The building was sold during the year ended
March 31, 2018 and a gain of 16,022 million JPY was recognized in other operating income.
The assets held for sale as of March 31, 2018 represent primarily buildings and structures that were
classified as held for sale during the year then ended based on management decision to sell this property. No
impairment was recorded upon classification of the building as held for sale.
The fair value of assets is based on valuations by independent appraisers who hold recognized and
relevant professional qualifications in the respective location of assets held for sale. The valuations, which
conform to the standards of the location, are based on market evidence of transaction prices for similar assets.
The fair value of assets held for sale is classified as Level 3 in the fair value hierarchy.
F-43
Disposal Groups Held for Sale
JPY (millions)
As of March 31
Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
¥ 36,634
1,655
22,223
28,978
21,797
10,108
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥121,395
Bonds and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net defined benefit liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 60,000
2,372
107
832
14,999
10,346
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 88,656
2018
¥ —
—
1,202
1,466
451
692
¥3,811
¥ —
—
1,066
—
165
1,983
¥3,214
Gains or losses recognized resulting from measuring the disposal groups classified as held for sale at the
lower of their carrying amounts or fair value, less costs to sell when assets or disposal groups are classified to
held for sale, are recorded as other operating expense.
The disposal groups held for sale as of March 31, 2017, consisted mainly of a group of assets and
liabilities related to Takeda’s consolidated subsidiary, Wako Pure Chemical Industries, Ltd. (“Wako”). On
December 15, 2016, Takeda entered into an agreement to sell the subsidiary to FUJIFILM Corporation, and
reclassified the disposal group as held for sale. Wako, a chemical company, was disposed of as it was no longer
aligned with Takeda’s core business activities. No impairment was recorded upon classification of the disposal
group as held for sale. At the time of sale, the carrying value of Wako’s net assets was de minimis. Takeda sold
Wako and recorded a gain of 106,337 million JPY in other operating income. The proceeds from the sale netted
with Wako’s cash-on-hand of 21,782 million JPY comprised the majority of Takeda’s proceeds from sales of
business of 85,080 million JPY for the year ended March 31, 2018.
The disposal groups held for sale as of March 31, 2018, consisted mainly of a group of assets, liabilities,
and other comprehensive income related to Takeda’s consolidated subsidiary, Multilab Indústria e Comércio de
Produtos Farmacêuticos Ltda., and reclassified as held for sale. The shares of the subsidiary have been sold in
July 2018.
Takeda recorded a loss of 3,213 million JPY on the classification of the disposal group as held for sale
for the year ended March 31, 2018. The fair value of disposal group held for sale is classified as Level 2 in the
fair value hierarchy.
F-44
20. Bonds and Loans
JPY (millions)
As of March 31
2017
2018
Average
Interest Rate
(%)
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 179,836
¥172,889
Short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
405,054
560,000
18
812,755
1.2
1.1
0.5
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,144,890
¥985,662
Non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current
¥ 599,862
¥ 545,028
¥985,644
18
¥
Maturity
Period
July 2019 –
January 2022
July 2019 –
April 2027
“Average interest rate” represents the weighted-average rate on the balance as of March 31, 2018. The
interest rate fixed by the interest rate swaps is used for a portion of the long-term loans identified in the above
table.
A summary of the bond terms is as follows:
JPY (millions) As of March 31
Name of Bond
Date of Issuance
2017
2018
Interest
Rate
(%)
Collateral
Date of Maturity
13th Unsecured straight
bonds . . . . . . . . . . . . . . . March 22, 2012
¥ 59,974
¥
—
0.5
14th Unsecured straight
bonds . . . . . . . . . . . . . . .
July 19, 2013
59,942
59,967
0.5
15th Unsecured straight
bonds . . . . . . . . . . . . . . .
US dollar unsecured senior
notes (Due in 2022) . . . .
July 19, 2013
59,920
59,944
0.7
July 18, 2017
—
2.5
52,978
(500 million
USD)
Total
¥179,836
¥
172,889
—
—
—
—
March 22, 2018
July 19, 2019
July 17, 2020
January 18, 2022
The US dollar unsecured senior notes were issued in overseas markets, and are presented in US dollar
amounts. At the time of issuance, Takeda had entered into foreign currency swap agreement to hedge the JPY
amount for 200 million US dollar of the unsecured senior notes.
F-45
21. Other Financial Liabilities
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration arising from business combinations (Note 31) . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY (millions)
As of March 31
¥
2017
9,893
58,811
28,976
12,996
¥
2018
8,871
53,149
30,569
28,247
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥110,676
¥120,836
Non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 81,778
¥ 28,898
¥ 91,223
¥ 29,613
The future minimum payments related to the finance lease obligations are as follows:
Within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Between one year and five years . . . . . . . . . . . . . . . . . . . . . . .
More than five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY (millions)
As of March 31
Minimum Lease Payments
Present Value of Minimum
Lease Payments
¥
2017
4,995
17,647
87,474
2018
2017
2018
¥ 4,808
14,335
80,018
¥ 2,111
7,297
49,403
¥ 2,127
4,704
46,318
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥110,116
¥99,161
¥58,811
¥53,149
Less: Future finance charges . . . . . . . . . . . . . . . . . . . . . . . . . .
51,305
46,012
Present value of minimum lease payments . . . . . . . . . . . . . . .
¥ 58,811
¥53,149
Non-current
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 56,700
2,111
¥
¥51,022
¥ 2,127
The weighted average interest rates of the non-current and current finance lease obligations as of
March 31, 2018 were 5.0 % and 5.6 %, respectively.
22. Employee Benefits
Defined Benefit Plans
The Company and some of its subsidiaries have various defined benefit plans such as lump-sum
retirement payments plans, and defined benefit pension plans, which define the amount of benefits that an
employee will receive on or after retirement, usually based on one or more factors, such as age, years of service,
compensation, classes, and earned points, based on service.
The Company’s defined benefit plans account for the majority of Takeda’s defined benefit obligations
and plan assets. The Company has a corporate defined benefit pension plan and a lump-sum retirement payment
plan.
Defined benefit pension plans
The Company’s corporate defined benefit pension plan in Japan is a funded defined benefit pension
plan, which is regulated by the Defined-Benefit Corporate Pension Act, one of the Japanese pension laws.
Benefits are paid in exchange for services rendered by employees who worked for more than a specified period,
typically three years, considering their years of service and the degree of their contribution to the Company.
F-46
The Company’s pension fund (the “Fund”) is an independent entity established in accordance with the
Japanese pension laws, and Takeda has an obligation to make contributions. The Director(s) of the Fund has the
fiduciary duty to comply with laws; the directives by the Minister of Health, Labor and Welfare, and the
Director-Generals of Regional Bureaus of Health and Welfare made pursuant to those laws; and the by-laws of
the Fund and the decisions made by the Board of Representatives of the Fund. Contributions are also regularly
reviewed and adjusted as necessary to the extent permitted by laws and regulations.
The present value of the defined benefit obligation is calculated annually based on actuarial valuations
that are dependent upon a number of assumptions, including discount rates and future salary (benefit) increases,
in accordance with IAS 19 ‘Employee Benefits.’ Service costs charged to operating expense related to defined
benefit plans represent the increase in the defined benefit liability arising from pension benefits earned by active
participants in the current period. Takeda is exposed to investment and other experience risks and may need to
make additional contributions where it is estimated that the benefits will not be met from regular contributions,
expected investment income, and assets held.
Other types of defined benefit pension plans operated by Takeda are generally established and operated
in the same manner as described above and in accordance with local laws and regulations where applicable.
Certain of the Company’s European subsidiaries changed a portion of their existing defined benefit
plans into defined contribution plans during the year ended March 31, 2016. As a result, settlement gains and
losses were recognized in the consolidated statement of income for the year ended March 31, 2016.
The amounts recognized in the consolidated statements of income and the consolidated statements of
financial position are as follows:
Consolidated statements of income
JPY (millions)
For the Year Ended March 31
2016
2017
2018
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of the world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 5,436
5,268
¥ 6,779
5,210
¥ 4,582
5,772
Defined benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥10,704
¥11,989
¥10,354
Consolidated statements of financial position
Present value of defined benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥217,026
246,952
Net defined benefit liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net defined benefit assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,846
40,772
Japan
JPY (millions)
As of March 31
Rest of
the World
¥90,424
18,079
72,427
82
2017
¥307,450
265,031
83,273
40,854
Net amount of liabilities (assets) recognized in the consolidated statement
of financial position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (29,926)
¥72,345
¥ 42,419
F-47
Present value of defined benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥198,686
230,421
Net defined benefit liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net defined benefit assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,604
41,339
Japan
JPY (millions)
As of March 31
Rest of
the World
¥99,174
21,207
78,007
40
2018
¥297,860
251,628
87,611
41,379
Net amount of liabilities (assets) recognized in the consolidated statement
of financial position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (31,735)
¥77,967
¥ 46,232
Net defined benefit assets were included in “Other non-current assets” in the consolidated statement of
financial position, except for 1,210 million JPY included in “Assets held for sale” as of March 31, 2017. Net
defined benefit liabilities included 2,372 million JPY in “Liabilities held for sale” as of March 31, 2017, related
to disposal groups held for sale (refer to Note 19).
Defined benefit obligations
A summary of changes in present value of the defined benefit obligations for the periods presented is as
follows:
At beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Re-measurement of defined benefit plans
Re-measurement gains and losses arising from changes in
JPY (millions)
For the Year Ended March 31
Japan
¥236,957
6,015
964
Rest of
the World
¥94,135
3,601
1,515
2017
¥331,092
9,616
2,479
demographic assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,264)
(349)
(5,613)
Re-measurement gains and losses arising from changes in financial
assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Experience adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Past service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of business combinations and disposals . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9,824)
259
823
—
(12,847)
(57)
—
(1,826)
601
294
—
(2,871)
(185)
(4,491)
(11,650)
860
1,117
—
(15,718)
(242)
(4,491)
At end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥217,026
¥90,424
¥307,450
F-48
At beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Re-measurement of defined benefit plans
Re-measurement gains and losses arising from changes in
JPY (millions)
For the Year Ended March 31
Japan
¥217,026
4,866
1,424
Rest of
the World
¥90,424
4,295
1,713
2018
¥307,450
9,161
3,137
demographic assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,294
(1,179)
2,115
Re-measurement gains and losses arising from changes in financial
assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Experience adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Past service cost
Settlement
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of business combinations and disposals . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)
466
11
(2,515)
(13,134)
(12,749)
—
782
297
5
2,346
(3,093)
81
3,503
779
763
16
(169)
(16,227)
(12,668)
3,503
At end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥198,686
¥99,174
¥297,860
The remaining weighted average duration of the defined benefit obligations was 14.1 years and
14.4 years as of March 31, 2017 and 2018, respectively.
Significant actuarial assumptions used to determine the present value are as follows:
2017
2018
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of the world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of the world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount Rate
Future Salary
Increases
0.7%
1.8%
0.7%
1.7%
0.2%
2.5%
0.2%
2.7%
A 0.5% change in these actuarial assumptions would affect the present value of defined benefit
obligations by the amounts shown below:
2017
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of the world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of the world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-49
JPY (millions)
Discount Rate
Future Salary Increases
Change in
assumption
Impact
Change in
assumption
Impact
+ 0.50% ¥(12,910)
14,475
- 0.50%
(6,761)
+ 0.50%
7,543
- 0.50%
+ 0.50% (12,250)
13,778
- 0.50%
(7,371)
+ 0.50%
8,247
- 0.50%
+ 0.50%
- 0.50%
+ 0.50%
- 0.50%
+ 0.50%
- 0.50%
+ 0.50%
- 0.50%
¥ 593
(559)
485
(654)
517
(477)
479
(665)
Plan assets
The defined benefit plans are independent of Takeda and funded only by contributions from Takeda.
Takeda’s investment policies are designed to secure the necessary returns in the long-term within acceptable risk
levels to ensure payments of pension benefits to eligible participants,
including future participants. The
acceptable risk level in the return rate on the plan assets is derived from a detailed study considering the mid- to
long-term trends and the changes in income such as contributions and payments. Based on policies and studies,
after consideration of issues such as the expected rate of return and risks, Takeda formulates a basic asset mix
which aims at an optimal portfolio on a long-term basis with the selection of appropriate investment assets.
A summary of changes in fair value of plan assets for the periods presented is as follows:
Balance at beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Re-measurement of defined benefit plans
Return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contributions by the employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of business combinations and disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY (millions)
2017
2018
¥262,977
1,224
¥265,031
1,959
6,839
5,851
—
(12,068)
—
208
4,813
4,753
(3,564)
(11,507)
(11,225)
1,368
Balance at end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥265,031
¥251,628
Takeda expects to contribute 4,694 million JPY to the defined benefit plans for the year ending
March 31, 2019.
Breakdown of fair value by asset class:
JPY (millions)
As of March 31
2017
2018
With Quoted
Prices in
Active
Markets
No Quoted
Prices in
Active
Markets
With Quoted
Prices in
Active
Markets
No Quoted
Prices in
Active
Markets
Equities:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside Japan . . . . . . . . . . . . . . . . . . . . . . .
¥16,761
16,136
¥
2,838
44,992
¥15,494
6,396
¥
2,804
58,286
Bonds:
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside Japan . . . . . . . . . . . . . . . . . . . . . . .
Life insurance company general accounts . . . . .
Cash and cash equivalent
. . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,125
8,057
—
7,409
14,533
29,235
26,086
70,799
—
22,060
1,568
2,278
—
8,452
514
19,157
38,716
68,551
—
29,412
Total plan assets . . . . . . . . . . . . . . . . . . . . . . . . .
¥69,021
¥196,010
¥34,702
¥216,926
Life insurance company general accounts are accounts with guaranteed capital and minimum interest
rate, in which life insurance companies manage funds on a contractual basis.
F-50
Defined Contribution Plans
The Company and some of the Company’s subsidiaries offer defined contribution benefit plans.
Benefits of defined contribution plans are linked to contributions paid, the performance of each participant’s
chosen investments, and the form in which participants choose to redeem their benefits. Contributions made into
these plans are generally paid into an independently administered fund. Contributions payable by Takeda for
these plans are charged to operating expenses. Takeda has no exposure to investment risks and other experience
risks with regard to defined contribution plans.
The amount of defined contribution costs was 19,608 million JPY, 20,897 million JPY, and
19,525 million JPY for the years ended March 31, 2016, 2017 and 2018, respectively. These amounts include
contributions to publicly provided plans.
Other Employee Benefit Expenses
Major employee benefit expenses other than retirement benefits for each fiscal year are as follows:
Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥241,335
76,713
72,148
¥226,985
68,935
75,949
¥215,256
70,708
81,616
JPY (millions)
For the Year Ended March 31
2016
2017
2018
The above table does not include severance expenses.
23. Provisions
The movements in the provisions are as follows:
As of April 1, 2016 . . . . . . . . . . . . . . . . . . . . .
Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases (utilized) . . . . . . . . . . . . . . . . . . . . .
Decreases (reversed) . . . . . . . . . . . . . . . . . . . .
Increases (decreases) due to changes in
consolidation scope . . . . . . . . . . . . . . . . . . .
Reclassification to liabilities held for sale . . .
Foreign currency translation differences . . . .
As of March 31, 2017 . . . . . . . . . . . . . . . . . . .
Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases (utilized) . . . . . . . . . . . . . . . . . . . . .
Decreases (reversed) . . . . . . . . . . . . . . . . . . . .
Increases (decreases) due to changes
consolidation scope . . . . . . . . . . . . . . . . . . .
Reclassification to liabilities held for sale . . .
Foreign currency translation differences . . . .
Litigation
(Note 32)
¥ 37,949
1,410
(7,471)
(376)
Restructuring
¥ 10,215
28,465
(10,554)
(632)
JPY (millions)
Rebates and
Return
Reserves
¥ 78,652
267,566
(247,594)
(9,202)
Other
Total
¥ 22,946
13,413
(10,894)
(2,642)
¥ 149,762
310,854
(276,513)
(12,852)
2,567
—
(633)
—
—
(376)
1,645
—
(197)
215
(107)
(461)
4,427
(107)
(1,667)
¥ 33,446
3,692
(12,372)
(286)
¥ 27,118
5,935
(19,183)
(128)
¥ 90,870
310,070
(284,164)
(9,557)
¥ 22,470
14,009
(11,579)
(2,045)
¥ 173,904
333,706
(327,298)
(12,016)
—
(676)
(622)
(133)
—
(993)
—
—
(5,378)
(107)
(390)
826
(240)
(1,066)
(6,167)
As of March 31, 2018 . . . . . . . . . . . . . . . . . . .
¥ 23,182
¥ 12,616
¥ 101,841
¥ 23,184
¥ 160,823
F-51
The current portion of the provision is 115,341 million JPY, 135,796 million JPY, and 132,781 million
JPY as of April 1, 2016, March 31, 2017 and 2018, respectively. The non-current portion of the provision is
34,421 million JPY, 38,108 million JPY and 28,042 million JPY, as of April 1, 2016, March 31, 2017 and 2018,
respectively.
Balances as of March 31, 2017, are revised to reflect the completed purchase price allocation of ARIAD
acquisition that resulted from adjustments to the provisional fair value of the acquired net assets (refer to
Note 31).
Restructuring
Takeda has commenced various restructuring efforts during the years ended March 31, 2016, 2017 and
2018, in connection with efforts to transform its R&D function and to improve the efficiency of its operations.
These initiatives included consolidation of sites and functions and reduction in workforce. A restructuring
provision is recorded when Takeda has a detailed formal plan for the restructuring, including communication of
the overall plan to its employees. Takeda records the provision and associated expenses based on estimated costs
associated with the plan. The ultimate cost and the timing of any payments under the plan will be impacted by
the actual timing of the actions and the actions of employees impacted by the restructuring activities. The
payments for non-current restructuring provision are expected to be made within approximately 4 years.
Restructuring expenses recorded during the years ended March 31 are as follows:
JPY (millions)
2016
2017
2018
Cash:
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consulting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 7,692
7,571
8,371
¥32, 290
7,271
11,611
¥ 6,397
7,205
16,528
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥23,634
¥ 51,172
¥30,130
Non-Cash:
Depreciation and impairment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,126
3,417
¥14,606
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥25,760
¥ 54,589
¥44,736
The other restructuring costs mainly relate to contract termination costs.
Rebates and Returns
Takeda has recognized a provision related mainly to sales rebates and sales returns for products and
merchandises, which include sales linked rebates such as government health programs in the US. These are
expected to be paid out generally within one year. Sales rebates and sales returns are reviewed and updated
monthly or when there is a significant change in its amount.
Other
Other provisions are primarily related to asset retirement obligations, contract termination fees and
onerous contracts.
F-52
24. Other Liabilities
JPY (millions)
As of March 31
2017
2018
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥219,749
62,918
51,277
¥231,497
52,527
48,206
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥333,944
¥332,230
Non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 77,437
¥256,507
¥ 68,300
¥263,930
Accrued expenses include accrued labor cost of 110,988 million JPY and 108,766 million JPY as of
March 31, 2017 and 2018, respectively.
Deferred income includes government grants for the purchase of property, plant and equipment. The
grants amounts received were 26,215 million JPY and 23,937 million JPY during the years ended March 31,
2017 and 2018, respectively. The primary government grants relate to funding a portion of Takeda’s investment
in the development and production of new influenza vaccines. Takeda was reimbursed for investments it made in
facilities. The grant income is recognized over the life of the associated assets and is recorded as an offset to the
depreciation expense (included in cost of sales, selling, general, and administrative expenses, and research and
development expenses). Deferred income also includes unearned co-promotion fees received in advance of
26,453 million JPY and 21,656 million JPY as of March 31, 2017 and 2018, respectively. The unearned
co-promotion fees will offset selling, general and administrative expenses during the periods as planned on a pro
rata basis.
25. Trade and Other Payables
JPY (millions)
As of March 31
2017
2018
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥125,713
114,910
¥133,705
106,554
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥240,623
¥240,259
Trade payables relate to expenditures associated with Takeda’s manufacturing and other payables relate
to other expenditures associated with its day-to-day operations.
26. Equity and Other Equity Items
Authorized shares as of April 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding shares:
(Thousands of Shares)
2017
2018
3,500,000
3,500,000
At April 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
790,284
237
—
790,521
617
3,550
At March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
790,521
794,688
The shares issued by the Company are ordinary shares with no par value that have no restrictions on any
rights. The number of treasury shares included in the above “Outstanding shares” was 4,032 thousand shares,
F-53
6,745 thousand shares, 9,680 thousand shares, and 13,379 thousand shares as of April 1, 2015, March 31, 2016,
2017 and 2018, respectively. The number of treasury shares as of March 31, 2018 includes 13,133 thousand
shares held by the Employee Stock Ownership Plan (“ESOP”) Trust and the Board Incentive Plan (“BIP”) Trust.
The ESOP and BIP Trust acquired 6,804 thousand shares and sold 3,116 thousand shares during the year ended
March 31, 2018.
During the year ended March 31, 2018, the Company issued 3,550,000 shares through third-party
allotment to the Master Trust Bank of Japan, Ltd., which is the trust account for Takeda’s ESOP subsidiary. The
issuance of these shares resulted in an increase in share capital of 11,388 million JPY and share premium of
11,286 million JPY. The Master Trust Bank of Japan is a co-trustee of the ESOP. This issuance was approved by
the resolution of our Board of Directors. These shares were reacquired by the Company from the ESOP trust for
distribution of share based compensation awards. The reacquisition of the shares resulted in an increase in
treasury shares of 22,773 million JPY.
Dividends Declared
April 1, 2015 to March 31, 2016
Total
Dividends
JPY
(millions)
Dividends
per Share
(JPY)
Basis Date
Effective Date
Q1 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Q3 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥71,081
71,101
April 1, 2016, to March 31, 2017
Q1 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Q3 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71,112
71,122
April 1, 2017, to March 31, 2018
Q1 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Q3 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71,133
71,165
¥90.00 March 31, 2015
90.00
September 30,
2015
June 29, 2015
December 1,
2015
90.00 March 31, 2016
90.00
September 30,
2016
June 30, 2016
December 1,
2016
90.00 March 31, 2017
90.00
September 30,
2017
June 29, 2017
December 1,
2017
Dividends declared for which the effective date falls in the following fiscal year are as follows:
Dividends Declared and Paid
April 1, 2018 to March 31, 2019
Total
Dividends
JPY
(millions)
Dividends
per Share
(JPY)
Basis Date
Effective Date
Q1 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥71,507
¥90.00 March 31, 2018
June 29, 2018
27. Financial Instruments
Capital Management
The capital structure of Takeda consists of shareholders’ equity (Note 26), debt (Note 20), and cash and
cash equivalents (Note 18). The fundamental principles of Takeda’s capital risk management are to build and
maintain a steady financial base for the purpose of maintaining soundness and efficiency of operations and
achieving sustainable growth. According to these principles, Takeda conducts capital
investment, profit
distribution such as dividends, and repayment of loans based on steady operating cash flows through the
development and sale of competitive products. Takeda balances its capital structure between debt and equity and
adheres to a conservative financial discipline. Takeda monitors this balance through the use and has a target of a
medium-term net debt to earnings before interest, taxes, depreciation, and amortization ratio of 2.0x or less.
F-54
Financial Risk Management
Takeda promotes risk management to reduce the financial risks arising from business operations. The
principal risks to which Takeda is exposed include customer credit risk, liquidity risk and market risks caused by
changes in the market environment such as fluctuations in the price of foreign currency, interest rates and market
prices. Each of these risks are managed in accordance with Takeda’s policies.
Financial assets
JPY (millions)
As of March 31
2017
2018
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial assets at fair value through profit or loss (derivatives) . . . . . . . . . . . . . . . . . .
Derivative transactions to which hedge accounting is applied . . . . . . . . . . . . . . . . . . . .
Loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 319,455
2,960
—
489,274
164,490
¥ 294,522
762
2,527
522,157
171,884
Financial liabilities
JPY (millions)
As of March 31
2017
2018
Financial liabilities at fair value through profit or loss(derivatives) . . . . . . . . . . . . . . . .
Financial liabilities at fair value through profit or loss (contingent considerations
¥
7,419
¥
5,373
arising from business combinations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative transactions to which hedge accounting is applied . . . . . . . . . . . . . . . . . . . .
Other financial liabilities, including bonds and loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,976
2,474
1,457,320
30,569
3,498
1,307,317
Credit Risk
Takeda is exposed to credit risk from its operating activities (primarily trade receivables) and from its
financing activities, including deposits with banks and financial institutions, foreign exchange transactions, and
other financial instruments. Trade and other receivables are exposed to customer credit risk. Takeda monitors the
status of overdue balances, reviews outstanding balances for each customer and regularly examines the
credibility of major customers in accordance with Takeda’s policies for credit management to facilitate the early
evaluation and the reduction of potential credit risks. If necessary, Takeda obtains rights to collateral or
guarantees on the receivables.
Cash reserves of the subsidiaries are concentrated mostly with the Company and regional treasury
centers located in the United States and Europe through the group cash pooling system. These cash reserves are
primarily managed exclusively by investments in highly rated short-term bank deposits and bonds of highly rated
issuers within the investment limits determined by reviewing the investment ratings and terms under Takeda’s
policies for fund management, resulting in limited credit risk. Cash reserves, other than those subject to the group
cash pooling system, are managed by each consolidated subsidiary in accordance with the Company’s fund
management policies.
For derivatives, Takeda enters into trading contracts only with highly rated financial agencies in order to
minimize counterparty risk.
The maximum exposure to credit risk, without taking into account of any collateral held at the end of the
reporting period, is represented by the carrying amount of the financial instruments which is exposed to credit
risk on the consolidated statement of financial position.
F-55
The following represents the age of trade receivables that are past due but not impaired:
As of March 31, 2017 . . . . . . . . . . . . . . . . . . .
As of March 31, 2018 . . . . . . . . . . . . . . . . . . .
¥ 8,955
16,222
¥2,746
6,453
Total
Within 30
Days
JPY (millions)
Amount Past Due
Over 30
Days but
within 60
Days
¥1,912
2,243
Over 60
Days but
within 90
Days
¥369
782
Over 90
Days but
within
One Year
¥2,696
5,042
Over One
Year
¥1,232
1,702
The amounts in the above table are net of allowances for doubtful receivables. Management believes
that the unimpaired amounts that are past due are still collectible in full, based on historical payment behavior
and extensive analysis of customer credit risk.
The following is a summary of the change in allowance for doubtful receivables for the periods
presented:
JPY (millions)
2016
2017
2018
At beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases (utilized) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases (reversed) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification to assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,278
7,972
(1,192)
(733)
—
(160)
¥ 9,165
2,438
(1,185)
(712)
(40)
67
¥ 9,733
1,946
(1,941)
(1,130)
(45)
262
At end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 9,165
¥ 9,733
¥ 8,825
Liquidity Risk
The Company manages liquidity risk and establishes an adequate management framework for liquidity
risk to secure stable short-, mid-, and long-term funds and sufficient liquidity for operations. Takeda manages
liquidity risk by continuously monitoring forecasted cash flows, actual cash flows and the balance of
available-for-sale financial assets. In addition, Takeda has commitment lines with some counterparty financial
institutions to manage liquidity risk.
F-56
The table below presents the balances of financial liabilities by maturity. The contractual cash flows are
presented on an undiscounted cash flow basis, including interest expense.
Carrying
Amount
Contract
Amount
Within
One Year
JPY (millions)
Between
One and
Two
Years
Between
Two and
Three
Years
Between
Three and
Four
Years
Between
Four and
Five
Years
More than
Five Years
As of March 31, 2017
Bonds and loans
Bonds . . . . . . . . . . . ¥179,836 ¥182,459 ¥ 61,068 ¥
965,054
Loans . . . . . . . . . . . .
973,043
486,862
746 ¥60,520 ¥60,125 ¥ — ¥ —
352,512
60,937
70,849
878
1,005
Trade and other
payables . . . . . . . . . . . .
Finance leases . . . . . . . . .
Derivative liabilities . . . .
Derivative assets . . . . . . .
240,623
58,811
9,893
(2,960)
240,623
110,116
9,880
(2,960)
240,623
4,995
8,413
(2,960)
—
5,839
731
—
—
5,272
552
—
—
3,678
184
—
—
2,858
—
—
—
87,474
—
—
As of March 31, 2018
Bonds and loans
Bonds . . . . . . . . . . . ¥172,889 ¥179,567 ¥
Loans . . . . . . . . . . . .
812,773
872,738
2,050 ¥61,824 ¥61,429 ¥54,264 ¥ — ¥ —
634,929
5,556
76,879
81,882
66,611
6,881
Trade and other
payables . . . . . . . . . . . .
Finance leases . . . . . . . . .
Derivative liabilities . . . .
Derivative assets . . . . . . .
240,259
53,149
8,871
(3,289)
240,259
99,161
6,364
(33,590)
240,259
4,808
5,639
(3,049)
—
5,410
40
(3,383)
—
3,495
(336)
(3,729)
—
2,709
1,021
(3,698)
—
2,721
—
(3,699)
—
80,018
—
(16,032)
For bonds and loans denominated in a foreign currency, Takeda uses currency swaps and applies hedge
accounting. The contract amount of foreign currency bonds applicable for hedge accounting was 0 million JPY
and 21,287 million JPY (200 million USD) as of March 31, 2017 and 2018 respectively. The contract amount of
foreign currency loans applicable for hedge accounting was 0 million JPY and 98,451 million JPY (925 million
USD) as of March 31, 2017 and 2018 respectively.
Market Risk
Major market risks to which Takeda is exposed are 1) foreign currency risk, 2) interest rate risk and 3)
commodity price fluctuation risk. Financial instruments affected by market risk include loans and borrowings,
deposits, available-for-sale financial assets and derivative financial instruments. Takeda uses derivatives, such as
forward exchange contracts, for hedging.
Takeda enters into derivative hedging contracts according to Takeda’s policies which determine the
authority for entering into such transactions and the transaction limits.
Foreign Currency Risk
Takeda’s exposure to the risk of changes in foreign exchange rates primarily relates to its operations
(when revenue or expense is denominated in a foreign currency) and the Company’s net investments in foreign
subsidiaries. The Company manages foreign currency risks in a centralized manner. Takeda’s subsidiaries do not
bear the risks of fluctuations in exchange rates. Foreign currency risks are hedged by derivative transactions,
such as forward exchange contracts to achieve the expected net positions of trade receivables and payables in
each foreign currency on a monthly basis.
F-57
Takeda uses forward exchange contracts, currency swaps, and currency options for individually
significant foreign currency transactions. Foreign currency risk of the net investments in foreign operations is
managed through the use of foreign-currency-denominated borrowing.
JPY (millions)
For the Year Ended March 31, 2017
Contract Amount
More than one
year
Fair Value
Forward exchange contracts:
Selling:
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States Dollar . . . . . . . . . . . . . . . . . . . . . . .
Chinese Yuan . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan New Dollar . . . . . . . . . . . . . . . . . . . . . . . .
Thai Bhat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buying:
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States Dollar . . . . . . . . . . . . . . . . . . . . . . .
British Pound . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Singapore Dollar . . . . . . . . . . . . . . . . . . . . . . . . . .
¥130,322
54,389
20,231
930
945
119,874
8,833
2,839
1,074
Currency options:
Buying (put option):
Russian Ruble . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,496
¥—
—
—
—
—
—
—
—
—
—
¥ 1,690
(1,481)
(2,013)
(60)
(53)
(2,814)
656
(134)
28
(276)
Other than the above, starting from April 1, 2016, Takeda designated loans denominated in the US
dollar as hedges of net investments in foreign operations and applied hedge accounting in order to manage the
foreign currency exposure. The fair value of the foreign-currency-denominated loans was 97,928 million JPY as
of March 31, 2017.
JPY (millions)
For the Year Ended March 31, 2018
Contract Amount
More than one
year
Fair Value
Forward exchange contracts:
Selling:
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States Dollar . . . . . . . . . . . . . . . . . . . . . . .
Chinese Yuan . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan New Dollar . . . . . . . . . . . . . . . . . . . . . . . .
Thai Bhat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buying:
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States Dollar . . . . . . . . . . . . . . . . . . . . . . .
Thai Bhat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
British Pound . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Singapore Dollar . . . . . . . . . . . . . . . . . . . . . . . . . .
Chinese Yuan . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 98,198
39,799
20,528
944
910
173,627
9,585
2,388
1,601
938
178
¥ —
—
—
—
—
—
—
—
—
—
—
¥ (894)
100
(1,211)
14
(15)
(964)
(19)
71
41
(16)
(1)
Currency swaps:
Buying:
United States Dollar . . . . . . . . . . . . . . . . . . . . . . .
124,028
123,993
(1,773)
F-58
The above currency swaps were related to bonds and loans denominated in foreign currency, which the
Company designated as cash flow hedges.
Other than the above, Takeda designated loans and bonds denominated in the US dollar as hedges of net
investments in foreign operations and applied hedge accounting in order to manage the foreign currency
exposure. The fair value of the foreign-currency-denominated loans and foreign-currency-denominated bonds
were 61,200 million JPY and 31,930 million JPY, respectively, as of March 31, 2018.
Takeda is exposed mainly to foreign currency risks of the US dollar and Euro. A depreciation of the JPY
by 5% against the US dollar and Euro would impact profit or loss by 9,346 million JPY, 5,156 million JPY, and
12,533 million JPY as of March 31, 2016, 2017 and 2018, respectively. These amounts do not include the effects
of foreign currency translation on financial instruments in the functional currency or on assets, liabilities,
revenue, and expenses of foreign operations. This analysis assumes that all other variables, in particular interest
rates, remain constant. The Company’s exposure to foreign currency changes for all other currencies is not
material.
Interest Rate Risk
Takeda’s exposure to the risk of changes in market interest rates relates to the outstanding borrowings
with floating interest rates. Takeda uses interest rate swaps that fix the amount of interest payments to manage
interest rate risks. The following summarizes interest rate swaps for the periods ended March 31:
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥170,000
300,938
Notional Amount
JPY (millions)
As of March 31
More than One
Year
¥120,000
300, 938
Fair Value
¥(2,474)
(970)
The above swaps are related to the borrowings which the Company designated as cash flow hedges.
The following represents interest rate sensitivity analysis for the periods presented. This analysis
assumes that all other variables, in particular foreign currency exchange rates, remain constant.
JPY (millions)
As of March 31, 2017
Interest Rates
As of March 31, 2018
Interest Rates
+1%
-1%
+1%
-1%
Impact on other comprehensive income (before tax effects) . . .
¥2,653
¥(2,653)
¥16,543
¥(16,543)
There is no impact on profit because the amount of interest payments from all the outstanding
borrowings with floating rates are fixed using interest rate swaps.
Price Fluctuation Risk Management
For equity instruments, the Company manages the risk of price fluctuations in the instruments by
regularly reviewing share prices and financial positions of the issuers.
Market Price Sensitivity Analysis
The analysis shows that if the market price for the underlying equity instruments, the equity securities
held by Takeda and investments in trusts which hold equity securities on behalf of Takeda had increased by 10%,
the hypothetical impact on other comprehensive income (before tax effect) would have been 15,537 million JPY
and 16,303 million JPY as of March 31, 2017 and 2018 respectively. This analysis assumes that all other
variables, in particular interest rates and foreign currency exchange rates, remain constant.
F-59
—
(403,931)
(801)
337,154
—
—
—
—
—
(80,000)
56,299
(60,000)
(2,658)
(2,855)
(11,978)
2,226
2,626
Reconciliation of liabilities arising from financing activities
JPY (millions)
Long-
term
Loans
Short-
term
Loans
Finance
Lease
Obligations
Bonds
Derivative
Assets Used
for Hedge
of Debts
Derivative
Liabilities
Used for
Hedge of
Debts
Total
As of April 1, 2017 . . . . . . . . . . . . . . . . . ¥179,836 ¥560,000 ¥ 405,054
¥58,811
¥ —
¥ — ¥1,203,701
Cash flows from financing
activities
Net increase (decrease) in
short-term loans . . . . . . . . .
—
— (403,931)
Proceeds from long-term
loans . . . . . . . . . . . . . . . . . .
— 337,955
Payments of long-term
loans . . . . . . . . . . . . . . . . . .
— (80,000)
Proceeds from issuance of
bonds . . . . . . . . . . . . . . . . .
Repayments of bonds . . . . . . .
Repayment of obligations
under finance lease . . . . . . .
Interest paid . . . . . . . . . . . . . .
55,951
(60,000)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2,658)
(2,855)
—
—
—
348
—
—
—
Non-cash items
Foreign exchange
movement . . . . . . . . . . . . . .
Change in fair value . . . . . . . .
Others . . . . . . . . . . . . . . . . . . .
(3,019)
—
121
(5,244)
—
44
(1,105)
—
—
(2,610)
—
2,461
—
(528)
—
—
2,754
—
As of March 31, 2018 . . . . . . . . . . . . . . . ¥172,889 ¥812,755 ¥
18
¥53,149
¥(180)
¥1,953
¥1,040,584
“Others” includes increase in debts due to application of amortized cost method.
Fair Value Measurements
Financial Assets and Liabilities at Fair Value through Profit or Loss
The fair value of derivatives to which hedge accounting was not applied is measured at quoted prices or
quotes obtained from financial institutions, whose significant inputs to the valuation model used are based on
observable market data.
Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition
date as part of the business combination. When the contingent consideration meets the definition of a financial
liability, it is subsequently re-measured to fair value at each reporting date. The determination of the fair value is
based on discounted cash flows. The key assumptions take into consideration the probability of meeting each
performance target and the discount factor. The fair value measurement of contingent considerations arising from
business combinations is stated in Note 31, “Business Combinations.”
Loans and Receivables
As trade receivables are settled in a short period, their carrying amounts approximate their fair values.
Available-for-Sale Financial Assets
The fair value of available-for-sale financial assets is measured at quoted prices or quotes obtained from
financial institutions.
F-60
Derivative Transactions to which Hedge Accounting is applied
The fair value of derivatives to which hedge accounting is applied is measured at quotes obtained from
financial institutions, whose significant inputs to the valuation model used are based on observable market data.
Other Financial Liabilities
The fair value of bonds is measured at quotes obtained from financial institutions, and the fair value of
loans and finance leases is measured at the present value of future cash flows discounted using the applicable
effective interest rate on the loans with consideration of the credit risk by each group classified in a specified
period.
Other current items are settled within a short period, and the coupon rates of other non-current items
reflect market interest rates. Therefore, the carrying amounts of these liabilities approximate their fair values.
Fair Value Hierarchy
Level 1: Fair value measured at quoted prices in active markets
Level 2: Fair value that is calculated using an observable price other than that categorized in Level 1
directly or indirectly
Level 3: Fair value that is calculated based on valuation techniques which include input that is not based
on observable market data
Fair Value of Financial Instruments Carried at Cost
The carrying amount and fair value of financial instruments that are not recorded at fair value in the
consolidated statements of financial position are as follows:
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY (millions) As of March 31
2017
2018
Carrying
Amount
¥179,836
560,000
58,811
Fair Value
¥182,068
559,748
58,811
Carrying
Amount
¥172,889
812,755
53,149
Fair Value
¥172,872
815,865
53,690
The amounts to be paid within a year are included. The fair value of bonds, long-term loans, and finance
leases are classified as Level 2 in the fair value hierarchy. This table excludes financial instruments that have
carrying amounts that approximates fair value as described in the discussion above.
F-61
Fair value Measurement Recognized in the Consolidated Statement of Financial Position
As of March 31, 2017
Level 1
Level 2
Level 3
Total
JPY (millions)
Assets:
Financial assets at fair value through profit or loss (derivatives) . . . ¥ — ¥2,960 ¥ — ¥
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,960
— 155,431
155,368
63
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥155,368 ¥3,023 ¥ — ¥158,391
Liabilities:
Financial liabilities at fair value through profit or loss
(derivatives) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ — ¥7,419 ¥ — ¥
Derivative transactions to which hedge accounting is applied . . . . .
Contingent considerations arising from business combinations . . . .
— 2,474
—
—
— 28,976
7,419
2,474
28,976
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ — ¥9,893 ¥28,976 ¥ 38,869
As of March 31, 2018
Level 1
Level 2
Level 3
Total
JPY (millions)
Assets:
Financial assets at fair value through profit or loss (derivatives) . . . ¥ — ¥ 762 ¥ — ¥
Derivatives transactions to which hedge accounting is applied . . . . .
Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 2,527
34
762
2,527
—
— 163,064
163,030
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥163,030 ¥3,323 ¥ — ¥166,353
Liabilities:
Financial liabilities at fair value through profit or loss
(derivatives) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ — ¥5,373 ¥ — ¥
Derivative transactions to which hedge accounting is applied . . . . .
Contingent considerations arising from business combinations . . . .
— 3,498
—
—
— 30,569
5,373
3,498
30,569
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ — ¥8,871 ¥30,569 ¥ 39,440
Available-for-sale financial assets and derivatives, for which the fair value was difficult to reliably
measure, are excluded from the table. The carrying amounts of such assets were 9,059 million JPY and
8,820 million JPY as of March 31, 2017 and 2018, respectively. The assets are primarily unlisted equity
investments and the fair value of the investments was difficult to reliably measure as they are not traded on stock
markets.
Takeda recognizes transfers between levels of the fair value hierarchy, at the end of the reporting period
during which the change has occurred. There were no transfers among Level 1, Level 2, and Level 3 during each
reporting period. Disclosures related to contingent considerations arising from business combinations are
included in Note 31.
28. Share-based Payments
Takeda maintains certain share based compensation payment plans for the benefit of its directors and
certain of its employees. Takeda recorded total compensation expense related to its share-based payment plans of
14,714 million JPY, 17,414 million JPY, and 22,172 million JPY for the years ended March 31, 2016, 2017 and
2018, respectively, in its consolidated statements of income.
F-62
Equity-settled Plans
Stock Options
Takeda had maintained a stock option plan under which it granted awards to members of the board,
corporate officer, and senior management through the year ended March 31, 2014. There were no stock options
granted during the years presented in these financial statements and all previously granted awards are fully
vested. These awards generally vested three years after the grant date. The stock options are exercisable for
10 years after the grant date for options held by directors and 20 years for options held by corporate officers and
senior management. The individual must be either a director of the Company or an employee of Takeda to
exercise the options, unless the individual retired due to the expiration of their term of office, mandatory
retirement or other acceptable reasons.
The total compensation expense recognized related to the stock option was 333 million JPY and,
63 million JPY during the years ended March 31, 2016 and 2017, respectively. There was no compensation
expense during the year ended March 31, 2018 as all awards were fully vested.
The following table summarizes the stock option activities for the years ended March 31:
2016
2017
2018
Number of
options
(shares)
Weighted average
exercise price
(JPY)
Number of
options
(shares)
Weighted average
exercise price
(JPY)
Number of
options
(shares)
Weighted average
exercise price
(JPY)
As of beginning of the
year . . . . . . . . . . . . . . . . . 4,618,500
Exercised . . . . . . . . . . . . . .
(360,500)
As of end of the year . . . . . . 4,258,000
Exercisable balance as of
¥3,875
3,342
3,920
4,258,000
(237,100)
4,020,900
¥3,920
2,121
4,026
4,020,900
(617,100)
3,403,800
¥4,026
3,876
4,054
end of the year
. . . . . . . . 3,079,000
¥3,588
4,020,900
¥4,026
3,403,800
¥4,054
The weighted-average share price at the date of exercise was 5,909 JPY, 4,939 JPY and 5,965 JPY
during the year ended March 31, 2016, 2017 and 2018, respectively. The weighted-average exercise price and
weighted-average remaining contractual life of the share options outstanding were 3,920 JPY and 16 years, 4,026
JPY and 15 years, and 4,054 JPY and 14 years, as of March 31, 2016, 2017 and 2018, respectively.
Stock Incentive Plans
Takeda has two stock-based incentive compensation plans for its directors and members of senior
management, including the following:
Board incentive plan (BIP) – The BIP is a stock-based incentive plan for directors of the Company
whereby awards are granted to the directors. Each award is settled in a single share of stock of the Company. The
vesting of the awards under the BIP is one third each year over a three-year period for half of the awards and
three years from the date of grant for the remainder of the awards. The settlement of the awards is based on stock
price, foreign exchange rates (in countries other than Japan), and company dividends. Performance shares are
also based on the achievement of certain performance criteria, which are established at the grant date, including,
among others, consolidated revenue, operating free cash flow, earnings per share and targeted R&D, which are
transparent and objective indicators. Takeda, through a wholly owned trust, buys shares of the Company in the
market on the grant date, and uses these shares to settle the awards. The number of shares the individual receives
(either through physical settlement or cash) is based on the achievement of the performance criteria and vesting
of the award. The trust settles the awards through the issuance of shares to individuals in Japan. For individuals
outside of Japan the trust sells the share the individual is eligible to receive and pays the cash to the individual.
Employee Stock Ownership Plan (ESOP) – The ESOP is a stock based incentive plan for senior
management whereby awards are granted to the employees. Each award is settled in a single share of stock of the
F-63
Company. The vesting of the awards under this plan is the same as the BIP for certain members of senior
management with the remainder of the employees’ awards vesting one third each year over a three-year period.
The settlement of the awards is based on stock price, foreign exchange rates (in countries other than Japan), and
company dividends. Performance shares, are also based on the achievement of certain performance criteria,
which are established at the grant date including, among others, consolidated revenue, operating free cash flow,
earnings per share and targeted R&D, which are transparent and objective indicators. Takeda, through wholly
owned trust, buys shares of the Company in the market on the grant date and uses these shares to settle the
awards. The number of shares the individual receives (either through physical settlement or cash) is based on the
achievement of the performance criteria and vesting of the award. The trust settles the awards through the
issuance of shares to individuals in Japan. For individuals outside of Japan the trust sells the share the individual
is eligible to receive and pays cash to the individual.
The total compensation expense recognized related to these plans was 12,845 million JPY,
15,322 million JPY and 18,610 million JPY during the years ended March 31, 2016, 2017 and 2018, respectively.
The fair value of the awards at the grant date is as follows (in JPY):
For the Year Ended March 31
2017
2016
2018
BIP:
Fair value at grant date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥5,870
5,870
¥4,664
4,664
¥5,709
5,709
ESOP:
Fair value at grant date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,870
5,870
4,438
4,438
5,709
5,709
The grant date fair value was calculated using the Company’s share price on the grant date as it was
determined to be approximately the same as the fair value of the awards.
The following table summarizes the award activity related to the stock incentive plans for the years
ended March 31 (number of awards):
2016
2017
2018
ESOP
BIP
ESOP
BIP
ESOP
BIP
At beginning of the year . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/expired before vesting . . . . . . .
Settled . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,003,020
3,312,561
(484,417)
(1,021,722)
235,019
144,688
(49,489)
(49,064)
4,809,442
4,328,364
(849,886)
(1,816,816)
281,154
192,818
—
(59,039)
6,471,104
3,944,938
(602,245)
(2,922,035)
414,933
188,695
—
(170,368)
At end of the year . . . . . . . . . . . . . . . . . .
4,809,442
281,154
6,471,104
414,933
6,891,762
433,260
Exercisable balance at end of the year . .
—
—
—
—
—
—
The weighted average remaining contractual life of the outstanding awards was one year as of each year
end for both the BIP and the ESOP plans.
Liability Settled Awards
Takeda has phantom stock appreciation rights (PSARs) and restricted stock units (RSUs) plans for
certain of its employees. The value of these awards is linked to share price of the Company and are settled in
cash. The total compensation expense recorded associated with these plans was 1,536 million JPY, 2,029 million
JPY, and 3,562 million JPY during the years ended March 31, 2016, 2017 and 2018, respectively and the total
is
liability reflected in the consolidated statements of financial position at March 31, 2017 and 2018,
7,350 million JPY and 4,872 million JPY, respectively.
F-64
Phantom stock appreciation rights (PSARs)
The PSARs vest one third each year over a three-year period from the end of the fiscal year during
which the awards were granted and can be exercised for a period of 10 years from the end of the fiscal year
during which the awards were granted. The awards are settled through a cash payment to the holder based on the
difference between the share price of the Company at the date of exercise, and the share price at the date of grant.
The following table summarizes the award activity related to the PSARs for the years ended March 31:
2016
2017
2018
Number of
PSARs
As of beginning of the year
Granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited before vesting . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/expired after vesting . . . . . . . .
. . . . . . . . . . 12,344,335
—
(103,329)
(1,974,786)
(9,065)
Weighted
Average
Exercise
Price
(JPY)
¥5,373
—
5,402
5,385
5,964
Weighted
Average
Exercise
Price
(JPY)
¥5,063
—
—
4,706
5,012
Weighted
Average
Exercise
Price
(JPY)
¥5,017
—
—
5,072
5,505
Number
of PSARs
9,282,080
—
—
(4,335,961)
(361,182)
Number
of PSARs
10,257,155
—
—
(618,494)
(356,581)
As of end of the year
. . . . . . . . . . . . . . . 10,257,155
5,063
9,282,080
5,017
4,584,937
4,650
Exercisable balance as of end of the
year . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,218,385
¥5,064
9,282,080
¥5,017
4,584,937
¥4,650
Restricted stock units (RSUs)
The RSUs vest one third each year over a three-year period from the end of the fiscal year during which
the awards were granted. The RSUs are settled upon vesting based on the share price at the vesting date plus any
dividends paid on shares during the vesting period. There is no exercise price payable by the holder.
The following table summarizes the award activity related to the RSUs for the years ended March 31
(number of RSUs):
2016
2017
2018
As of the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/expired before vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,484,391
378,123
(145,667)
(1,496,613)
1,220,234
255,116
(148,502)
(878,562)
448,286
254,710
(82,388)
(222,129)
As of the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,220,234
448,286
398,479
Exercisable balance as of the end of the year . . . . . . . . . . . . . . . . . . .
658,212
—
—
The total intrinsic value of vested cash-settled share-based payments was 1,965 million JPY and
2,442 million JPY as of March 31, 2017 and 2018, respectively.
The Company applied hedge accounting to a portion of the RSUs payments during the year ended
March 31, 2016.
29. Subsidiaries and Associates
The number of consolidated subsidiaries increased by three due to establishment of legal entities and
decreased by 20 primarily due to divestitures including Wako Pure Chemical, Ltd. The number of associates
accounted for using the equity method increased by three primarily due to establishment of new entities and
decreased by seven primarily due to divestitures.
F-65
The following is a listing of the Company’s consolidated subsidiaries as of March 31, 2018:
Company Name
Country
Voting Share
Capital Held
(%)
Italy
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Takeda Pharmaceuticals International, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.A.
Takeda Pharmaceuticals U.S.A., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.A.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.A.
Millennium Pharmaceuticals, Inc.
ARIAD Pharmaceuticals, Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.A.
Takeda California, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.A.
Takeda Vaccines, Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.A.
Takeda Development Center Americas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.A.
Takeda Ventures, Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.A.
Takeda Europe Holdings B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
Takeda A/S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Denmark
Takeda Pharmaceuticals International AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Switzerland
Takeda GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
Takeda Pharma Vertrieb GmbH & Co. KG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
Takeda Italia S.p.A.
Takeda Austria GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Austria
Takeda Pharma Ges.m.b.H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Austria
Takeda France S.A.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
Takeda Pharma A/S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Denmark
Takeda AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Norway
Takeda Belgium SCA/CVA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Belgium
Takeda UK Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom
Takeda Oy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finland
Takeda Pharma AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Switzerland
Takeda Farmaceutica Espana S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spain
Takeda Nederland B.V.
Takeda Pharma AB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sweden
Takeda Pharma Sp. z o.o. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Poland
Takeda Hellas S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Greece
Takeda Ireland Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ireland
Takeda Development Centre Europe Ltd.
Takeda Canada Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada
Takeda Pharmaceuticals Limited Liability Company . . . . . . . . . . . . . . . . . . . . . . Russia
Takeda Yaroslavl Limited Liability Company . . . . . . . . . . . . . . . . . . . . . . . . . . . Russia
Takeda Ukraine LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ukraine
Takeda Kazakhstan LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kazakhstan
Takeda Distribuidora Ltda.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil
Multilab Indústria e Comércio de Produtos Farmacêuticos Ltda. . . . . . . . . . . . . . Brazil
Takeda Pharma Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil
Takeda Mexico, S.A. de C.V.
Takeda Pharma, S.A.
Takeda (China) Holdings Co., Ltd.
Takeda Pharmaceuticals (Asia Pacific) Pte. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . Singapore
Guangdong Techpool Bio-Pharma Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
Takeda Pharmaceutical (China) Company Limited . . . . . . . . . . . . . . . . . . . . . . . . China
Tianjin Takeda Pharmaceuticals Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
Takeda Pharmaceuticals Korea Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Korea
Takeda (Thailand), Ltd.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Argentina
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thailand
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
51.3
100.0
100.0
100.0
52.0
F-66
Company Name
Country
Voting Share
Capital Held
(%)
Indonesia
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Philippines
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Singapore
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Singapore
Takeda Pharmaceuticals Taiwan, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taiwan
P.T. Takeda Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Takeda Healthcare Philippines Inc.
Takeda Development Center Asia, Pte. Ltd.
Takeda Vaccines Pte. Ltd.
Takeda (Pty.) Ltd.
Takeda Pharmaceuticals Australia Pty. Ltd.
Takeda I˙laç Sag˘lık Sanayi Ticaret Limited S¸ irketi
Takeda Consumer Healthcare Company Limited . . . . . . . . . . . . . . . . . . . . . . . . .
Nihon Pharmaceutical Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Takeda Healthcare Products Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Axcelead Drug Discovery Partners, Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71 immaterial subsidiaries
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . South Africa
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia
. . . . . . . . . . . . . . . . . . . . . . . . Turkey
Japan
Japan
Japan
Japan
100.0
70.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
87.3
100.0
100.0
The following is a listing of the Company’s associates accounted for using the equity method as of
March 31, 2018:
Company Name
Country
Voting Share
Capital Held
(%)
Cerevance, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.A.
Japan
Teva Takeda Pharma Ltd.
Amato Pharmaceutical Products, Ltd.
Japan
12 immaterial associates
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27.8
49.0
30.0
30. Related Party Transactions
Transactions with Affiliates
Takeda has one major affiliate, Teva Takeda Pharma, to which Takeda sells products and acts as a sales
agent. Total transactions with Teva Takeda Pharma for the years ended March 31, 2017 and 2018 were
15,685 million JPY and 18,166 million JPY, respectively. Balances of receivables and payables are as follows:
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY (millions)
As of March 31
2017
¥ 5,703
1,427
28,745
2018
¥ 4,187
1,507
30,066
The terms and conditions of the related party transactions are entered into on terms consistent with
third-party transactions and considering market prices. In addition, the receivables and payables are settled in
cash and consistent with terms of third party settlements.
There is no outstanding balance of collateral or guarantee. Provisions for doubtful accounts are not
recognized for the receivables.
F-67
Compensation for Key Management Personnel
The compensation for key management personnel is as follows:
Basic compensation and bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31. Business Combinations
Acquisitions during the Year Ended March 31, 2017
ARIAD Pharmaceuticals, Inc.
JPY (millions)
For the years ended March 31
2016
¥1,456
896
31
¥2,383
2017
¥1,478
948
38
¥2,464
2018
¥1,332
1,176
26
¥2,534
On February 16, 2017, Takeda acquired ARIAD Pharmaceuticals, Inc. (hereinafter referred to as
“ARIAD”) through a tender offer to purchase all issued and outstanding shares of common stock in cash.
ARIAD is focused on discovering, developing and commercializing precision therapies for patients with
rare cancers. The acquisition of ARIAD is a highly strategic deal as it transforms Takeda’s global oncology
portfolio and pipeline by expanding into solid tumors and reinforcing the existing strength in hematology.
Brigatinib (US product name: ALUNBRIG) is a small molecule ALK (anaplastic lymphoma kinase) inhibitor for
non-small cell lung cancer. After the acquisition, Brigatinib was granted marketing authorization by the U.S.
Food and Drug Administration (FDA) in April 2017. ICLUSIG, a treatment for CML (chronic myeloid leukemia)
and Philadelphia chromosome positive ALL (acute lymphoblastic leukemia),
is commercialized globally
(marketing rights of the product are out-licensed in some certain markets other than the US). These two targeted
and innovative medicines, with cost synergies, are expected to be value drivers for Takeda’s oncology business.
Additionally, ARIAD has a robust early stage pipeline, and Takeda will leverage ARIAD’s R&D capabilities and
platform to generate immediate and long-term growth in the pharmaceuticals business.
The following represents fair value of assets acquired, liabilities assumed, purchase consideration
transferred:
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
JPY (millions)
Amount
¥433,047
43,490
(92,419)
(38,852)
273,627
Net Assets Acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥618,893
F-68
The consideration transferred was comprised of the following:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumption of Share-based payment liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Reduced by:
JPY (millions)
Amount
¥531,918
59,155
27,820
¥618,893
Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from cash flow hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(29,869)
(1,509)
(4,411)
Net consideration paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥583,104
Goodwill comprises excess earning power expected from the future business development. Goodwill is
not expected to be deductible for tax purposes.
The fair value of the assets acquired and the liabilities assumed, as of March 31, 2017, was booked
provisionally, and allocation of the purchase price was completed during the year ended March 31, 2018. The
purchase price allocation above reflects the fair value, and has been updated from the provisional amounts. As a
result of the adjustments to the provisional fair value, goodwill at the acquisition date decreased by 3,198 million
JPY while other liabilities increased by 2,827 million JPY and intangible assets, other assets and deferred tax
liabilities decreased by 2,853 million JPY, 3,114 million JPY and 11,992 million JPY, respectively.
Acquisition-related costs of 3,194 million JPY, which includes agent fee and legal fee arising from the
acquisition, were expensed as incurred and recorded in selling, general and administrative expenses.
Net revenue and net loss of ARIAD during the post-acquisition period, which were recognized in the
consolidated statement of income for the year ended March 31, 2017, were immaterial. The impact on Takeda’s
revenue and net profit of the ARIAD for the period ended March 31, 2017 assuming the acquisition date had
been as of the beginning of the annual reporting period was immaterial.
In addition to the acquisition of ARIAD, Takeda acquired another business during the year for
6,040 million JPY. The aggregate net cash paid for acquisitions during the year ended March 31, 2017 was
589,144 million JPY.
Acquisitions during the Years ended March 31, 2016 and 2018
During the year ended March 31, 2016, Takeda acquired a business for 14,042 million JPY, which
represents net cash consideration of 8,269 million JPY, 1,493 million JPY of contingent consideration, and
4,280 million JPY of cash and cash equivalents included in assets acquired.
During the year ended March 31, 2018, Takeda acquired a business for 28,328 million JPY, which was
fully paid in cash.
Contingent Consideration
The consideration for certain acquisitions includes amounts contingent upon future events such as the
achievement of development milestones and sales targets. At each reporting date, the fair value of contingent
consideration is re-measured based on risk-adjusted future cash flows discounted using appropriate discount rate.
The contingent consideration discussed below is the discounted royalty payable for a certain period based on
F-69
future financial performance, primarily consisting of the COLCRYS business which was acquired in the
acquisition of URL Pharma. Inc. in June 2012. There is no cap on the royalty payable for the COLCRYS
business and the estimated future royalty payments are calculated based on forecasted financial performance.
The fair value of contingent consideration is classified as Level 3 in the fair value hierarchy. The
definition of the fair value hierarchy is stated in Note 27, “Financial Instruments”.
As of the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions arising from business combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in the fair value during the period:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
URL Pharma. Inc.
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settled during the period:
URL Pharma. Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification to other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY (millions)
For the Year Ended March 31
2017
¥64,182
—
2018
¥ 28,976
3,164
(8,417)
(6,331)
(7,610)
(8,015)
(2,370)
(2,088)
(375)
11,149
1,635
(11,475)
(1,131)
—
(1,243)
(506)
As of the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥28,976
¥ 30,569
Payment term (undiscounted)
Within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Between one and three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Between three and five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
More than five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY (millions)
As of March 31
2017
2018
¥ 9,635
17,571
3,263
4,838
¥10,620
18,584
4,641
2,831
The following sensitivity analysis represents effect on the fair value of contingent consideration from
changes in major assumptions:
Revenue derived from the COLCRYS business . . . . . . . . . . . .
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase by 5%
Decrease by 5%
Increase by 0.5%
Decrease by 0.5%
32. Commitments and Contingent Liabilities
Operating Lease
JPY (millions)
For the Year Ended March 31
2017
¥ 871
(872)
(229)
263
2018
¥ 862
(862)
(257)
256
Takeda is the lessee under several operating leases, primarily for office and other facilities, and certain
office equipment.
F-70
Future minimum lease payments by maturity under non-cancelable operating leases that have initial or
remaining lease terms in excess of one year as of March 31, 2017 and 2018 are as follows:
Within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Between one and five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
More than five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
¥11,880
31,686
37,471
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥81,037
2018
¥12,053
31,278
33,720
¥77,051
JPY (millions)
For the Year Ended March 31
Total future minimum sublease income under non-cancellable subleases as of March 31, 2017 and 2018
were 12,036 million JPY and 34,482 million JPY, respectively.
Rent expense for operating lease contracts and sublease income recognized in profit or loss for the years
ended March 31 are as follows:
Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sublease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥11,648
—
¥11,758
(109)
¥21,384
(2,493)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥11,648
¥11,649
¥18,891
JPY (millions)
2016
2017
2018
Purchase Commitments
The amount of contractual commitments for the acquisition of property, plant and equipment was
24,786 million JPY and 14,078 million JPY as of March 31, 2017 and 2018, respectively.
Milestone Payments
As discussed in Note 13, Takeda has certain contractual agreements related to the acquisition of
intangible assets that require it to make payments of up to 364,907 million JPY and 517,017 million JPY as of
March 31, 2017 and 2018, respectively. These commitments include development milestone payments in relation
to pipelines under development and expected maximum commercial milestone payments in relation to launched
products. As for the pipelines under development, the possibility to meet certain conditions for commercial
milestone payments is uncertain and the related commercial milestone payments were not included in the
commitments.
Guarantees
The amount of contingent liabilities was 349 million JPY and 186 million JPY as of March 31, 2017 and
2018, respectively. These are all related to transactions with financial institutions and are not recognized as
financial liabilities in the consolidated statement of financial position because the possibility of loss from
contingent liabilities was remote.
Litigation
Takeda is involved in various legal and administrative proceedings. The most significant matters are
described below.
Takeda may become involved in significant legal proceedings for which it is not possible to make a
reliable estimate of the expected financial effect, if any, which may result from ultimate resolution of the
F-71
proceedings. In these cases, appropriate disclosures about such cases would be included in this note, but no
provision would be made for the cases.
With respect to each of the legal proceedings described below, other than those for which a provision
has been made, Takeda is unable to make a reliable estimate of the expected financial effect at this stage. The
Company does not believe that information about the amount sought by the plaintiffs, if that is known, would be
meaningful with respect to those legal proceedings. This is due to a number of factors, including, but not limited
to, the stage of proceedings, the entitlement of parties to appeal a decision and clarity as to theories of liability,
damages and governing law.
Legal expenses incurred and charges related to legal claims are recorded in selling, general and
administrative expenses line. Provisions are recorded, after taking appropriate legal and other specialist advice,
where an outflow of resources is considered probable and a reliable estimate can be made of the likely outcome
of the dispute. For certain product liability claims, Takeda will record a provision where there is sufficient
history of claims made and settlements to enable management to make a reliable estimate of the provision
required to cover unasserted claims. At March 31, 2018, Takeda’s aggregate provision for legal and other
disputes was 23,182 million JPY. The ultimate liability for legal claims may vary from the amounts provided and
is dependent upon the outcome of litigation proceedings, investigations and possible settlement negotiations.
Takeda’s position could change over time, and, therefore, there can be no assurance that any losses that
result from the outcome of any legal proceedings will not exceed by a material amount the amount of the
provisions reported in these consolidated financial statements.
Product Liability and Related Claims
Pre-clinical and clinical trials are conducted during the development of potential products to determine
the safety and efficacy of products for use by humans following approval by regulatory bodies. Notwithstanding
these efforts, when drugs and vaccines are introduced into the marketplace, unanticipated safety issues may
become, or be claimed by some to be, evident. Takeda is currently a defendant in a number of product liability
lawsuits related to its products. For the product liability lawsuits and related claims, other than those for which
provision has been made, Takeda is unable to make a reliable estimate of the expected financial effect at this
stage.
Actos
Takeda has been named as a defendant in lawsuits in U.S. federal and state courts in which plaintiffs
allege to have developed bladder cancer or other injuries as a result of taking products containing type 2 diabetes
treatment pioglitazone (U.S. brand name: Actos). Eli Lilly and Company (“Lilly”), which co-promoted Actos in
the United States for a period of time, also has been named as a defendant in many of these lawsuits. Under the
parties’ co-promotion agreement, Takeda has agreed to defend and indemnify Lilly in the U.S. matters. Outside
the U.S., lawsuits and claims have also been brought by persons claiming similar injuries.
In April 2015, Takeda reached an agreement with the lead plaintiffs’ lawyers that resolved the vast
majority of Actos product liability lawsuits pending against Takeda and Lilly in the U.S. The settlement covered
all bladder cancer claims pending in any U.S. court as of the date of settlement. Also claimants with unfiled
claims in the U.S. represented by counsel as of the date of settlement and within three days thereafter were
eligible to participate. The settlement became effective when 95% of litigants and claimants opted-in. In
connection with this broad settlement, Takeda has paid $2.4 billion (approximately 288 billion JPY) into a
qualified settlement fund. Takeda received insurance proceeds totaling approximately 58 billion JPY under
various policies covering product liability claims against Takeda. Takeda also established reserves for remaining
Actos claims and lawsuits.
F-72
In addition to remaining product liability claims, the following lawsuits have been filed against Takeda
by public and private third-party payors, as well as consumers, seeking damages for alleged economic losses:
A purported nation-wide class action lawsuit has been filed federal court in California – the Painters’
Fund case – on behalf of third-party payors and consumers seeking, among other things, reimbursement of
monies spent on Actos. In April 2018, the court dismissed the Painters’ Fund case. Plaintiffs appealed.
The States of Mississippi and Louisiana have filed lawsuits against Takeda and Lilly alleging that
defendants did not warn about bladder cancer and other risks of Actos. The lawsuits seek reimbursement of the
cost of Actos, paid by the states on behalf of patients through programs such as Medicaid, and for medical
treatment of patients allegedly injured by Actos, attorneys’ fees and expenses, punitive damages and/or penalties.
The court granted Takeda’s motion to dismiss the Louisiana case. The decision has been appealed.
Prevacid
As of March 31, 2018, more than 1,100 product liability lawsuits involving Prevacid and/or Dexilant
have been filed against Takeda in U.S. federal and state courts. The federal lawsuits are consolidated for pre-trial
proceedings in a Multi-District Litigation in federal court in New Jersey. The plaintiffs allege they developed
kidney injuries as a result of taking Prevacid or Dexilant, and that Takeda failed to adequately warn them of this
potential danger. However, it remains unclear how many of these claimants took Takeda PPIs. Similar claims are
pending against other manufacturers of drugs in the same proton pump inhibitor (PPI) class as Prevacid and
Dexilant, including AstraZeneca, Proctor & Gamble, and Pfizer.
In Canada, three proposed class actions have been filed in three provinces (Quebec, Ontario and
Saskatchewan). The defendants include Takeda, AstraZeneca, and several generic manufacturers. It is unclear
how many new lawsuits will be filed against Takeda. At this time, a reserve is not probable or estimable.
Intellectual property
Intellectual property claims include challenges to the validity and enforceability of Takeda’s patents on
various products or processes as well as assertions of non-infringement of those patents. A loss in any of these
cases could result in loss of patent protection for the product at issue. The consequences of any such loss could be
a significant decrease in sales of that product and could materially affect future results of operations for Takeda.
Prevacid
In January 2018, Takeda received notice from Zydus that it has amended its application for a generic
version of SoluTab. In response, Takeda filed a patent infringement lawsuit against Zydus and in response, Zydus
filed a counterclaim asserting that Takeda’s challenge of Zydus’ ANDA product violates antitrust laws. Takeda
believes the counterclaim is without merit.
Other generic companies have filed ANDAs for generic versions of SoluTab and may launch their
products upon approval by the FDA. In June 2009, Apotex filed a lawsuit in Toronto, Canada, against Takeda
and Abbott Laboratories seeking alleged damages for delayed market entry of its generic lansoprazole capsules
due to a prior patent infringement lawsuit against Apotex. Previously, Abbott and Takeda filed a patent
infringement lawsuit against Apotex in response to Apotex’s regulatory submission to the Canadian Minister of
Health seeking permission to market generic lansoprazole capsules before the expiration of various Canadian
patents relating to this drug. In September 2008, Abbott and Takeda settled that patent infringement lawsuit
against Apotex and Apotex was allowed to begin selling generic lansoprazole capsules in Canada on May 1,
2009. Under the terms of the settlement, Apotex retained its right to seek damages for delayed market entry
caused by the lawsuit.
F-73
Pantoprazole
On January 15, 2016, Mylan filed a suit at the Federal Court against Takeda claiming damages as a
result of the dismissal of Takeda´s previous PM(NOC) proceeding against Mylan. Mylan claimed damages due
to being held-off the market with its generic pantoprazole magnesium product during the time period of June 27,
2013 until June 15, 2015. The parties settled the lawsuit in May 2018.
Amitiza
In March 2017, Sucampo (Takeda’s licensor) received a paragraph IV certification directed to Amitiza
from Amneal Pharmaceuticals, and in August 2017 received a paragraph IV certification directed to Amitiza
from Teva. These parties contend that the patents listed in FDA’s Orange Book for Amitiza are invalid and/or not
infringed by their ANDA product. In response, Sucampo and Takeda filed patent infringement lawsuits against
the parties. In June 2018, the parties settled the lawsuits. Patent litigation against other ANDA filers for Amitiza
was previously settled.
Trintellix
Takeda has received notices from sixteen generic pharmaceutical companies that they have submitted
ANDAs with paragraph IV certifications seeking to sell generic versions of Trintellix. To date, at least five
generic companies are challenging the patents covering the compound, vortioxetine, which expire in 2026.
Takeda filed patent infringement lawsuits against the ANDA filers in federal court in Delaware.
Entyvio
Roche has filed patent infringement lawsuits against Takeda in Germany, Italy and the U.K. alleging
that Entyvio infringes Roche patents. Takeda is vigorously defending the lawsuits. Additionally, Takeda has filed
lawsuits seeking nullification of Roche’s patents in the U.K. and Germany. Takeda also filed a lawsuit against
Genentech in state court in Delaware seeking a declaration that Takeda has a license to the Roche patent under
the terms of a prior agreement between Takeda and Genentech.
Other
In addition to the individual patent litigation cases described above, Takeda is party to a number of
cases where Takeda has received notices that companies have submitted ANDAs with paragraph IV certifications
to sell generic versions of other Takeda products. These include Uloric and Alogliptin products. Takeda has filed
patent infringement lawsuits against parties involved in these situations.
Sales, Marketing, and Regulation
Takeda has other litigations related to its products and its activities, the most significant of which are
described below.
Antitrust
There have been purported class action lawsuits filed in federal court in New York by several end
payors and wholesalers against Takeda alleging anticompetitive conduct to delay generic competition for Actos.
In September 2015, the court granted defendants’ motions to dismiss the antitrust claims asserted by the end
payors. The end payors appealed this decision to the Federal 2nd Circuit Court of Appeals. The wholesalers’
lawsuit had been stayed pending the appellate court’s decision in the end payors’ lawsuit. In February 2017, the
appellate court reversed in part the dismissal of the end-payors’ case and allowed one of plaintiffs’ antitrust
F-74
theories to proceed in the trial court. Specifically, the court ruled that plaintiffs sufficiently alleged that Takeda’s
characterizations of two patents in the FDA Orange Book were false, and that this resulted in delaying Teva’s
launch of generic Actos. Takeda disagrees with these allegations and believes the Orange Book listings were
correct. The court, however, affirmed the trial court’s dismissal of other antitrust theories. The end payors’ case,
along with the wholesalers’ case, is proceeding in the trial court, where Takeda has filed a motion to dismiss the
remaining legal theory.
Investigation of Patient Assistance Programs
In November 2016, the U.S. Department of Justice (through the U.S. Attorneys’ Office in Boston)
issued a subpoena to ARIAD, which was acquired by Takeda during the year ended March 31, 2017, seeking
information from January 2010 to the present relating to ARIAD’s donations to 501(c) (3) co-payment
foundations, financial assistance programs, and free drug programs available to Medicare beneficiaries and the
relationship between these copayment foundations and specialty pharmacies, hubs or case management
programs. ARIAD is cooperating in the investigation.
33. Subsequent Events
Acquisition of Shire plc
On May 8, 2018,
the Company reached agreement with Shire plc (“Shire”) on the terms of a
recommended offer pursuant to which the Company will acquire the entire issued and to be issued ordinary
shares of Shire (the “Acquisition”).
Shire is a leading global biotechnology company focused on serving patients with rare diseases and
other highly specialised conditions.
Under the terms of the Shire Acquisition, Shire shareholders will receive 30.33 USD in cash and either
0.839 Takeda shares or 1.678 Takeda ADSs (American Depository Shares) per Shire share. The expected
aggregate consideration is approximately 46 billion GBP (at assumed exchange rate of £: ¥ of 1:151.51,
approximately 6.96 trillion JPY), based on the closing price of 4,923 JPY per Takeda share and the exchange
rates of £: ¥ of 1:151.51 and £: $ of 1:1.3945 on April 23, 2018 (being the day prior to the announcement that the
Shire Board would, in principle, be willing to recommend the consideration proposed by the Company).
Immediately following completion of the transaction, Shire shareholders are expected to hold approximately
50 percent of the combined group. The Acquisition is anticipated to complete in the first half of 2019, subject to
the completion of applicable conditions including, among other things, the sanction of the Royal Court of Jersey,
the approval of the shareholders of both of Shire and the Company and the receipt of regulatory clearances in the
relevant jurisdictions.
In certain specific circumstances if the Acquisition does not complete, the Company will be required to
pay a break fee to Shire of between 1% and 2% of the total offer price (depending on which circumstances apply,
and subject to certain carve-outs) calculated on the basis set out in the announcement made by the Company
pursuant to the City Code on Takeovers and Mergers in the UK on May 8, 2018.
Further, the Company has entered into a 364-Day Bridge Credit Agreement of 30.85 billion USD (the
“Bridge Credit Agreement”) to finance funds necessary for the Acquisition on May 8, 2018. The commitments
under the Bridge Credit Agreement are contemplated to be reduced or refinanced. On June 8, 2018, the Company
has entered into a Term Loan Credit Agreement for an aggregate principal amount of up to 7.5 billion USD to
finance a portion funds necessary for the Acquisition, and upon the execution thereof, the commitments under the
Bridge Credit Agreement will be reduced by up to 7.5 billion USD.
Disposal of ownership interest in Guangdong Techpool Bio-Pharma Co., Ltd
On May 21, 2018, Takeda entered into an agreement to sell its entire shareholding of 51.34% in
Guangdong Techpool Bio-Pharma Co., Ltd (“Techpool”), a leader in the research, discovery and marketing of
F-75
urinary protein biopharmaceuticals and production of biopharmaceuticals in critical care for approximately
280 million USD (approximately 30 billion JPY). The transaction is subject
to approval from the State
Administration for Market Regulation in the People’s Republic of China. The shares of the subsidiary have been
sold in August 2018.
Acquisition of TiGenix NV (“TiGenix”)
On April 30, 2018, the Company made an all cash voluntary public takeover bid for the entire issued
ordinary shares (“Ordinary Shares”), warrants (“Warrants”) and American Depositary Shares (“ADSs” and
together with the Ordinary Shares and the Warrants, the “Securities”) of TiGenix not already owned by Takeda.
On June 8, 2018, the Company acquired the Securities tendered in the first acceptance period for 470.2 million
EUR. In response to the takeover bid with the Securities already owned by Takeda, Takeda acquired 90.8% of
the voting rights. TiGenix NV (“TiGenix”) is a biopharmaceutical company developing novel stem cell therapies
for serious medical conditions. This acquisition will expand Takeda’s late stage gastroenterology (GI) pipeline
with the U.S. rights to Cx601 (darvadstrocel), a suspension of allogeneic expanded adipose-derived stem cells
(eASC) under investigation for the treatment of complex perianal fistulas in patients with non-active/mildly
active luminal Crohn’s disease (CD). Following the 2nd Takeover bid and a squeeze-out ended in July 2018,
TiGenix became a wholly owned subsidiary of Takeda.
The following represents provisional fair value of assets acquired, liabilities assumed:
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basis adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
JPY (millions)
Amount
¥ 63,421
5,794
(10,128)
(5,678)
(3,381)
19,975
Net Assets Acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 70,003
The purchase consideration was comprised of the following:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The ordinary shares of TiGenix already owned by Takeda immediately prior to the acquisition
JPY (millions)
Amount
¥67,319
date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,684
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥70,003
Goodwill comprises excess earning power expected from the future business development. Goodwill is
not deductible for tax purposes.
The fair value primarily consisting of intangible assets, deferred tax liabilities and goodwill assumed as
of the acquisition date have been recorded provisionally based on the information available as of the approval
date of the consolidated financial statements. These are subject to change as the Company is in the process of
reviewing further details of the basis for the fair value measurement.
Takeda entered in a forward exchange contract to hedge foreign currency risks and applied the hedge
accounting to the contract. Basis adjustment represents a fair value of the hedging instrument of 3,381 million
JPY that was added to the amount of goodwill at the acquisition date.
F-76
No gains or losses were recognized as a result of remeasurement of fair value of the ordinary shares of
TiGenix already owned by Takeda immediately prior to the acquisition date.
Acquisition-related costs of 767 million JPY which included agent fee and due diligence costs arising
from the acquisition were recorded in “Selling, general and administrative expenses” for the year ended
March 31, 2019.
F-77
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULE
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2017 and 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S-2
S-3
Consolidated Statements of Operations for each of the three years in the period ended
December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S-4
Consolidated Statements of Comprehensive Income for each of the three years in the period ended
December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S-6
Consolidated Statements of Changes in Equity for each of the three years in the period ended
December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S-7
Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Schedule:
Schedule II - Valuation and Qualifying Accounts for each of the three years in the period ended
December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-92
S-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Shire plc
St Helier, Jersey
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Shire plc and subsidiaries (the “Company”) as
of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income,
changes in equity and cash flows, for each of the three years in the period ended December 31, 2017, and the
related notes and the schedule listed in the Index at ITEM 15 (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2017, in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte LLP
London, United Kingdom
February 16, 2018
We have served as the Company’s auditor since 2002.
S-2
SHIRE PLC
CONSOLIDATED BALANCE SHEETS
(In millions, except par value of shares)
Notes
December 31,
2017
December 31,
2016
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment (PP&E), net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
9
10
11
13
12
21
$
472.4
39.4
3,009.8
3,291.5
795.3
7,608.4
241.1
6,635.4
19,831.7
33,046.1
188.8
205.4
$
528.8
25.6
2,616.5
3,562.3
806.3
7,539.5
191.6
6,469.6
17,888.2
34,697.5
96.7
152.3
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$67,756.9
$67,035.4
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short term borrowings and capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long term borrowings and capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
17
18
17
21
Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
$ 4,184.5
2,788.7
908.8
7,882.0
16,752.4
4,748.2
2,197.9
31,580.5
$ 4,312.4
3,068.0
362.9
7,743.3
19,899.8
8,322.7
2,121.6
38,087.4
Equity:
Common stock of 5p par value; 1,500 shares authorized; and 917.1 shares
issued and outstanding (2016: 1,500 shares authorized; and 912.2 shares
issued and outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock: 8.4 shares (2016: 9.1 shares)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income/(loss) . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26
26
20
81.6
25,082.2
(283.0)
1,375.0
9,920.6
81.3
24,740.9
(301.9)
(1,497.6)
5,925.3
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,176.4
28,948.0
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$67,756.9
$67,035.4
The accompanying notes are an integral part of these Consolidated Financial Statements.
S-3
SHIRE PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
Years ended December 31,
Notes
2017
2016
2015
Revenues:
Product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalties and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14,448.9
711.7
$10,885.8
510.8
$6,099.9
316.8
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,160.6
11,396.6
6,416.7
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of acquired intangible assets . . . . . . . . . . . . . . . . . .
Integration and acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Reorganization costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of product rights . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
5
6
4,700.8
1,763.3
3,530.9
1,768.4
894.5
47.9
(0.4)
3,816.5
1,439.8
3,015.2
1,173.4
883.9
121.4
(16.5)
969.0
1,564.0
1,842.5
498.7
39.8
97.9
(14.7)
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,705.4
10,433.7
4,997.2
Operating income from continuing operations . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income/(expense), net
Total other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before income taxes and equity in
earnings/(losses) of equity method investees . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings/(losses) of equity method investees, net of taxes . .
Income from continuing operations, net of taxes . . . . . . . . . . . . . . . . .
Gain/(loss) from discontinued operations, net of taxes . . . . . . . . . . . . .
21
7
2,455.2
9.7
(578.9)
7.4
(561.8)
1,893.4
2,357.6
2.5
4,253.5
18.0
962.9
18.4
(469.6)
(25.6)
(476.8)
486.1
126.1
(8.7)
603.5
(276.1)
1,419.5
4.2
(41.6)
3.7
(33.7)
1,385.8
(46.1)
(2.2)
1,337.5
(34.1)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,271.5
$
327.4
$1,303.4
The accompanying notes are an integral part of these Consolidated Financial Statements.
S-4
SHIRE PLC
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(In millions, except per share amounts)
Years ended December 31,
Notes
2017
2016
2015
Earnings per Ordinary Share – basic
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings/(loss) from discontinued operations . . . . . . . . . . . . . . . . . . . .
Earnings per Ordinary Share – basic . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per Ordinary Share – diluted
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings/(loss) from discontinued operations . . . . . . . . . . . . . . . . . . . .
Earnings per Ordinary Share – diluted . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average number of shares:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22
22
22
22
22
22
$
$
$
$
4.69
0.02
4.71
4.66
0.02
4.68
$
$
$
$
0.78
(0.35)
0.43
0.77
(0.35)
0.42
$
$
$
$
2.27
(0.06)
2.21
2.26
(0.06)
2.20
906.5
912.0
770.1
776.2
590.4
593.1
The accompanying notes are an integral part of these Consolidated Financial Statements.
S-5
SHIRE PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income/(loss):
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other employee benefits (net of tax expense of $11.2 million,
$8.8 million and $nil for the years ended December 31, 2017, 2016 and
2015, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on available-for-sale securities (net of tax benefit of
$0.1 million the years ended December 31, 2017 and 2016 and $nil for
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
the year ended December 31, 2015)
Hedging activities (net of tax benefit of $3.1 million, tax expense of
$3.3 million and $nil for the years ended December 31, 2017, 2016 and
2015, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years ended December 31,
2017
2016
2015
$4,271.5
$
327.4
$1,303.4
2,785.0
(1,323.3)
(156.4)
32.7
(5.2)
—
61.3
8.3
4.1
(6.4)
6.4
—
Comprehensive income/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,144.1
$ (986.4) $1,151.1
The components of Accumulated other comprehensive income/(loss) as of December 31, 2017 and
December 31, 2016 are as follows:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other employee benefits, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized holding gain on available-for-sale securities, net of taxes . . . . . . . . . . . . .
Hedging activities, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,279.6
27.5
67.9
—
$(1,505.4)
(5.2)
6.6
6.4
Accumulated other comprehensive income/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,375.0
$(1,497.6)
December 31,
2017
December 31,
2016
The accompanying notes are an integral part of these Consolidated Financial Statements.
S-6
SHIRE PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In millions)
Common
stock
number
of shares
As of January 1, 2017 . . . . . . . .
Net income . . . . . . . . . . . . . . . . . —
Other comprehensive income,
912.2
Common
stock
$81.3
—
net of tax . . . . . . . . . . . . . . . . —
—
Shares issued under employee
Additional
paid-in
capital
$24,740.9
—
—
benefit plans and other . . . . . .
4.9
0.3
155.7
Cumulative-effect adjustment
from adoption of ASU
2016-09 . . . . . . . . . . . . . . . . . —
Share-based compensation . . . . . —
Shares released by employee
benefit trust to satisfy
exercise of stock options . . . . —
Dividends . . . . . . . . . . . . . . . . . . —
—
—
—
—
Treasury
stock
$(301.9)
—
—
—
—
—
10.7
174.9
—
—
18.9
—
Accumulated
other
comprehensive
(loss)/income
$(1,497.6)
—
2,872.6
—
—
—
—
—
Retained
earnings
Total equity
$5,925.3
4,271.5
$28,948.0
4,271.5
—
—
2,872.6
156.0
24.0
—
34.7
174.9
(18.9)
(281.3)
—
(281.3)
As of December 31, 2017 . . . . .
917.1
$81.6
$25,082.2
$(283.0)
$ 1,375.0
$9,920.6
$36,176.4
Dividends per share
During the year ended December 31, 2017, Shire plc declared and paid dividends of $0.3079 per
ordinary share (equivalent to $0.9237 per ADS) totaling $281.3 million.
The accompanying notes are an integral part of these Consolidated Financial Statements.
S-7
SHIRE PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In millions)
As of January 1, 2016 . . . . . . . .
Net income . . . . . . . . . . . . . . . . .
Other comprehensive loss, net of
tax . . . . . . . . . . . . . . . . . . . . . .
Shares issued under employee
benefit plans . . . . . . . . . . . . . .
Shares issued for the acquisition
of Baxalta . . . . . . . . . . . . . . . .
Share-based compensation . . . . .
Tax benefit associated with
Common
stock
number
of shares
601.1
—
Common
stock
Additional
paid-in
capital
Treasury
stock
$58.9
—
$ 4,486.3
—
$(320.6)
—
—
—
—
5.9
0.4
138.4
305.2
—
22.0
—
19,788.9
318.5
Accumulated
other
comprehensive
loss
$ (183.8)
—
(1,313.8)
—
—
—
—
—
—
Retained
earnings
Total equity
$5,788.3
327.4
$ 9,829.1
327.4
—
—
—
—
—
(1,313.8)
138.8
19,810.9
318.5
8.8
(19.1)
(171.3)
(0.4)
(171.3)
—
—
—
—
—
18.7
—
exercise of stock options . . . .
—
Shares released by employee
benefit trust to satisfy
exercise of stock options . . . .
Dividends . . . . . . . . . . . . . . . . . .
—
—
—
—
—
8.8
—
—
As of December 31, 2016 . . . . .
912.2
$81.3
$24,740.9
$(301.9)
$(1,497.6)
$5,925.3
$28,948.0
Dividends per share
During the year ended December 31, 2016, Shire plc declared and paid dividends of $0.2679 per
ordinary share (equivalent to $0.8037 per ADS) totaling $171.3 million.
The accompanying notes are an integral part of these Consolidated Financial Statements.
S-8
SHIRE PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In millions)
Common
stock
number
of shares
As of January 1, 2015 . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . —
Other comprehensive loss, net of
599.1
tax . . . . . . . . . . . . . . . . . . . . . . —
Options exercised . . . . . . . . . . . .
Share-based compensation . . . . . —
Tax benefit associated with
2.0
exercise of stock options . . . . —
Shares released by employee
benefit trust to satisfy exercise
of stock options . . . . . . . . . . . —
Dividends . . . . . . . . . . . . . . . . . . —
Common
stock
$58.7
—
Additional
paid-in
capital
$4,338.0
—
Treasury
stock
$(345.9)
—
Accumulated
other
comprehensive
loss
Retained
earnings
Total equity
$ (31.5)
—
$4,643.6
1,303.4
$8,662.9
1,303.4
—
0.2
—
—
—
—
—
16.4
100.3
31.6
—
—
—
—
—
—
25.3
—
(152.3)
—
—
—
—
—
—
—
—
—
(152.3)
16.6
100.3
31.6
(24.3)
(134.4)
1.0
(134.4)
As of December 31, 2015 . . . . . .
601.1
$58.9
$4,486.3
$(320.6)
$(183.8)
$5,788.3
$9,829.1
Dividends per share
During the year ended December 31, 2015, Shire plc declared and paid dividends of $0.233 per ordinary
share (equivalent to $0.699 per ADS) totaling $134.4 million.
The accompanying notes are an integral part of these Consolidated Financial Statements.
S-9
SHIRE PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating
activities:
Years ended December 31,
2017
2016
2015
$ 4,271.5
$
327.4
$ 1,303.4
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing fees . . . . . . . . . . . . . . . . . . . . . . . . .
Expense related to the unwind of inventory fair value adjustments . . . .
Change in deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of contingent consideration . . . . . . . . . . . . . . . . . .
Impairment of PP&E and intangible assets . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Increase in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in sales deduction accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease/(increase) in prepayments and other assets . . . . . . . . . . . . . . .
(Decrease)/increase in accounts payable and other liabilities . . . . . . . . .
2,264.2
174.9
12.8
747.8
(2,916.4)
120.7
289.9
55.6
(487.6)
314.1
(145.1)
81.1
(526.8)
1,466.3
318.5
125.5
1,118.0
(594.6)
11.1
101.3
31.4
(701.7)
288.3
(255.8)
(198.4)
621.6
637.2
100.3
—
31.1
(198.2)
(149.9)
643.7
—
(211.4)
97.6
(63.2)
37.2
109.2
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,256.7
2,658.9
2,337.0
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of PP&E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of businesses, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Movements in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(798.8)
—
88.6
(13.7)
23.0
(648.7)
(17,476.2)
0.9
62.8
(31.0)
(114.7)
(5,553.4)
85.7
(32.0)
(5.5)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(700.9)
(18,092.2)
(5,619.9)
The accompanying notes are an integral part of these Consolidated Financial Statements.
S-10
SHIRE PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In millions)
Years ended December 31,
2017
2016
2015
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit, long term and short term
borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,236.7
32,443.4
3,760.8
Repayment of revolving line of credit, long term and short term
borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of stock for share-based compensation
(7,681.4)
(281.3)
—
(16,404.3)
(171.3)
(172.3)
(3,110.9)
(134.4)
(24.1)
arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
134.1
(27.4)
169.2
(38.9)
Net cash (used in)/provided by financing activities . . . . . . . . . . . . . . . . . . . .
(3,619.3)
15,825.8
Effect of foreign exchange rate changes on cash and cash equivalents . . . . .
Net (decrease)/increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . .
7.1
(56.4)
528.8
0.8
393.3
135.5
16.6
(69.0)
439.0
(3.0)
(2,846.9)
2,982.4
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . .
$
472.4
$
528.8
$
135.5
Supplemental information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes paid, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
554.2
524.7
$
$
284.0
431.0
$
$
20.0
69.0
For stock issued as purchase consideration for the acquisition of Baxalta related to non-cash investing
activities, refer to Note 3, Business Combinations, to these Consolidated Financial Statements.
Years ended December 31,
2017
2016
2015
The accompanying notes are an integral part of these Consolidated Financial Statements.
S-11
SHIRE PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Operations
Shire plc and its subsidiaries (collectively referred to as either “Shire” or the “Company”) is the leading
global biotechnology company focused on serving people with rare diseases.
Some of the Company’s marketed products include GAMMAGARD, HYQVIA and CINRYZE for
Immunology, ADVATE/ADYNOVATE, VONVENDI and FEIBA for Hematology, VYVANSE and
ADDERALL XR for Neuroscience, LIALDA/MEZAVANT and PENTASA for Internal Medicine, ELAPRASE
and REPLAGAL for Genetic Diseases, ONCASPAR and ONYVIDE for Oncology and XIIDRA for
Ophthalmics.
The Company has grown both organically and through acquisition, completing a series of major
transactions that have brought therapeutic, geographic and pipeline growth and diversification. The Company
will continue to conduct its own research and development (R&D) focused on rare diseases, as well as evaluate
companies, products and pipeline opportunities that offer a strategic fit and have the potential to deliver value to
all of the Company’s stakeholders: patients, physicians, policy makers, payers, partners,
investors and
employees.
2.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Consolidated Financial Statements include the accounts of Shire plc, all of its
subsidiaries and the Income Access Share trust, after elimination of inter-company accounts and transactions.
They have been prepared in accordance with generally accepted accounting principles in the United States of
America (U.S. GAAP) and U.S. Securities and Exchange Commission (SEC) regulations for annual reporting.
On June 3, 2016, the Company completed its acquisition of Baxalta for $32.4 billion, representing the
fair value of purchase consideration. The Company’s Consolidated Financial Statements include the results of
Baxalta from the date of acquisition. For further details regarding the acquisition, refer to Note 3, Business
Combinations, to the Consolidated Financial Statements set forth in this Annual Report on Form 10-K.
Use of Estimates
The preparation of Financial Statements, in conformity with U.S. GAAP and SEC regulations, requires
management to make estimates, judgments and assumptions that affect the reported and disclosed amounts of
assets, liabilities and equity at the date of the Consolidated Financial Statements and reported amounts of
revenues and expenses during the period. On an on-going basis, the Company evaluates its estimates, judgments
and methodologies. Estimates are based on historical experience, current conditions and on various other
assumptions that are reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets, liabilities and equity and the amounts of revenues and expenses.
Actual results may differ from these estimates under different assumptions or conditions.
Consolidation
The Consolidated Financial Statements reflect the financial statements of the Company and those of the
Company’s wholly-owned subsidiaries. For consolidated entities where the Company owns or is exposed to less
than 100% of the economics, the Company records net income (loss) attributable to non-controlling interests in
its Consolidated Statements of Operations equal to the percentage of the economic or ownership interest retained
in such entities by the respective non-controlling parties. Intercompany balances and transactions are eliminated
in consolidation.
S-12
The Company determines whether to consolidate subsidiaries based on either the variable interest entity
(VIE) model or the voting interest model. The Company consolidates a VIE if it is determined that the Company
is the primary beneficiary of the VIE. In determining whether the Company is the primary beneficiary of an
entity, management applies a qualitative approach that determines whether the Company has both (1) the power
to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right
to receive benefits from, the entity that could potentially be significant to that entity. The Company consolidates
entities that are not VIEs if it is determined that the Company holds a majority voting interest in the entity.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases
when the Company loses control of the subsidiary. Intercompany balances and transactions are eliminated in
consolidation.
Revenue recognition
The Company recognizes revenue when all of the following criteria are met:
•
•
•
•
there is persuasive evidence an arrangement exists;
delivery has occurred or services have been rendered;
the price to the customer is fixed or determinable; and
collectibility is reasonably assured.
Where applicable, all revenues are stated net of value added and similar taxes and trade discounts. The
Company’s principal revenue streams and their respective accounting treatments are discussed below:
Product sales
Revenues from Product sales are recognized when title and risk of loss have passed to the customer,
which is typically upon delivery. Product sales are recorded net of applicable reserves for discounts and
allowances.
Reserves for Discounts and Allowances
The Company establishes reserves for trade discounts, chargebacks, distribution service fees, Medicaid
rebates, managed care rebates, incentive rebates, product returns and other governmental rebates or applicable
allowances. These reserves are based on estimates of the amounts earned or to be claimed on the related sales.
Management’s estimates take into consideration historical experience, current contractual and statutory
requirements, specific known market events and trends, industry data and forecasted customer buying and
payment patterns. Actual amounts may ultimately differ from estimates. If actual results vary, management
adjusts these estimates, which have an effect on earnings in the period of adjustment.
•
•
•
Trade discounts are generally credits granted to wholesalers, specialty pharmacies and other
customers for remitting payment on their purchases within established incentive periods and are
classified as a reduction of accounts receivable.
Chargebacks are credits or payments issued to wholesalers and distributors who provide products to
qualified healthcare providers at prices lower than the list prices charged to the wholesaler or
distributor. Reserves are estimated based on expected purchases by those qualified healthcare
providers. Chargeback reserves are classified as a reduction of accounts receivable.
Distribution service fees are credits or payments issued to wholesalers, distributors and specialty
pharmacies for compliance with various contractually-defined inventory management practices or
services provided to support patient access to a product. These fees are generally based on a
S-13
percentage of gross purchases but can also be based on additional services these entities provide.
Most of these costs are reflected as a reduction of gross sales; however, to the extent benefit from
services can be separately identified and the fair value determined, costs are classified in Selling,
general and administrative expense. Reserves are classified within accrued expenses.
• Medicaid rebates are payments
to States under
statutory and voluntary reimbursement
arrangements. Reserves for these rebates are generally based on an estimate of expected product
usage by Medicaid patients and expected rebate rates. Statutory rates are generally based on a
percentage of selling price adjusted upwards for price increases in excess of published inflation
indices. As a result, rebates generally increase as a percentage of the selling price over the life of
the product (as prices increase). Medicaid rebate reserves are classified within accrued expenses.
• Managed care rebates are payments to third parties, primarily pharmacy benefit managers and other
health insurance providers. The reserve for these rebates is based on an estimate of customer buying
patterns and applicable contractual rebate rates to be earned over each period. Reserves are
classified within accrued expenses.
•
•
•
Incentive rebates are generally credits or payments issued to specialty pharmacies, distributors or
Group Purchasing Organizations for qualified purchases of certain products. Reserves are estimated
based on the terms of each individual contract and purchase volumes and are classified within
accrued expenses.
Return credits are issued to customers for return of product damaged in shipment and, for certain
products, return due to lot expiry. The majority of returns are due to expiry, and reserves are
estimated based on historical returns experience. The returns reserve is classified within accrued
expenses.
Other discounts and allowances include Medicare rebates, coupon and patient co-pay assistance.
Medicare rebates are payments to certain health insurance providers of Medicare Part D coverage to
qualified patients. Reserve estimates are based on customer buying patterns and applicable
contractual rebate rates to be earned over each period. Coupon and co-pay assistance programs
provide discounts to qualified patients. Reserve estimates are based on expected claim volumes
under these programs and estimated cost per claim that the Company expects to pay. Reserves for
Medicare and coupon and patient co-pay programs are classified within accrued expenses.
Royalties and Other Revenue
Royalty income relating to licensed technology is recognized when the licensee sells the underlying
product, with the amount of royalty income recorded based on sales information received from the relevant
licensee. The Company estimates sales amounts and related royalty income based on the historical product
information for any period that the sales information is not available from the relevant licensee.
Other revenue includes revenues derived from product out-licensing arrangements, which may consist
of an initial up-front payment on inception of the license and subsequent milestone payments upon achievement
of certain clinical and sales milestones. To the extent the license requires Shire to provide services to the
licensee; up-front payments are deferred and recognized over the service period.
Business combinations
Business combinations are accounted for using the acquisition method of accounting. Under the
acquisition method, assets acquired, including in-process research and development (IPR&D) projects, and
liabilities assumed are recorded at their respective fair values as of the acquisition date in the Consolidated
Financial Statements. The excess of the fair value of consideration transferred over the fair value of the net assets
acquired is recorded as goodwill. Contingent consideration obligations incurred in connection with a business
S-14
combination (including the assumption of an acquiree’s liability arising from a business combination it
completed prior to the acquisition) are recorded at their fair values on the acquisition date and remeasured at their
fair values each subsequent reporting period until the related contingencies are resolved. The resulting changes in
fair values are recorded in earnings.
Goodwill
Goodwill represents the difference between the purchase price and the fair value of the identifiable
tangible and intangible net assets acquired in a business combination. Goodwill is not amortized, but instead is
reviewed for impairment. Goodwill is reviewed annually, as of October 1, and whenever events or changes in
circumstances indicate that the carrying value of goodwill may not be recoverable. Events or changes in
circumstances which could trigger an impairment review include but are not limited to: unexpected adverse
business conditions, economic factors, unanticipated technological changes or competitive activities and acts by
governments and courts.
For the purpose of assessing the carrying value of goodwill for impairment, goodwill is allocated at the
Company’s reporting unit level. As described in Note 27, Segment Reporting, the Company operates in one
operating segment which it considers to be its only reporting unit.
The Company reviews goodwill for impairment by firstly assessing qualitative factors, including
comparing the market capitalization of the Company to the carrying value of its assets, to determine whether
events or circumstances exist which indicate that it is more likely than not that the fair value of a reporting unit is
less than its carrying amount. If, after assessing these qualitative factors, it is deemed more likely than not that
the fair value of a reporting unit is less than its carrying value, a “two step” quantitative assessment is performed
by comparing the carrying value of the reporting unit’s net assets (including allocated goodwill) to the fair value
of the reporting unit.
If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of its reporting
unit, then it determines the implied fair value of its reporting unit’s goodwill. If the carrying value of the
reporting unit’s goodwill exceeds its implied fair value, then an impairment loss equal to the difference is
recorded.
Intangible Assets
Intangible assets primarily relate to commercially marketed products and IPR&D projects. Intangible
assets are recorded at fair value at the time of their acquisition and are stated in the Consolidated Balance Sheets,
net of accumulated amortization and impairments, if applicable.
Intangible assets related to commercially marketed products are amortized over their estimated useful
lives. Remaining useful lives range from 1 year to 24 years (weighted average 19 years) and the Company
amortizes its intangibles on an economic consumption method, or a straight-line basis when straight-line method
approximates economic consumption method.
Milestone payments made to third parties on and subsequent to regulatory approval are capitalized as
intangible assets, and amortized over the remaining useful life of the related product.
The following factors, where applicable, are considered in estimating the useful lives of intangible
assets:
•
•
expected use of the asset;
regulatory, legal or contractual provisions, including the regulatory approval and review process,
patent issues and actions by government agencies;
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•
•
•
the effects of obsolescence, changes in demand, competing products and other economic factors,
including the stability of the market, known technological advances, development of competing
drugs that are more effective clinically or economically;
actions of competitors, suppliers, regulatory agencies or others that may eliminate current
competitive advantages; and
historical experience of renewing or extending similar arrangements.
Acquired IPR&D represents the fair value assigned to research and development assets that have not
reached technological feasibility. The value assigned to acquired IPR&D is determined by estimating the costs to
develop the acquired technology into commercially viable products, estimating the resulting revenue from the
projects, and discounting the net cash flows to present value. The revenue and costs projections used to value
acquired IPR&D are, as applicable, reduced based on the probability of success of developing a new drug.
the projections consider the relevant market sizes and growth factors, expected trends in
Additionally,
technology, and the nature and expected timing of new product
introductions by the Company and its
competitors. The rates utilized to discount the net cash flows to their present value are commensurate with the
stage of development of the projects and uncertainties in the economic estimates used in the projections.
Upon the acquisition of IPR&D, the Company completes an assessment of whether the acquisition
constitutes the purchase of a single asset or a group of assets. The Company considers multiple factors in this
assessment, including the nature of the technology acquired, the presence or absence of separate cash flows, the
development process and stage of completion, quantitative significance and its rationale for entering into the
transaction.
If the Company acquires a business as defined under applicable accounting standards, then the acquired
IPR&D is capitalized as an intangible asset. If the Company acquires an asset or group of assets that do not meet
the definition of a business, then the acquired IPR&D is expensed on its acquisition date. Future costs to develop
these assets are recorded to research and development expense as they are incurred.
IPR&D projects are considered to be indefinite-lived until completion of the associated R&D efforts. If
and when development is complete, which generally occurs when regulatory approval to market a product is
obtained, the associated assets would be deemed finite-lived and would then be amortized based on their
respective estimated useful lives at that point in time. Intangible assets related to IPR&D projects are reviewed
for impairment at least annually, as of October 1st, until commercialization, after which time the IPR&D is
amortized over its estimated useful life.
Impairment of Long-lived Assets
The Company evaluates the carrying value of long-lived assets, except for goodwill and indefinite lived
intangible assets, whenever events or changes in circumstances indicate that the carrying amounts of the relevant
assets may not be recoverable. When such a determination is made, management’s estimate of undiscounted cash
flows to be generated by the use and ultimate disposition of these assets is compared to the carrying value of the
assets to determine whether the carrying value is recoverable. If the carrying value is deemed not to be
recoverable, the amount of the impairment recognized in the Consolidated Financial Statements is determined by
estimating the fair value of the relevant assets and recording an impairment loss for the amount by which the
carrying value exceeds the estimated fair value.
The Company calculates the fair value using significant estimates and assumptions including but not
limited to: revenues and operating profits related to the products, existing competitive activities and acts by
governments and courts. Changes in these estimates and assumptions could materially affect the determination of
fair value. Should the fair value of long-lived assets decline, charges for impairment may be necessary.
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Fair Value Measurements
The Company has certain financial assets and liabilities recorded at fair value which have been
classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value
measurements:
•
•
•
Level 1 - Fair values are determined utilizing quoted prices (unadjusted) in active markets for
identical assets or liabilities that we have the ability to access;
Level 2 - Fair values are determined by utilizing quoted prices for similar assets and liabilities in
active markets or other market observable inputs such as interest rates, yield curves and foreign
currency spot rates; and
Level 3 - Prices or valuations that require inputs that are both significant to the fair value
measurement and unobservable.
The majority of the Company’s financial assets have been classified as Level 1 and 2. The Company’s
financial assets, which include cash equivalents, derivative contracts, marketable equity and debt securities, and
plan assets for deferred compensation, have been initially valued at the transaction price and subsequently
valued, at the end of each reporting period, utilizing third-party pricing services or other market observable data.
The Company utilizes industry standard valuation models, including both income and market-based approaches
and observable market inputs to determine value. These observable market inputs include reportable trades,
benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and
economic events.
Accounts receivable
The Company’s accounts receivable arise from Product sales and represent amounts due from its
customers. The Company monitors the financial performance and credit worthiness of its large customers so that
it can assess and respond to changes in their credit profile. The Company provides reserves against accounts
receivable for estimated losses, if any, that may result from a customer’s inability to pay. Amounts determined to
be uncollectible are written-off against the reserve.
Investments
The Company has certain investments in pharmaceutical and biotechnology companies whose securities
are not publicly traded and where fair value is not readily available. These investments are recorded using either
the cost method or the equity method of accounting, depending on its ownership percentage and other factors that
suggest the Company has significant influence. Under the equity method of accounting, the Company records its
investments in equity-method investees in the consolidated balance sheet under Investments and its share of the
investees’ earnings or losses together with other-than- temporary impairments in value under Equity in earnings/
(losses) of equity method investees, net of taxes in the Consolidated Statements of Operations. The Company
monitors these investments to evaluate whether any decline in their value has occurred that would be other-than-
temporary, based on the implied value of recent company financings, public market prices of comparable
companies, and general market conditions.
All other equity investments, which consist of investments for which the Company does not have the
ability to exercise significant influence, are accounted for under the cost method or at fair value. Investments in
private companies are carried at cost,
in value. For
investments in equity investments that have readily determinable fair values, the Company classifies its equity
investments as available-for-sale and, accordingly, records these investments at their fair values with unrealized
holding gains and losses included in the Consolidated Statements of Comprehensive Income, net of any related
tax effect. Realized gains and losses, and declines in value of available-for-sale securities judged to be other-
less provisions for other-than-temporary impairment
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than-temporary, are included in Other income/(expense), net in the Consolidated Statements of Operations. The
cost of securities sold is based on the specific identification method. Interest on securities classified as
available-for-sale is included as Interest income in the Consolidated Statements of Operations.
Inventories
Inventories are stated at the lower of cost, computed using the first-in, first-out method, and net
realizable value. The inventory costs are classified as long term when the Company expects to utilize the
inventory beyond the normal operating cycle and includes these costs in Other non-current assets in the
Consolidated Balance Sheets.
Capitalization of Inventory Costs
The Company capitalizes inventory costs associated with its products prior to regulatory approval,
when, based on management’s judgment, future commercialization is considered highly probable and the future
economic benefit is expected to be realized.
Obsolescence and Unmarketable Inventory
Inventories are written down for estimated obsolescence or unmarketable inventory equal to the
difference between the cost of inventory and estimated net realizable value based upon assumptions about future
demand and market conditions. Amounts written down due to obsolescence and unmarketable inventory are
charged to Cost of sales.
Property, plant and equipment
Property, plant and equipment are carried at cost, net of accumulated depreciation and impairment
losses. Property, plant and equipment are subject to review for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be recoverable. The cost of normal,
recurring, or periodic repairs and maintenance activities related to property, plant and equipment are expensed as
incurred. The cost for planned major maintenance activities, including the related acquisition or construction of
assets, is capitalized if the repair will result in future economic benefits.
Interest costs incurred during the construction of major capital projects are capitalized until
the
underlying asset is ready for its intended use, at which point the interest costs are amortized as depreciation
expense over the useful life of the underlying asset. The Company also capitalizes certain direct and incremental
costs associated with the validation effort required for licensing by regulatory agencies of new manufacturing
equipment for the production of a commercially approved drug. These costs primarily include direct labor and
material and are incurred in preparing the equipment for its intended use. The validation costs are amortized over
the useful life of the related equipment.
Depreciation of property, plant and equipment is calculated using the straight-line method over the
estimated useful lives as follows:
Asset category
Estimated useful lives
Land
Buildings and leasehold improvements
Office furniture, fittings and equipment
Machinery, equipment and other
Not depreciated
15 to 50 years
3 to 10 years
3 to 15 years
At the time property, plant and equipment is retired or otherwise disposed of, the cost and accumulated
depreciation are eliminated from the asset and accumulated depreciation accounts. The profit or loss on such
disposition is reflected in operating income.
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Assets Held for Sale
The Company classifies long-lived assets or disposal groups to be sold as held for sale in the period in
which all of the following criteria are met:
• management, having the authority to approve the action, commits to a plan to sell the asset or
disposal group;
•
•
•
•
•
the asset or disposal group is available for immediate sale in its present condition;
an active program to locate a buyer and other actions required to complete the plan to sell the asset
or disposal group have been initiated;
the sale of the asset or disposal group is probable, and transfer of the asset or disposal group is
expected to qualify for recognition as a completed sale within one year, except if events or
circumstances beyond our control extend the period of time required to sell the asset or disposal
group beyond one year;
the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation
to its current fair value; and
actions required to complete the plan indicate that it is unlikely that significant changes to the plan
will be made or that the plan will be withdrawn.
The Company initially measures a long-lived asset or disposal group that is classified as held for sale at
the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is
recognized in the period in which the held-for-sale criteria are met.
The Company assesses the fair value of a long-lived asset or disposal group less any costs to sell each
reporting period it remains classified as held for sale and reports any subsequent changes as an adjustment to the
carrying value of the asset or disposal group, as long as the new carrying value does not exceed the carrying
value of the asset at the time it was initially classified as held for sale.
Upon determining that a long-lived asset or disposal group meets the criteria to be classified as held for
sale, the Company ceases depreciation.
Discontinued operations
Discontinued operations comprise those activities that were disposed of during the period or which were
classified as held for sale at the end of the period, and represent a separate major line of business or geographical
area that can be clearly distinguished for operational and financial reporting purposes.
Contingent consideration payable
Contingent consideration payable represents future milestones and royalties the Company may be
required to pay in conjunction with various business combinations. The amounts ultimately payable by the
Company are dependent upon the successful achievement of the underlying scientific or commercial event and
future net sales of the relevant products over applicable term. The Company records an obligation for such
contingent payments at fair value on the acquisition date. The Company assesses the probability, and estimated
timing, of these milestones being achieved and the present value of forecast future net sales of the relevant
products and re-measures the related contingent consideration to fair value each balance sheet date. The amount
of contingent consideration which may ultimately be payable by Shire in relation to future royalties is dependent
upon future net sales of the relevant products over the life of the royalty term.
The fair value of the Company’s contingent consideration payable, which is considered as Level 3
within the fair value hierarchy, could significantly increase or decrease due to changes in certain assumptions
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which underpin the fair value measurements. Each set of assumptions and milestones is specific to the individual
contingent consideration payable. The assumptions include, among other things, the probability of, and period in
which, the relevant milestone event is expected to be achieved; the amount of royalties that will be payable based
on forecast net sales of the relevant products; and the discount rates to be applied in calculating the present
values of the relevant milestone or royalty. The Company regularly reviews these assumptions, and makes
adjustments to the fair value measurements as required by facts and circumstances.
Derivative financial instruments
The Company uses derivative financial instruments to manage its exposure to foreign exchange risk to
earnings relating to forecasted transactions and recognized assets and liabilities. For each derivative instrument
that is designated and effective as a cash flow hedge, the gain or loss on the derivative is recorded in
Accumulated Other Comprehensive Income (AOCI) and then recognized in earnings consistent with the
underlying hedged item. Cash flow hedges are classified in revenues and cost of sales and primarily relate to
forecasted third-party sales denominated in foreign currencies and forecasted intercompany sales denominated in
foreign currencies, respectively.
In its application of hedge accounting, the Company assesses, both at inception and on a prospective
basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting the changes
in cash flows or fair values of the hedged items. The Company also assesses hedge effectiveness on a
retrospective basis every quarter with any hedge ineffectiveness recorded to the Consolidated Statements of
Operations.
The Company uses forward contracts to mitigate the effects of changes in foreign exchange relating to
certain of the Company’s intercompany and third-party receivables and payables. These derivative instruments
generally are not formally designated as hedges and the terms of these instruments generally do not exceed three
months. The fair values of these instruments are included in the Consolidated Balance Sheets in Current assets or
Current liabilities, with changes in the fair value recognized in the Consolidated Statements of Operations. The
cash flows relating to these instruments are presented within Net cash provided by operating activities in the
Consolidated Statements of Cash Flows, unless the derivative instruments are economically hedging specific
investing or financing activities.
Translation of foreign currency
The functional currency for most of the foreign subsidiaries is their local currency. For the non-U.S.
subsidiaries that transact in a functional currency other than the U.S. dollar, assets and liabilities are translated at
current rates of exchange at the balance sheet date. Income and expense items are translated at the average
foreign exchange rates for the period. Adjustments resulting from the translation of the financial statements of
the foreign operations into U.S. dollars are excluded from the determination of Net income and are recorded in
AOCI, a separate component of equity. For subsidiaries where the functional currency of the assets and liabilities
differ from the local currency, non-monetary assets and liabilities are translated at the rate of exchange in effect
on the date assets were acquired while monetary assets and liabilities are translated at current rates of exchange
as of the balance sheet date. Income and expense items are translated at the average foreign currency rates for the
period. Translation adjustments of these subsidiaries are included in Other income/(expense), net.
Foreign currency exchange transaction (losses)/gains included in Consolidated Statements of Operations
in the years ended December 31, 2017, 2016 and 2015 amounted to $(97.3) million, $17.7 million and
$(26.5) million, respectively.
Cost of sales
Cost of sales includes the cost of purchasing finished product for sale, the cost of raw materials and
costs of manufacturing those products including shipping and handling costs, depreciation and amortization of
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intangible assets in respect of favorable manufacturing contracts. Royalties payable to third party intellectual
property owners related to the sold products are also included in Cost of sales.
Research and development (R&D) expense
Research and development expenses consist of compensation and benefits, facilities and overhead
expenses, clinical trial expenses and fees paid to contract research organizations (CROs), clinical supply and
manufacturing expenses and upfront fees and milestones paid to collaborators. R&D expense also includes the
impairment charges related to the IPR&D intangible assets.
Research and development expenses are expensed as incurred. Payments that were made for research
and development services prior to the services being rendered are recorded as Prepaid expenses and other current
assets on the Consolidated Balance Sheets and are expensed as the services are provided. Management also
accrues the costs of ongoing clinical trials associated with programs that have been terminated or discontinued
for which there is no future economic benefit at the time the decision is made to terminate or discontinue the
program.
Selling, general and administrative expenses
Selling, general and administrative expenses are primarily comprised of compensation and benefits
information technology and other
associated with sales and marketing, finance, human resources,
administrative personnel, outside marketing, advertising and legal expenses and other general and administrative
costs.
legal,
Advertising costs are expensed as incurred. Advertising costs amounted to $210.3 million,
$216.0 million and $56.1 million for the years ended December 31, 2017, 2016 and 2015, respectively.
Collaborative arrangements
The Company enters into collaborative arrangements to develop and commercialize drug candidates.
These collaborative arrangements often require up-front, milestone, royalty or profit share payments, or a
combination of these, with payments often contingent upon the success of the related development and
commercialization efforts. Collaboration agreements entered into by the Company may also include expense
reimbursements or other such payments to the collaborating partner. The Company records payments received
from the collaborative partners for their share of the development costs as a reduction of research and
development expense.
For collaborations with commercialized products, if the Company is the principal, it records revenue
and the corresponding operating costs in their respective line items in the Consolidated Statements of Operations.
If the Company is not the principal, it records operating costs as a reduction of revenue.
Leased assets
The costs of operating leases are charged to operations on a straight-line basis over the lease term, even
if rental payments are not made on such a basis.
Assets acquired under capital leases are included in the Consolidated Balance Sheets as property, plant
and equipment and are depreciated over the shorter of the period of the lease or their useful lives. The capital
element of future lease payments is recorded as a liability, while the interest element is charged to operations
over the period of the lease to produce a level yield on the balance of the capital lease obligation.
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Finance costs of debt
Financing costs relating to debt issued are recorded against the corresponding debt and amortized to the
Consolidated Statements of Operations over the period to the earliest redemption date of the debt, using the
effective interest rate method. On extinguishment of the related debt, any unamortized deferred financing costs
are written off and charged to Interest expense in the Consolidated Statements of Operations.
Income taxes
The provision for income taxes includes Irish corporation tax, US federal, state, local and other foreign
taxes. Income taxes are accounted for under the liability method.
Uncertain tax positions are recognized in the Consolidated Financial Statements for positions which are
considered more likely than not of being sustained, based on the technical merits of the position on audit by the
tax authorities. The measurement of the tax benefit recognized in the Consolidated Financial Statements is based
upon the largest amount of tax benefit that, in management’s judgment, is greater than 50% likely of being
realized based on a cumulative probability assessment of the possible outcomes.
The Company recognizes interest and penalties relating to income taxes within Income taxes. Interest
income on cash required to be deposited with the tax authorities is recognized within Interest income.
Deferred tax assets and liabilities are recognized for differences between the carrying amounts of assets
and liabilities in the Consolidated Financial Statements and the tax bases of assets and liabilities that will result
in future taxable or deductible amounts. The deferred tax assets and liabilities are measured using the enacted tax
laws and rates applicable to the periods in which the differences are expected to affect taxable income.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be realized.
Earnings per share
Basic earnings per share is based upon net income attributable to the Company divided by the weighted
average number of ordinary shares outstanding during the period. Diluted earnings per share is based upon net
income attributable to the Company divided by the weighted average number of ordinary share equivalents
outstanding during the period, adjusted for the dilutive effect of all potential ordinary shares equivalents that
were outstanding during the year. Such potentially dilutive shares are excluded when the effect would be to
increase diluted earnings per share or reduce the diluted loss per share.
Share-based compensation
The share-based compensation programs grant awards that include stock-settled share appreciation
rights (SARs), stock options, performance share awards (PSAs), restricted stock units (RSUs) and performance
share units (PSUs). The Company also operates a Global Employee Stock Purchase Plan, and Sharesave Plans in
the UK and Ireland.
Share-based compensation represents the cost of share-based awards granted to employees. The
Company measures share-based compensation cost for awards classified as equity at the grant date, based on the
estimated fair value of the award. Predominantly all of the Company’s awards have service and/or performance
conditions and the fair values of these awards are estimated using a Black-Scholes valuation model.
For share-based compensation awards which cliff vest, the Company recognizes the cost of the relevant
share-based payment award as an expense on a straight-line basis (net of estimated forfeitures) over the
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employee’s requisite service period. For those share-based compensation awards with a graded vesting schedule,
the Company recognizes the cost of the relevant share-based payment award as an expense on a straight-line
basis (net of estimated forfeitures) over the requisite service period for the entire award (that is, over the requisite
service period for the last separately vesting portion of the award). The share-based compensation expense is
recorded in Cost of product sales, R&D, SG&A, Reorganization costs and Integration and Acquisition costs in
the Consolidated Statements of Operations based on the employees’ respective functions.
The Company records deferred tax assets for awards that result in deductions on the Company’s income
tax returns, based on the amount of compensation cost recognized and the Company’s statutory tax rate in the
jurisdiction in which it will receive a deduction. For the years ended December 31, 2016 and 2015, differences
between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported
on the Company’s income tax returns were recorded in additional paid-in capital (if the tax deduction exceeds the
deferred tax asset) or in the Consolidated Statements of Operations (if the deferred tax asset exceeds the tax
deduction and no additional paid-in capital exists from previous awards). Following the adoption of new
accounting guidance effective January 1, 2017, for the year ended December 31, 2017, differences between the
deferred tax assets and the actual tax deduction reported on the Company’s income tax returns were recorded in
the Consolidated Statements of Operations, including if the tax deduction exceeds the deferred tax asset. The
Company’s share-based compensation plans are described in more detail in Note 23, Share-based Compensation
Plans.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards
Board (FASB) or other standard setting bodies that the Company adopts as of the specified effective date. Unless
otherwise discussed below, the Company does not believe that the impact of recently issued standards that are
not yet effective will have a material impact on the Company’s financial position or results of operations upon
adoption.
Adopted during the current period
Inventory
In July 2015, the FASB issued new guidance which requires an entity to measure inventory at the lower
of cost and net realizable value. Net realizable value is defined as the estimated selling prices in the ordinary
course of business, less reasonably predictable costs of completion, disposal and transportation. The Company
adopted this standard as of January 1, 2017, which did not impact the Company’s financial position or results of
operations.
Share-Based Payment Accounting
In March 2016,
the FASB issued Accounting Standards Update
(ASU) No. 2016-09,
Compensation - Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment
Accounting. The new standard requires recognition of the income tax effects of vested or settled awards in the
income statement and involves several other aspects of the accounting for share-based payment transactions,
including the income tax consequences, classification of awards as either equity or liabilities and classification on
the Statements of Cash Flows and allows a one-time accounting policy election to account for forfeitures as they
occur. The new standard was effective January 1, 2017.
The Company adopted ASU 2016-09 in the first quarter of 2017. Before adoption, excess tax benefits or
deficiencies from the Company’s equity awards were recorded as Additional paid-in capital in its Consolidated
Balance Sheets. Upon adoption, the Company recorded any excess tax benefits or deficiencies from its equity
awards in its Consolidated Statements of Operations in the reporting periods in which vesting or settlement
occurs.
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Amendments related to accounting for excess tax benefits have been adopted prospectively, resulting in
recognition of excess tax benefits against Income taxes rather than Additional paid-in capital of $11.5 million for
the twelve months ended December 31, 2017.
As a result of the adoption, the Company recorded an adjustment to Retained earnings of $39.0 million
to recognize net operating loss carryforwards attributable to excess tax benefits on stock compensation that had
not been previously recognized to Additional paid-in capital.
Excess tax benefits for share-based payments are now included in Net cash provided by operating
activities rather than Net cash provided by financing activities. The changes have been applied prospectively in
accordance with the ASU and prior periods have not been adjusted.
Upon adoption of ASU 2016-09, the Company elected to account for forfeitures in relation to service
conditions as they occur. The change was applied on a modified retrospective basis with a cumulative effect
adjustment to Retained earnings of $10.7 million as of January 1, 2017.
Definition of a Business
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying
the Definition of a Business. This new standard clarifies the definition of a business and provides guidance to
determine when an integrated set of assets and activities is not a business. The Company adopted this standard
prospectively on January 1, 2017.
To be adopted in future periods
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350):
Simplifying the Test of Goodwill Impairment. This new standard simplifies how an entity is required to test
goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill
impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of
that goodwill. This standard will be effective for the Company as of January 1, 2020, with early adoption
permitted for annual goodwill impairment tests performed after January 1, 2017. The Company does not expect
the adoption of this standard to have a material impact on its financial position and results of operations.
Revenue from Contracts with Customers
In May 2014,
the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers
(Topic 606), which supersedes all existing revenue recognition requirements, including most industry-specific
guidance. The new standard requires a company to recognize revenue when it transfers goods or services to
customers in an amount that reflects the consideration that the company expects to receive for those goods or
services. The new standard also requires additional qualitative and quantitative disclosures.
In August 2015,
the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers
(Topic 606): Deferral of the Effective Date, which delayed the effective date of the new standard from January 1,
2017 to January 1, 2018.
The FASB has subsequently issued five additional ASUs amending the guidance in Topic 606, each
with the same effective date and transition date of January 1, 2018. This amended guidance has been considered
in the Company’s overall assessment of Topic 606.
Shire will adopt this standard on January 1, 2018, using the modified retrospective transition method.
The Company has identified two primary revenue streams from contracts with customers as part of its
assessment: 1) product sales and 2) licensing arrangements.
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The Company completed its assessment of implementing the new standard. The adoption of the new
standard will not have a material
to revenue recognition related to product revenue or licensing
arrangements. The impact of the adoption will be recorded as a cumulative effect adjustment in the Consolidated
Statement of Changes in Equity upon adoption on January 1, 2018.
impact
Financial Instrument Accounting
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic
825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new standard amends
certain aspects of accounting and disclosure requirements of financial instruments, including the requirement that
equity investments with readily determinable fair values be measured at fair value with changes in fair value
recognized in the results of operations. This standard will be effective for the Company as of January 1, 2018.
The adoption of this guidance will not have a material impact on its financial position and results of operations.
Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new accounting
guidance will require the recognition of all long-term lease assets and lease liabilities by lessees and sets forth
new disclosure requirements for those lease assets and liabilities. The standard requires lessees to recognize
right-of-use assets and lease liabilities on the balance sheet using a modified retrospective approach at the
beginning of the earliest comparative period in the financial statements. This standard will be effective for the
Company as of January 1, 2019. Early adoption is permitted. The Company is currently evaluating the potential
impact on its financial position and results of operations of adopting this guidance.
Statement of Cash Flows
In August 2016,
the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments. The new standard clarifies certain aspects of the
statement of cash flows, and aims to reduce diversity in practice regarding how certain transactions are classified
in the statement of cash flows. This standard will be effective for the Company as of January 1, 2018. Early
adoption is permitted. The adoption of this guidance will not have a material impact on the Company’s
Consolidated Statements of Cash Flows.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted
Cash. The new guidance is intended to reduce diversity in the presentation of restricted cash and restricted cash
equivalents in the statement. The guidance requires that restricted cash and restricted cash equivalents be
included as components of total cash and cash equivalents as presented on the statement of cash flows. This
standard will be effective for the Company as of January 1, 2018. The adoption of this guidance will not have a
material impact on the Company’s Consolidated Statements of Cash Flows.
Income Taxes
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers
Other than Inventory. This standard removes the current exception in U.S. GAAP prohibiting entities from
recognizing current and deferred income tax expenses or benefits related to transfer of assets, other than
inventory, within the consolidated entity. The current exception to defer the recognition of any tax impact on the
transfer of inventory within the consolidated entity until it is sold to a third party remains unaffected. The
Company will adopt the standard effective January 1, 2018 using a modified retrospective approach with a
cumulative-effect adjustment to opening retained earnings in the first quarter of 2018. The adoption of this
guidance will not have a material impact on its financial position and results of operations.
S-25
Retirement Benefits Income Statement Presentation
In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The
standard amends the income statement presentation of the components of net periodic benefit cost for defined
benefit pension and other postretirement plans. The standard requires entities to (1) disaggregate the
current-service-cost component from the other components of net benefit cost (the “other components”) and
present it with other current compensation costs for related employees in the income statement and (2) present
the other components elsewhere in the income statement and outside of income from operations if such a subtotal
is presented. The standard also requires entities to disclose the income statement lines that contain the other
components if they are not presented on appropriately described separate lines. This standard will be effective for
the Company as of January 1, 2018. The adoption of this guidance will not have a material impact on its financial
position and results of operations.
Share-Based Payment Accounting
In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718):
Scope Modification Accounting. The new standard clarifies when changes to the terms or conditions of a
share-based payment award must be accounted for as modifications. This standard will be effective for the
Company as of January 1, 2018. Early adoption is permitted. The adoption of this guidance is not expected to
have a material impact on the Company’s financial position and results of operations.
Derivatives and Hedging
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted
Improvements to Accounting for Hedging Activities. The standard amends its hedge accounting model to enable
entities to better portray the economics of their risk management activities in the financial statements. The new
guidance also expands an entity’s ability to hedge non-financial and financial risk components and reduces
complexity in fair value hedges of interest rate risk. Additionally, it eliminates the requirement to separately
measure and report hedge ineffectiveness, eases certain assessment requirements and modifies the accounting for
components excluded from the assessment of hedge effectiveness. This standard will be effective for the
Company as of January 1, 2019. Early adoption is permitted. The Company is currently evaluating the method of
adoption and the potential impact on its financial position and results of operations of adopting this guidance.
3. Business Combinations
Acquisition of Baxalta
On June 3, 2016, Shire acquired all of the outstanding common stock of Baxalta for $18.00 per share in
cash and 0.1482 Shire American Depository Shares (ADSs) per Baxalta share, or if a former Baxalta shareholder
properly elected, 0.4446 Shire ordinary shares per Baxalta share.
Baxalta was a global biopharmaceutical company that focused on developing, manufacturing and
commercializing therapies for orphan diseases and underserved conditions in hematology, immunology and
oncology.
S-26
The purchase price consideration for the acquisition of Baxalta was finalized in the second quarter of
2017. The fair value of the purchase price consideration consisted of the following:
(In millions)
Cash paid to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of stock issued to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of partially vested stock options and RSUs assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value
$12,366.7
19,353.2
508.8
165.0
Total purchase price consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$32,393.7
The acquisition of Baxalta was accounted for as a business combination using the acquisition method of
accounting. Shire issued 305.2 million shares to former Baxalta shareholders at the date of the acquisition. For a
more detailed description of the fair value of the partially vested stock options and RSUs assumed, refer to
Note 23, Share-based Compensation Plans, to the Consolidated Financial Statements set forth in this Annual
Report on Form 10-K.
The assets acquired and the liabilities assumed from Baxalta have been recorded at their fair value as of
June 3, 2016, the date of acquisition. The Company’s Consolidated Financial Statements included the results of
Baxalta from the date of acquisition. The amount of Baxalta’s post-acquisition revenues included in the
Company’s Consolidated Statements of Operations for the year ended December 31, 2016 was $4,011.6 million.
After the closing of the acquisition, the Company began integrating Baxalta and as such the combined business is
now sharing various research and development and selling, general and administrative functions. As a result,
computing a separate measure of Baxalta’s stand-alone profitability for periods after the acquisition date is not
practical.
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The purchase price allocation for the acquisition of Baxalta was finalized in the second quarter of 2017.
The Company’s allocation of the purchase price to the assets acquired and liabilities assumed as of the
acquisition date, including measurement period adjustments, is outlined below.
(In millions)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currently marketed products . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-Process Research and Development (IPR&D) . . . . . . . . . . . . .
Contract based arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preliminary value as of
acquisition date (as
previously reported as
of December 31, 2016)
Measurement
period
adjustments
Fair value
$
583.2
1,069.7
3,893.4
576.0
6,122.3
5,452.7
128.2
11,422.4
21,995.0
730.0
42.2
155.0
$ —
$
(96.4)
81.2
5.3
(9.9)
(46.5)
—
1,076.2
(830.0)
(570.0)
—
69.7
583.2
973.3
3,974.6
581.3
6,112.4
5,406.2
128.2
12,498.6
21,165.0
160.0
42.2
224.7
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$46,047.8
$ (310.5)
$45,737.3
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long term borrowings and capital leases . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,321.9
354.4
5,424.9
5,445.3
1,103.6
$13,650.1
Fair value of identifiable assets acquired and liabilities
assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$32,397.7
Consideration
Fair value of purchase consideration . . . . . . . . . . . . . . . . . . . . . .
$32,397.7
$
(2.7)
9.0
—
(315.0)
2.2
$ 1,319.2
363.4
5,424.9
5,130.3
1,105.8
$ (306.5)
$13,343.6
$
$
(4.0)
$32,393.7
(4.0)
$32,393.7
The measurement period adjustments for Intangible assets reflect changes in the estimated fair value of
currently marketed products and IPR&D. Changes are mainly related to finalizing the unit of account judgments
and other changes in estimates including Cost of sales allocation and royalty expense. The measurement period
adjustments for Inventory primarily reflect refinements in the estimated selling price of inventory. The changes
in the estimated fair values primarily are to more accurately reflect market participant assumptions about facts
and circumstances existing as of the acquisition date. The measurement period adjustments did not result from
intervening events subsequent to the acquisition date.
As a result of measurement period adjustments related to the change in fair value of currently marketed
products and inventory, a charge of $85.2 million was recognized in Cost of sales and a benefit of $23.3 million
was recognized in Amortization of acquired intangible assets, respectively, in the Company’s Consolidated
Statements of Operations. These adjustments would have been recorded during the year ended December 31,
2016 if these adjustments had been recognized as of the acquisition date.
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Intangible assets
The fair value of the identifiable intangible assets has been estimated using an income approach, which
is a valuation technique that provides an estimate of the fair value of an asset based on market participant
expectations of the incremental after tax cash flows an asset would generate over its remaining useful life. The
useful lives for currently marketed products were determined based upon the remaining useful economic lives of
the assets that are expected to contribute to future cash flows.
Currently marketed products totaling $21,165.0 million relate to intellectual property (IP) rights
acquired for Baxalta’s currently marketed products. The estimated useful life of the intangible assets related to
currently marketed products range from 6 to 23 years (weighted average 21 years), with amortization being
recorded on a straight-line basis.
IPR&D intangible assets totaling $160.0 million represent
the value assigned to research and
development (R&D) projects acquired. The IPR&D intangible assets are capitalized and accounted for as
indefinite-lived intangible assets and will be subject to impairment testing until completion or abandonment of
the projects. Upon successful completion of each project, the Company will make a separate determination of the
estimated useful life of the IPR&D intangible asset and the related amortization will be recorded as an expense
over the estimated useful life.
Some of the more significant assumptions inherent in the development of those asset valuations include
the estimated net cash flows for each year for each asset or product (including net revenues, cost of sales, R&D
costs, selling and marketing costs, working capital/asset contributory asset charges and other cash flow
assumptions), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow
stream,
the potential regulatory and commercial success risks,
competitive trends impacting the asset and each cash flow stream as well as other factors.
the assessment of each asset’s life cycle,
The discount rate used to arrive at the present value at the acquisition date of the IPR&D intangible
assets was 9.5% to reflect the internal rate of return and incremental commercial uncertainty in the cash flow
projections. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow
analysis will not change. For these and other reasons, actual results may vary significantly from estimated results.
Goodwill
Goodwill of $12,498.6 million, which is not deductible for tax purposes, includes the expected synergies
that will result from combining the operations of Baxalta with Shire, intangible assets that do not qualify for
separate recognition at the time of the acquisition, the value of the assembled workforce, and impacted by
establishing a deferred tax liability for the acquired identifiable intangible assets which have no tax basis.
Contingent consideration
The Company acquired certain contingent obligations classified as contingent consideration related to
Baxalta’s historical business combinations. Additional consideration is conditionally due upon the achievement
of certain milestones related to the development, regulatory, first commercial sale and other sales milestones,
which could total up to approximately $1.5 billion. The Company may also pay royalties based on certain
product sales. The Company estimated the fair value of
the assumed contingent consideration to be
$165.0 million using a probability weighting approach that considered the possible outcomes based on
assumptions related to the timing and probability of the product launch date, discount rates matched to the timing
of first payment and probability of success rates and discount adjustments on the related cash flows.
Inventory
The estimated fair value of work-in-process and finished goods inventory was determined utilizing the
net realizable value, based on the expected selling price of the inventory, adjusted for incremental costs to
S-29
complete the manufacturing process and for direct selling efforts, as well as for a reasonable profit allowance.
The estimated fair value of raw material inventory was valued at replacement cost, which is equal to the value a
market participant would pay to acquire the inventory.
The fair value adjustment related to inventory is expensed based on the expected product-specific
inventory utilization, which is reviewed on a periodic basis and is recorded within Cost of sales in the Company’s
Consolidated Statements of Operations.
Retirement plans
The Company assumed pension plans as part of the acquisition of Baxalta, including defined benefit and
post-retirement benefit plans in the U.S. and foreign jurisdictions, which had a net
liability balance of
$610.4 million. As of June 3, 2016, the Baxalta defined benefit pension plans had assets with a fair value of
$358.5 million.
Integration and acquisition costs
In the year ended December 31, 2017, the Company expensed $763.9 million relating to the acquisition
and integration of Baxalta, which have been recorded within Integration and acquisition costs in the Company’s
Consolidated Statements of Operations. Refer to Note 5, Integration and Acquisition Costs, for further
information regarding the Company’s Integration and acquisition costs for the year ended December 31, 2017.
Supplemental disclosure of pro forma information
The following unaudited pro forma financial information presents the combined results of the operations
of Shire and Baxalta as if the acquisition of Baxalta had occurred as of January 1, 2015. The unaudited pro forma
financial information is not necessarily indicative of what the consolidated results of operations actually would
have been had the respective acquisition been completed on January 1, 2015. In addition, the unaudited pro
forma financial information does not purport to project the future results of operations of the combined
Company.
(In millions, except per share amounts)
Year ended
December 31,
2016
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13,999.6
2,213.6
Per share amounts:
Net income from continuing operations per share - basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income from continuing operations per share - diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
2.87
2.85
The unaudited pro forma financial information above reflects the following pro forma adjustments:
(i) an adjustment to increase net income for the year ended December 31, 2016 by $678.9 million to
eliminate integration and acquisition related costs incurred by Shire and Baxalta;
(ii) an adjustment to increase net income for the year ended December 31, 2016 by $847.9 million to
reflect the expense related to the unwind of inventory fair value adjustments as inventory is sold;
(iii) an adjustment
to increase amortization expense for the year ended December 31, 2016 by
$304.0 million related to the identifiable intangible assets acquired; and
(iv) an adjustment to decrease net income for the year ended December 31, 2016 by $42.5 million,
primarily related to the additional interest expense associated with the debt incurred to partially
fund the acquisition of Baxalta and the amortization of related deferred debt issuance costs.
The adjustments above are stated net of their tax effects, where applicable.
S-30
Acquisition of Dyax
On January 22, 2016, Shire acquired all of the outstanding common stock of Dyax for $37.30 per share
in cash. Under the terms of the merger agreement, former Dyax shareholders may receive additional value
through a non-tradable contingent value right worth $4.00 per share, payable upon U.S. Food and Drug
Administration (FDA) approval of SHP643 (formerly DX-2930) in Hereditary Angioedema (HAE).
Dyax was a publicly-traded, Massachusetts-based rare disease biopharmaceutical company primarily
focused on the development of plasma kallikrein (pKal) inhibitors for the treatment of HAE. Dyax’s most
advanced clinical program was SHP643, a Phase 3 program with the potential for improved efficacy and
convenience for HAE patients. SHP643 has received Fast Track, Breakthrough Therapy, and Orphan Drug
Designations by the FDA and has also received Orphan Drug status in the EU. Dyax’s sole marketed product,
KALBITOR, is a pKal inhibitor for the treatment of acute attacks of HAE in patients 12 years of age and older.
The acquisition of Dyax was accounted for as a business combination using the acquisition method. The
acquisition-date fair value consideration was $6,330.0 million, comprising cash paid on closing of
$5,934.0 million and the fair value of the contingent value right of $396.0 million (maximum payable
$646.0 million). The assets acquired and the liabilities assumed from Dyax have been recorded at their fair value
as of January 22, 2016, the date of acquisition. The Company’s Consolidated Financial Statements include the
results of Dyax as of January 22, 2016. The amount of Dyax’s post-acquisition revenues included in the
Company’s Consolidated Statements of Operations for the year ended December 31, 2016 is $77.1 million. After
the closing of the acquisition, the Company began integrating Dyax and as such the combined business is now
sharing various research and development and selling, general and administrative functions. As a result,
computing a separate measure of Dyax’s stand-alone profitability for periods after the acquisition date is not
practical.
S-31
The purchase price allocation for the acquisition of Dyax was finalized in the first quarter of 2017. The
allocation of the total purchase price is outlined below.
(In millions)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currently marketed projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IPR&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract based royalty arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value
$ 241.2
22.5
20.2
8.1
292.0
5.8
2,702.1
135.0
4,100.0
425.0
28.6
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,688.5
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
30.0
1.7
1,325.4
1.4
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,358.5
Fair value of identifiable assets acquired and liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,330.0
Consideration
Fair value of purchase consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,330.0
Currently marketed products
Currently marketed products totaling $135.0 million relate to intellectual property rights acquired for
KALBITOR. The fair value of the currently marketed product has been estimated using an income approach,
based on the present value of incremental after tax cash flows attributable to KALBITOR.
The estimated useful life of the KALBITOR intangible asset is 18 years, with amortization being
recorded on a straight-line basis.
IPR&D
The IPR&D asset of $4,100.0 million relates to Dyax’s clinical program SHP643, a Phase 3 program
with the potential for improved efficacy and convenience for HAE patients. The IPR&D intangible asset is
capitalized and accounted for as indefinite-lived intangible assets and will be subject to impairment testing until
completion or abandonment of the projects. The fair value of this IPR&D asset was estimated based on an
income approach, using the present value of incremental after tax cash flows expected to be generated by this
development project. The estimated cash flows have been probability adjusted to take into account
the
development stage of completion and the remaining risks and uncertainties surrounding the future development
and commercialization.
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The estimated probability adjusted after tax cash flows used to estimate the fair value of intangible
assets have been discounted at 9%.
Royalty rights
Intangible assets totaling $425.0 million relate to royalty rights arising from licensing agreements of a
portfolio of product candidates. This portfolio includes two approved products, marketed by Eli Lilly &
Company, and various development-stage products. Multiple product candidates with other pharmaceutical
companies are in various stages of clinical development for which the Company is eligible to receive future
royalties and/or milestone payments.
The fair value of these royalty rights has been estimated using an income approach, based on the present
value of incremental after-tax cash flows attributable to each royalty right.
The estimated useful lives of these royalty rights range from seven to nine years (weighted average eight
years), with amortization being recorded on a straight-line basis.
Goodwill
Goodwill of $2,702.1 million, which is not deductible for tax purposes, includes the expected synergies
that will result from combining the operations of Dyax with Shire; intangible assets that do not qualify for
separate recognition at the time of the acquisition; the value of the assembled workforce; and impacted by
establishing a deferred tax liability for the acquired identifiable intangible assets which have no tax basis.
Supplemental disclosure of pro forma information
The following unaudited pro forma financial information presents the combined results of the operations
of Shire and Dyax as if the acquisitions of Dyax had occurred as of January 1, 2015. The unaudited pro forma
financial information is not necessarily indicative of what the consolidated results of operations actually would
have been had the respective acquisition been completed at the date indicated. In addition, the unaudited pro
forma financial information does not purport to project the future results of operations of the combined
Company.
(In millions, except per share amounts)
Year ended
December 31,
2016
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,402.5
792.2
Per share amounts:
Net income from continuing operations per share - basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income from continuing operations per share - diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
1.03
1.02
The unaudited pro forma financial information above reflects the following pro forma adjustments:
(i) an adjustment to increase net income for the year ended December 31, 2016 by $111.1 million to
eliminate acquisition related costs incurred by Shire and Dyax and
(ii) an adjustment
to increase amortization expense for the year ended December 31, 2016 by
$1.3 million related to the identifiable intangible assets acquired.
The adjustments above are stated net of their tax effects, where applicable.
S-33
4. Collaborative and Other Licensing Arrangements
The Company is party to certain collaborative and licensing arrangements.
In some of these
arrangements, Shire and the licensee are both actively involved in the development and commercialization of the
licensed product and have exposure to risks and rewards dependent on its commercial success.
Out-licensing arrangements
The Company has entered into various licensing arrangements where it has licensed certain product or
intellectual property rights for consideration such as up-front payments, development milestones, sales
milestones and/or royalty payments. Under the terms of these licensing arrangements, the Company may receive
development milestone payments up to an aggregate amount of $10.3 million and sales milestones up to an
aggregate amount of $91.0 million. The receipt of these substantive milestones is uncertain and contingent on the
achievement of certain development milestones or the achievement of a specified level of annual net sales by the
licensee. During the years ended 2017 and 2016, the Company received cash related to up-front and milestone
payments of $9.1 million and $10.5 million, respectively. During the years ended 2017, 2016 and 2015, the
Company recognized milestone income of $82.5 million, $17.4 million and $8.9 million, respectively, in other
revenues, and $34.6 million, $63.0 million and $51.0 million, respectively, in product sales for shipment of
product to the relevant licensee.
Collaboration and in-licensing arrangements
The Company is party to various collaborative and in-licensing arrangements. These agreements
generally provide for commercialization rights to a product or products being developed by the counterparty, and
in exchange often resulted in an upfront payment upon execution of the agreement and an obligation that the
Company make future development, regulatory approval or commercial milestone payments as well as royalty
payments. Under the terms of these licensing arrangements, the Company made an initial $47.5 million,
$110.0 million and $nil upfront license payment and milestone payments during the years ended 2017, 2016 and
2015, respectively, which were included in Research and development expense in the Company’s Consolidated
Statements of Operations. As of the December 31, 2017, the Company had the potential to make future payments
related to option fees and development, regulatory and commercialization milestones totaling up to $5.5 billion,
excluding potential future royalty payments.
The following is a description of the Company’s significant collaboration agreements, including those
that were acquired by the Company. The acquisition-date fair value of the collaboration agreements acquired
from Baxalta was included in the IPR&D.
Rani Therapeutics LLC
In December 2017, Shire entered into a collaboration agreement with Rani Therapeutics, LLC (Rani) to
conduct research on the use of the RANI PILL technology for oral delivery of Factor VIII (FVIII) therapy for
patients with hemophilia A. The collaboration agreement grants Shire an exclusive option to negotiate a license
to develop and commercialize the technology for delivery of FVIII therapy following completion of feasibility
studies. Shire also made an equity investment in Rani.
Novimmune S.A.
In July 2017, Shire entered into a licensing agreement with Novimmune S.A. (Novimmune). The license
grants Shire exclusive worldwide rights to develop and commercialize a bi-specific antibody in pre-clinical
development for the treatment of hemophilia A and hemophilia A patients with inhibitors. Under the terms of the
agreement, Shire will develop, and if approved, commercialize the product. Shire made an initial upfront license
payment. Novimmune will be entitled to receive additional potential milestone payments based on clinical,
regulatory and commercial milestones and single-digit royalties.
S-34
Parion Sciences Inc.
In May 2017, Shire entered into an agreement to license the exclusive worldwide rights to SHP659
(formerly known as P-321) from Parion Sciences Inc. (Parion). SHP659 is a Phase 2 investigational epithelial
sodium channel inhibitor for the potential treatment of dry eye disease in adults. Under the terms of the
agreement, Shire will develop, and if approved, commercialize this compound. Shire made an initial upfront
license payment. Parion will be entitled to receive additional potential milestone payments based on clinical,
regulatory and commercial milestones and Parion has the option to co-fund through additional stages of
development in exchange for enhanced tiered low double-digit royalties. In addition, Parion has the option to
co-fund commercialization activities and participate in the financial outcome from those activities.
Pfizer Inc.
In July 2016, the Company licensed the global rights to all indications for SHP647 from Pfizer Inc.
(Pfizer) SHP647 is an investigational biologic being evaluated for the treatment of moderate-to-severe
inflammatory bowel disease. Under the terms of the agreement, Pfizer received an upfront payment and eligible
to receive milestone payments based on clinical, regulatory and commercialization milestones and low double-
digit royalties on any potential sales if the product is approved.
Precision BioSciences Inc.
In June 2016,
the Company acquired a strategic immuno-oncology collaboration with Precision
BioSciences Inc. (Precision). The Company acquired the collaboration through the acquisition of Baxalta.
Together, Shire and Precision will develop chimeric antigen receptor (CAR) T cell therapies for up to six unique
targets. On a product-by-product basis, following successful completion of early-stage research activities up to
and including Phase 2 clinical trials, Shire will have exclusive option rights to complete late-stage development
and worldwide commercialization. Precision is responsible for development costs for each target prior to option
exercise. Precision also has the right to participate in the development and commercialization of any licensed
products resulting from the collaboration through a 50/50 co-development and co-promotion option in the United
States. Precision is eligible to receive option fees and milestone payments based on development, regulatory and
commercialization milestones, in addition to future royalty payments.
Symphogen
In June 2016, the Company acquired a research, option and commercial agreement with Symphogen.
The Company acquired the agreement through the acquisition of Baxalta. Under the terms of the agreement,
Shire and Symphogen plan to develop checkpoint inhibitor therapies for up to six unique targets. On a
product-by-product basis, following successful completion of early-stage research activities up to and including
Phase 1 clinical trials, Shire will have exclusive option rights to complete late-stage development and worldwide
commercialization. Symphogen is responsible for development costs for each target prior to such option exercise.
Symphogen is eligible to receive milestone payments based on development, regulatory and commercialization
milestones achieved after option exercise for all six proteins and future royalty payments.
Ipsen Bioscience Inc.
In June 2016, the Company acquired an exclusive license agreement with Ipsen Bioscience Inc.’s
predecessor, Merrimack Pharmaceuticals, Inc. (Merrimack) relating to the development and commercialization
of ONIVYDE (nanoliposomal irinotecan injection) (nal-IRI). The Company acquired the agreement through the
acquisition of Baxalta. The arrangement includes all potential indications for nal-IRI across all markets with the
exception of the U.S. and Taiwan. The first indication being pursued is for the treatment of patients with
metastatic pancreatic cancer who were previously treated with gemcitabine-based therapy. Ipsen is eligible to
receive milestone payments related to development, regulatory and commercialization milestones.
S-35
5.
Integration and Acquisition Costs
For
the year ended December 31, 2017, Shire recorded Integration and acquisition costs of
$894.5 million, primarily due to the acquisition and integration of Baxalta. A charge of $120.7 million relating to
the change in fair value of contingent consideration payable is included in these costs.
The Company entered its second phase of integration activities during 2017. The costs associated with
this phase primarily related to headcount reduction as the Company advanced and completed certain activities
related to exiting transition services agreements (TSA) with Baxter, integrating legal entities and rationalization
of the Company’s manufacturing facilities. For further details on existing agreements with Baxter, refer to Note
28, Agreements and Transactions with Baxter, of these Consolidated Financial Statements. The Company also
drove savings through the continued prioritization of its research and development programs and continued
consolidation of its commercial operations. The integration of Baxalta is estimated to be completed by mid to late
2019.
The Baxalta integration and acquisition costs include $211.6 million of employee severance and
acceleration of stock compensation, $140.3 million of third-party professional fees, $89.9 million of expenses
associated with facility consolidations and $231.7 million of asset impairments for the year ended December 31,
2017. The Company expects the majority of these expenses, except for certain costs related to facility
consolidations, to be paid within 12 months from the date the related expenses were incurred.
The following table summarizes the type and amount of cost recorded and the related reserve for the
years ended December 31, 2017 and 2016:
(In millions)
Severance and
employee benefits
Lease
terminations
As of January 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount charged to integration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid/utilized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount charged to integration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid/utilized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
267.3
(193.3)
$ 74.0
175.2
(176.3)
$ 72.9
$ —
—
—
$ —
72.7
(16.1)
Total
$ —
267.3
(193.3)
$ 74.0
247.9
(192.4)
$ 56.6
$ 129.5
For
the year ended December 31, 2016, Shire recorded Integration and acquisition costs of
$883.9 million primarily related to the acquisition and integration of Dyax and Baxalta. These costs primarily
consist of $463.4 million of employee severance and acceleration of stock compensation, $378.7 million of third-
party professional fees, $58.1 million of contract terminations and a credit of $11.1 million relating to the change
in fair value of contingent consideration.
For
the year ended December 31, 2015, Shire recorded net
integration and acquisition costs
of $39.8 million. The net integration and acquisition costs principally comprises costs related to the acquisition
and integration of NPS Pharma, Viropharma, Dyax and Baxalta of $189.7 million, offset by a net credit relating
to the change in the fair value of contingent consideration liabilities of $149.9 million. This net credit principally
relates to the acquisition of Lumena, reflecting the agreement in the third quarter of 2015 to settle all future
contingent milestones payable to former Lumena shareholders for a one-time cash payment of $90.0 million and
the acquisition of Lotus Tissue Repair, Inc. reflecting a lower probability of success for the SHP608 asset (for the
treatment of Dystrophic Epidermolysis Bullosa (DEB)) as a result of certain preclinical toxicity findings.
6. Reorganization Costs
The Company incurred Reorganization costs totaling $47.9 million during the year ended December 31,
2017. The costs primarily related to the planned closure of certain facilities and associated costs of $28.1 million
S-36
and employee termination and other costs of $10.6 million. As of December 31, 2017, cash payments associated
with these costs were not significant. Other restructuring charges recorded, which were not significant, during the
year ended December 31, 2017 relate to professional and consulting fees.
The Company incurred reorganization costs totaling $121.4 million during the year ended December 31,
2016. The costs primarily related to the planned closure of certain manufacturing facilities and associated asset
impairments of $77.4 million and employee termination and other costs of $16.2 million. As of December 31,
2016, cash payments associated with these costs were not significant. Other restructuring charges recorded,
which were not significant for the year ended December 31, 2016, relate to the closure of other offices and the
related employee relocation.
In October 2014, the Company announced its plans to relocate positions to Lexington, Massachusetts
from its Chesterbrook, Pennsylvania site and establish Lexington as the Company’s U.S. operational
headquarters in continuation of the One Shire efficiency program. During 2015,
the Company incurred
reorganization costs totaling $97.9 million, primarily related to employee involuntary termination benefits and
other reorganization costs primarily related to the Company’s One Shire business reorganization. The One Shire
reorganization was substantially completed as of December 31, 2015.
7. Results of Discontinued Operations
Following the divestment of the Company’s DERMAGRAFT business in January 2014, the operating
results associated with the DERMAGRAFT business have been classified as discontinued operations in the
Company’s Consolidated Statements of Operations for all periods presented.
During the year ended December 31, 2017, the Company recorded a gain of $18.0 million (net of tax of
$8.9 million), primarily related to legal contingencies related to the divested DERMAGRAFT business and the
release of escrow to Shire.
In January 2017, Shire entered into a final settlement agreement with the Department of Justice (DOJ) in
the amount of $350.0 million, plus interest which was accrued in 2016 and paid during 2017.
After the civil settlement with the DOJ was finalized, Shire and Advanced BioHealing Inc.’s (ABH)
equity holders entered into a settlement agreement and ABH’s equity holders released the $37.5 million escrow
to Shire. Shire released the claims against ABH equity holders upon receiving the entire amount held in escrow.
During the year ended December 31, 2016, the Company recorded a loss of $276.1 million (net of tax
benefit of $98.8 million), primarily related to legal contingencies related to the divested DERMAGRAFT
business.
During the year ended December 31, 2015, the Company recorded a loss from discontinued operations
of $34.1 million (net of tax benefit of $18.9 million), primarily relating to a change in estimate in relation to
reserves for onerous leases retained by the Company.
8. Accounts Receivable, Net
Accounts
receivable as of December 31, 2017 of $3,009.8 million (December 31, 2016:
$2,616.5 million), are stated at the invoiced amount and net of reserve for discounts and doubtful accounts of
$271.5 million (December 31, 2016: $169.6 million).
S-37
Reserve for discounts and doubtful accounts:
(In millions)
2017
2016
2015
As of January 1, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision charged to operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments/credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
169.6
1,408.1
(1,306.2)
$ 55.8 $ 48.5
424.2
(416.9)
838.1
(724.3)
As of December 31, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
271.5
$ 169.6 $ 55.8
As of December 31, 2017, accounts receivable included $106.6 million (December 31, 2016:
$102.2 million) related to royalties receivable.
9.
Inventories
Inventories are stated at the lower of cost and net realizable value. Inventories comprise:
(In millions)
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2017
December 31,
2016
$ 926.1
1,574.0
791.4
$3,291.5
$1,380.0
1,491.0
691.3
$3,562.3
For a more detailed description of inventories acquired, refer to Note 3, Business Combinations, to these
Consolidated Financial Statements.
10. Prepaid Expenses and Other Current Assets
Components of prepaid expenses and other current assets are summarized as follows:
(In millions)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value added taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2017
December 31,
2016
$242.6
179.9
59.8
313.0
$795.3
$183.9
237.5
40.3
344.6
$806.3
11. Property, Plant and Equipment, Net
Property, plant and equipment are recorded at historical cost, net of accumulated depreciation.
Components of Property, plant and equipment, net are summarized as follows:
(In millions)
December 31,
2017
December 31,
2016
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery, equipment and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets under construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
332.3
1,940.7
3,106.3
2,568.2
$ 337.9
1,915.4
2,547.2
2,632.5
Total property, plant and equipment at cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,947.5
(1,312.1)
7,433.0
(963.4)
Property, plant and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,635.4
$6,469.6
S-38
Depreciation expense for the years ended December 31, 2017, 2016 and 2015 was $495.8 million,
$292.9 million and $138.5 million, respectively.
During 2017, the Company determined it would divest certain facilities as part of its integration efforts.
As of December 31, 2017, the Company classified $19.2 million of assets as held for sale, which were reported in
Prepaid expenses and other current assets. The $19.2 million of held for sale assets was net of $27.7 million of
impairment charges recorded during 2017 and consisted primarily of property, plant and equipment. The
impairment charges were reported in Integration and acquisition costs.
The Company also completed the sales of certain assets during 2017 that were previously classified as
held for sale for total cash proceeds of $34.6 million. Prior to the sales, the Company recorded held for sale
impairment charges of $44.1 million on those assets in 2017, which were also reported in Integration and
acquisition costs.
12. Intangible assets
The following table summarizes the Company’s intangible assets:
(In millions)
December 31, 2017
Currently
marketed
products
Other
intangible
assets
IPR&D
Total
Gross acquired intangible assets . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$31,973.5
(4,549.2)
$5,113.9
—
$ 835.9
(328.0)
$37,923.3
(4,877.2)
Intangible assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$27,424.3
$5,113.9
$ 507.9
$33,046.1
December 31, 2016
Gross acquired intangible assets . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$31,217.5
(2,908.6)
$5,746.6
—
$ 842.2
(200.2)
$37,806.3
(3,108.8)
Intangible assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$28,308.9
$5,746.6
$ 642.0
$34,697.5
Other intangible assets are comprised primarily of royalty rights and other contract rights associated
with Baxalta, Dyax and NPS.
The change in the net book value of intangible assets for the years ended December 31, 2017 and 2016
is shown in the table below:
(In millions)
2017
2016
As of January 1, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization charged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$34,697.5
(1,385.0)
(1,768.4)
(20.0)
1,522.0
$ 9,173.3
27,462.8
(1,173.4)
(8.9)
(756.3)
As of December 31, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$33,046.1
$34,697.5
The decrease in Intangible assets, net during the year ended December 31, 2017 relates to the
measurement period adjustments of the acquisition of Baxalta and amortization of intangible assets. For a more
detailed description of measurement period adjustments, refer to Note 3, Business Combinations, to these
Consolidated Financial Statements.
In connection with the acquisition of Baxalta, the Company acquired IP rights related to currently
marketed products of $21,165.0 million, IPR&D assets of $160.0 million and other contract rights of
$42.2 million. For a more detailed description of this acquisition, refer to Note 3, Business Combinations, to
these Consolidated Financial Statements.
S-39
In connection with the acquisition of Dyax on January 22, 2016, the Company acquired IP rights related
to currently marketed products of $135.0 million, IPR&D assets of $4,100.0 million and royalty rights of
$425.0 million. For a more detailed description of this acquisition, refer to Note 3, Business Combinations, to
these Consolidated Financial Statements.
Estimated amortization expense can be affected by various factors including future acquisitions,
disposals of product rights, regulatory approval and subsequent amortization of acquired IPR&D projects,
foreign exchange movements and the technological advancement and regulatory approval of competitor products.
The estimated future amortization of acquired intangible assets for the next five years is expected to be as
follows:
(In millions)
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Anticipated
future
amortization
$1,891.6
1,668.4
1,570.3
1,536.7
1,511.0
13. Goodwill
The following table provides a roll-forward of the Goodwill balance:
(In millions)
2017
2016
As of January 1, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,888.2
1,076.2
867.3
$ 4,147.8
14,124.5
(384.1)
As of December 31, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$19,831.7
$17,888.2
The increase in Goodwill during the year ended December 31, 2017 related to the measurement period
adjustments of the acquisition of Baxalta. For a more detailed description of measurement period adjustments,
refer to Note 3, Business Combinations, to these Consolidated Financial Statements.
S-40
14. Fair Value Measurement
Assets and liabilities that are measured at fair value on a recurring basis
As of December 31, 2017 and December 31, 2016, the following financial assets and liabilities are
measured at fair value on a recurring basis using quoted prices in active markets for identical assets (Level 1);
significant other observable inputs (Level 2); and significant unobservable inputs (Level 3).
(In millions)
As of December 31, 2017
Financial assets:
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value
Total
Level 1 Level 2
Level 3
$
$89.7
3.8
89.7
17.9
17.9 —
$ — $ —
—
14.1
—
17.9
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 125.5
$93.5
$32.0
$ —
Financial liabilities:
Joint venture net written option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
40.0
14.2 —
1,168.2 —
$ — $ — $
40.0
—
1,168.2
14.2
—
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,222.4
$ — $14.2
$1,208.2
(In millions)
As of December 31, 2016
Financial assets:
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial liabilities:
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
Fair value
Total
Level 1 Level 2
Level 3
$65.8
3.6
65.8
15.5
18.0 —
$ — $ —
—
11.9
—
18.0
99.3
$69.4
$29.9
$ —
8.3
1,058.0 —
$ — $ 8.3
—
$ —
1,058.0
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,066.3
$ — $ 8.3
$1,058.0
Marketable equity and debt securities are included within Investments in the Consolidated Balance
Sheets. Contingent consideration payable is included within Other current liabilities and Other non-current
liabilities in the Consolidated Balance Sheets. For information regarding the Company’s derivative arrangements,
refer to Note 15, Financial Instruments, to these Consolidated Financial Statements.
Certain estimates and judgments were required to develop the fair value amounts. The estimated fair
value amounts shown above are not necessarily indicative of the amounts that the Company would realize upon
disposition, nor do they indicate the Company’s intent or ability to dispose of the financial instrument.
The following methods and assumptions were used to estimate the fair value of each material class of
financial instrument:
• Marketable equity securities: the fair values of marketable equity securities are estimated based on
quoted market prices for those investments.
• Marketable debt securities: the fair values of debt securities are obtained from pricing services or
broker/dealers who either use quoted prices in an active market or proprietary pricing applications,
which include observable market information for like or same securities.
S-41
•
•
Derivative instruments: the fair values of the swap and forward foreign exchange contracts have
been determined using the month-end interest rate and foreign exchange rates, respectively.
Joint venture net written option and contingent consideration payable:
the fair value of the
contingent consideration payable has been estimated using the income approach (using a probability
weighted discounted cash flow method).
There were no changes in valuation techniques or inputs utilized or transfers between fair value
measurement levels during the years ended December 31, 2017 and 2016.
Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs
(Level 3)
Contingent consideration payable
(In millions)
2017
2016
Balance as of January 1,
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value included in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,058.0
(4.0)
120.7
(6.5)
$ 475.9
565.4
11.1
5.6
Balance as of December 31,
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,168.2
$1,058.0
In 2017, the increase in contingent consideration payable was primarily related to the Company’s
change in fair value of contingent consideration resulting from positive topline data for SHP643. In 2016, the
increase in contingent consideration payable was related to the Company’s acquisition of Dyax and Baxalta.
Other contingent consideration payable primarily relates to foreign currency adjustments.
Of the $1,168.2 million of contingent consideration payable as of December 31, 2017, $626.8 million is
recorded within Other current liabilities and $541.4 million is recorded within Other non-current liabilities in the
Company’s Consolidated Balance Sheets.
Joint venture net written option
In March 2017, Shire executed option agreements related to a joint venture that provides Shire with a
call option on the partner’s investment in joint venture equity and the partner with a put option on its investment
in joint venture equity. The Company had a liability of $40.0 million for the net written option based on the
estimated fair value of these options as of December 31, 2017 and the Company re-measures the instrument to
fair value through the Consolidated Statements of Operations.
S-42
Quantitative Information about Assets and Liabilities Measured at Fair Value on a Recurring Basis Using
Significant Unobservable Inputs (Level 3)
Financial liabilities:
As of December 31, 2017
Fair value as of the measurement date
(In millions, except %)
Fair value
Contingent consideration
payable . . . . . . . . . . . . . .
$1,168.2
Valuation
technique
Income approach
(probability weighted
discounted cash flow)
Significant
unobservable
inputs
Range
• Cumulative
•
21.9 to 90%
probability of
milestones being
achieved
• Assumed market
participant discount
rate
•
•
Periods in which
milestones are
expected to be
achieved
Forecast quarterly
royalties payable on
net sales of relevant
products
•
•
•
1.8 to 8.7%
2018 to 2040
$0.1 to
$6.5 million
Contingent consideration payable represents future milestones and royalties the Company may be
required to pay in conjunction with various business combinations and license agreements. The fair value of the
Company’s contingent consideration payable could significantly increase or decrease due to changes in certain
assumptions which underpin the fair value measurements. Each set of assumptions is specific to the individual
contingent consideration payable.
Financial liabilities:
As of December 31, 2017
Fair value as of the measurement date
(In millions, except %)
Fair value
Joint venture net written
option . . . . . . . . . . . . . . .
$40.0
Valuation
technique
Income approach
(probability weighted
discounted cash flow)
Significant
unobservable
inputs
• Cash flow scenario
probability weighting
• Assumed market
participant discount
rate
Range
0 to 80%
16%
•
•
S-43
Financial assets and liabilities that are disclosed at fair value
The carrying amounts and estimated fair values as of December 31, 2017 and December 31, 2016 of the
Company’s financial assets and liabilities that are not measured at fair value on a recurring basis are as follows:
(In millions)
December 31, 2017
December 31, 2016
Carrying
amount
Fair value
Carrying
amount
Fair value
Financial liabilities:
SAIIDAC notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Baxalta notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,050.2
5,057.7
349.2
$11,913.7
5,229.9
349.2
$12,039.2
5,063.6
353.6
$11,633.8
5,066.5
353.6
The estimated fair values of long-term debt were based upon recent observable market prices and are
considered Level 2 in the fair value hierarchy. The estimated fair value of capital lease obligations is based on
Level 2 inputs.
The carrying amounts of other financial assets and liabilities approximate their estimated fair value due
to their short-term nature, such as liquidity and maturity of these amounts, or because there have been no
significant changes since the asset or liability was last re-measured to fair value on a non-recurring basis.
15. Financial Instruments
Foreign Currency Contracts
Due to the global nature of its operations, portions of the Company’s revenues and operating expenses
are recorded in currencies other than the U.S. dollar. The value of revenues and operating expenses measured in
U.S. dollars is therefore subject to changes in foreign currency exchange rates. The main trading currencies of the
Company are the U.S. dollar, Euro, British pound sterling, Swiss franc, Canadian dollar and Japanese yen.
Transactional exposure arises where transactions occur in currencies different to the functional currency
of the relevant subsidiary. It is the Company’s policy that these exposures are minimized to the extent practicable
by denominating transactions in the subsidiary’s functional currency. Where significant exposures remain, the
Company uses foreign exchange contracts (spot, forward and swap contracts) to manage the exposure for balance
sheet assets and liabilities that are denominated in currencies different to the functional currency of the relevant
subsidiary.
The Company has master netting agreements with a number of counterparties to these foreign exchange
contracts and on the occurrence of specified events, the Company has the ability to terminate contracts and settle
them with a net payment by one party to the other. The Company has elected to present derivative assets and
derivative liabilities on a gross basis in the Consolidated Balance Sheet. The Company does not have credit risk
related contingent features or collateral linked to the derivatives.
Designated Foreign Currency Derivatives
Certain foreign currency forward contracts were designated as cash flow hedges and accordingly, to the
extent effective, any unrealized gains or losses on these foreign currency forward contracts were reported in
AOCI. Realized gains and losses for the effective portion of such contracts were recognized in revenue or cost of
sales when the sale of product in the currency being hedged was recognized. To the extent ineffective, hedge
transaction gains and losses were reported in Other income/(expense), net.
The Company did not have any designated foreign currency contracts as of December 31, 2017. As of
December 31, 2016, the Company had designated foreign currency forward contracts with a total notional value
of $78.7 million with a maximum duration of six months; the fair value of these contracts was a net asset of
$4.2 million.
S-44
Undesignated Foreign Currency Derivatives
The Company uses forward contracts to mitigate the foreign currency risk related to certain balance
sheet positions, including intercompany and third-party receivables and payables. The Company has not elected
hedge accounting for these derivative instruments as the duration of these contracts is typically three months or
less. The changes in fair value of these derivatives are reported in earnings.
The table below presents the notional amount, maximum duration and fair value for the undesignated
foreign currency derivatives:
(In millions, except duration)
December 31, 2017 December 31, 2016
Notional amount
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum duration (in months) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value - net asset
$ 1,672.3
3 months
11.4
$
$ 1,309.1
3 months
6.7
$
The Company considers the impact of its and its counterparties’ credit risk on the fair value of the
contracts as well as the ability of each party to execute its contractual obligations. As of December 31, 2017,
credit risk did not materially change the fair value of the Company’s foreign currency contracts.
Interest Rate Contracts
The Company is exposed to the risk that its earnings and cash flows could be adversely impacted by
fluctuations in benchmark interest rates relating to its debt obligations on which interest is set at floating rates.
The Company’s policy is to manage this risk to an acceptable level. The Company is principally exposed to
interest rate risk on any borrowings under the Company’s various debt facilities and on part of the senior notes
assumed in connection with the acquisition of Baxalta. Interest on each of these debt obligations is set at floating
rates, to the extent utilized. Shire’s exposure under these facilities is to changes in U.S. dollar interest rates. For
further details related to interest rates on the Company’s various debt facilities, refer to Note 17, Borrowings and
Capital Leases, to these Consolidated Financial Statements.
Designated Interest Rate Derivatives
As of December 31, 2017, interest rate swap contracts designated as fair value hedges were outstanding.
The effective portion of the changes in the fair value of interest rate swap contracts are recorded as a component
of the underlying Baxalta Notes with the ineffective portion recorded in Interest expense. Any net interest
payments made or received on the interest rate swap contracts are recognized as a component of Interest expense
in the Consolidated Statements of Operations.
The table below presents the notional amount, maturity and fair value for the designated interest rate
derivatives:
(In millions, except maturity)
Notional amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value - net liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2017
December 31, 2016
1,000.0
$
June 2020 and June
2025
(7.7) $
1,000.0
$
June 2020 and June
2025
(1.2)
$
For the years ended December 31, 2017 and 2016, the Company recognized losses of $4.3 million and
$6.0 million, respectively, as ineffectiveness related to these contracts as a component of Interest expense.
S-45
Summary of Derivatives
The following tables summarize the income statement locations and gains and losses on the Company’s
designated and undesignated derivative instruments:
(In millions)
Years ended December 31,
Designated derivative instruments
Cash flow hedges
Gain/(loss) recognized
in OCI
2017
2016
Income
Statement
location
Gain reclassified from AOCI
into income
2017
2016
Foreign exchange contracts . . . . . . . . . . . . . .
$(0.9)
$14.6
Cost of sales
$ 8.8
$ 4.9
(In millions)
Years ended December 31,
Fair value hedges
Income Statement location
Gain/(loss) recognized in
income
2017
2016
Interest rate contracts, net
Undesignated derivative instruments
. . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . .
Interest rate swap contracts . . . . . . . . . . . . . .
Interest expense
$ (4.3)
$ (6.0)
Other income/(expense),
net
Interest expense
84.8
—
(40.2)
(3.2)
Summary of Derivatives
The following table presents the classification and estimated fair value of derivative instruments:
Asset position
Fair value
Liability position
Fair value
Balance Sheet
location
December 31,
2017
December 31,
2016
Balance Sheet
location
December 31,
2017
December 31,
2016
(In millions)
Designated derivative
Instruments
Foreign exchange
contracts . . . . . . . . . . . . . .
Prepaid
expenses and
other current
assets
Interest rate contracts . . . . . . Long term
borrowings
Prepaid
expenses and
other current
assets
Undesignated derivative
instruments
Foreign exchange
contracts . . . . . . . . . . . . . .
Total derivative fair
value . . . . . . . . . . . . . . . . .
Potential effect of rights to
offset . . . . . . . . . . . . . . . . .
Net derivative . . . . . . . . . . . .
$ —
—
$ —
$ 4.3
0.1
$ 4.4
Other current
liabilities
Long term
borrowings
$ —
7.7
$ 7.7
$ 0.1
1.3
$ 1.4
$17.9
$13.6
Other current
liabilities
$ 6.5
$ 6.9
$17.9
$18.0
$14.2
$ 8.3
(2.7)
$15.2
(1.7)
$16.3
S-46
(2.7)
$11.5
(1.7)
$ 6.6
16. Accounts Payable and Accrued Expenses
Components of Accounts payable and accrued expenses are summarized as follows:
(In millions)
Accounts payable and accrued purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued employee compensation and benefits payable . . . . . . . . . . . . . . . . . . . . . . . .
Accrued rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued sales returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17. Borrowings and Capital Leases
(In millions)
Short term borrowings:
Baxalta notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings under the Revolving Credit Facilities Agreement . . . . . . . . . . . . . . . . . . .
Borrowings under the November 2015 Facilities Agreement . . . . . . . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long term borrowings:
SAIIDAC notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Baxalta notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings under the November 2015 Facilities Agreement . . . . . . . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, December 31,
2017
2016
$ 914.6
571.4
1,612.7
175.7
910.1
$4,184.5
$ 911.9
574.8
1,431.3
118.4
1,276.0
$4,312.4
December 31,
2017
December 31,
2016
$
748.8
810.0
1,196.3
7.5
26.1
$
—
450.0
2,594.8
6.4
16.8
$ 2,788.7
$ 3,068.0
$12,050.2
4,308.9
—
341.7
51.6
$12,039.2
5,063.6
2,391.8
347.2
58.0
$16,752.4
$19,899.8
Total borrowings and capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$19,541.1
$22,967.8
For a more detailed description of the Company’s financing agreements, refer below.
The future payments related to short and long term borrowings and capital lease obligations, on
maturities, as of December 31, 2017 are as follows:
(In millions)
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter
$ 2,804.7
3,349.4
1,040.9
3,329.0
519.5
8,591.9
Total obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Debt issuance cost and discount
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,635.4
(94.3)
$19,541.1
S-47
SAIIDAC Notes
On September 23, 2016, Shire Acquisitions Investments Ireland Designated Activity Company
(SAIIDAC), a wholly owned subsidiary of Shire plc, issued unsecured senior notes with a total aggregate
principal value of $12.1 billion (SAIIDAC Notes), guaranteed by Shire plc and, as of December 1, 2016, by
Baxalta. Below is a summary of the SAIIDAC Notes as of December 31, 2017:
(In millions, except %)
Fixed-rate notes due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aggregate
amount
Coupon
rate
Effective
interest
rate in
2017
Carrying
amount as of
December 31,
2017
$ 3,300.0
3,300.0
2,500.0
3,000.0
$12,100.0
1.900% 2.05% $ 3,291.9
3,286.4
2.400% 2.53%
2,489.5
2.875% 2.97%
2,982.4
3.200% 3.30%
$12,050.2
As of December 31, 2017, there was $49.8 million of debt issuance costs and discount recorded as a
reduction of the carrying amount of debt. These costs will be amortized as additional interest expense using the
effective interest rate method over the period from issuance through maturity.
Baxalta Notes
Shire plc guaranteed senior notes issued by Baxalta with a total aggregate principal amount of
$5.0 billion in connection with the acquisition of Baxalta (Baxalta Notes). Below is a summary of the Baxalta
Notes as of December 31, 2017:
(In millions, except %)
Aggregate
principal
Coupon
rate
LIBOR plus
Effective
interest
rate in
2017
Carrying
amount as of
December 31,
2017
Variable-rate notes due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2045 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 375.0
375.0
1,000.0
500.0
1,750.0
1,000.0
0.78% 2.60% $ 373.9
2.000% 2.00%
374.9
1,001.3
2.875% 2.80%
506.8
3.600% 3.30%
1,770.2
4.000% 3.90%
1,030.6
5.250% 5.10%
Total assumed Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,000.0
$5,057.7
The effective interest rates above exclude the effect of any related interest rate swaps. The book values
above include any premiums and adjustments related to hedging instruments. For further details related to the
interest rate derivative contracts, please see Note 15, Financial Instruments, to these Consolidated Financial
Statements.
Revolving Credit Facilities Agreement
On December 12, 2014, Shire entered into a $2.1 billion revolving credit facilities agreement (RCF)
with a number of financial institutions. As of December 31, 2017, the Company utilized $810.0 million of the
RCF. The RCF, which terminates on December 12, 2021, may be used for financing the general corporate
purposes of Shire. The RCF incorporates a $250.0 million U.S. dollar and Euro swingline facility operating as a
sub-limit thereof.
S-48
Term Loan Facilities Agreements
November 2015 Facilities Agreement
On November 2, 2015, Shire entered into a $5.6 billion facilities agreement (November 2015 Facilities
Agreement), which is comprised of three amortizing credit facilities. The total amount outstanding under the
November 2015 Facilities Agreement was $1.2 billion as of December 31, 2017. During the year ended
December 31, 2017, the Company made $0.4 billion of advance repayments under November 2015 Facility A
and $2.2 billion of scheduled and advance repayments under November 2015 Facility B. Both November 2015
Facility A and November 2015 Facility B were fully repaid during the year ended December 31, 2017. The
Company also made $1.2 billion of advance repayments under November 2015 Facility C; consequently, the
amount outstanding under November 2015 Facility C was $1.2 billion as of December 31, 2017 maturing on
November 2, 2018.
Short-term uncommitted lines of credit (Credit lines)
Shire has access to various Credit lines from a number of banks which are available to be utilized from
time to time to provide short-term cash management flexibility. These Credit lines can be withdrawn by the
banks at any time. The Credit lines are not relied upon for core liquidity. As of December 31, 2017, these Credit
lines were not utilized.
Capital Lease Obligations
The capital leases are primarily related to office and manufacturing facilities. As of December 31, 2017,
the total capital lease obligations, including current portions, were $349.2 million.
18. Other Current Liabilities
Components of Other current liabilities are summarized as follows:
(In millions)
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value added taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2017
December 31,
2016
$ 65.1
30.4
626.8
186.5
$908.8
$ 46.2
17.6
65.1
234.0
$362.9
19. Retirement and Other Benefit Programs
The Company sponsors various pension and other post-employment benefit (OPEB) plans in the U.S.
and other countries.
S-49
Reconciliation of Pension and OPEB Plan Obligations and Funded Status
The following provides information about projected benefit obligations, plan assets, the funded status
and weighted-average assumptions of the OPEB and pension plans:
(In millions)
December 31, 2017
International
pensions
U.S.
pensions
OPEB
(U.S.)
December 31, 2016
International
pensions
U.S.
pensions
OPEB
(U.S.)
Benefit obligations
Beginning of period . . . . . . . . . . . . . . . . . . . . . .
Assumption of benefit obligations . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost
Interest cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant contributions . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Actuarial loss/(gain)
Benefit payments . . . . . . . . . . . . . . . . . . . . . . . .
Plan amendments . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
$ 384.1
—
14.6
15.6
—
34.4
(5.1)
—
—
—
—
—
$ 581.4
—
39.4
4.9
8.9
(22.9)
(19.8)
—
(10.4)
(4.0)
45.4
(5.0)
$ 25.0
—
1.5
1.0
—
(1.2)
(0.2)
(9.0)
—
—
—
—
$ —
$ —
$ —
441.6
13.0
11.1
—
(10.6)
(1.6)
—
—
(73.4)
—
4.0
503.8
18.6
3.2
3.2
(29.8)
(9.1)
—
(3.2)
—
(18.3)
113.0
23.5
0.8
0.6
—
0.1
—
—
—
—
—
—
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 443.6
$ 617.9
$ 17.1
$ 384.1
$ 581.4
$ 25.0
Fair value of plan assets
Beginning of period . . . . . . . . . . . . . . . . . . . . . .
Assumption of plan assets . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . .
Participant contributions . . . . . . . . . . . . . . . . . .
Benefit payments . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
$ 228.4
—
35.4
0.9
—
(5.0)
—
—
—
$ 197.9
—
12.3
32.2
8.9
(19.8)
(10.4)
11.9
4.2
$ — $ —
218.0
8.3
0.4
—
(1.6)
—
—
3.3
—
—
0.2
—
(0.2)
—
—
—
$ —
140.5
2.0
12.3
3.2
(9.1)
(3.2)
(3.8)
56.0
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . .
259.7
237.2
—
228.4
197.9
$ —
—
—
—
—
—
—
—
—
—
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(183.9)
$(380.7)
$(17.1) $(155.7)
$(383.5)
$(25.0)
Amounts recognized in the Consolidated Balance Sheets
(In millions)
December 31, 2017
December 31, 2016
U.S.
pensions
International
pensions
OPEB
(U.S.)
U.S.
pensions
International
pensions
OPEB
(U.S.)
Other current liabilities . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . .
$
(0.8)
(183.1)
$ (15.7)
(365.0)
$ (0.4) $
(16.7)
(0.6)
(155.1)
$
(8.8)
(374.7)
$ (0.2)
(24.8)
Net liability recognized . . . . . . . . . . . . . . . . . . .
$(183.9)
$(380.7)
$(17.1) $(155.7)
$(383.5)
$(25.0)
The majority of the Company’s pension and OPEB plans were assumed with the acquisition of Baxalta
on June 3, 2016.
The Company amended the OPEB and adopted a plan freeze effective December 31, 2017. According to
the amendment, employees who have not met certain criteria, may not qualify as an eligible retiree regardless of
such employee’s age or service at the employee’s date of termination. As a result, a prior service credit was
recorded during the year ended December 31, 2017.
S-50
On December 31, 2016, the Company amended the U.S. pension plan which eliminated the estimate of
future compensation levels beyond December 31, 2017, the effective date. As a result, a curtailment gain of
$69.4 million was recorded during 2016.
For the year ended December 31, 2016, Other primarily represents the recognition of additional defined
benefit plan in Switzerland.
Accumulated Benefit Obligation Information
The pension obligation represents the projected benefit obligation (PBO) as of December 31, 2017 and
2016. The PBO incorporates assumptions relating to future compensation levels. The accumulated benefit
obligation (ABO) is the same as the PBO except that it does not include assumptions relating to future
compensation levels. The ABO as of December 31, 2017 for the U.S. pension plans was $443.6 million
(December 31, 2016: $373.2 million). The ABO as of December 31, 2017 for the International pension plans was
$494.2 million (December 31, 2016: $457.9 million).
The funded status figures and ABO disclosed above reflect all of the Company’s pension plans. The
following ABO and plan asset information includes only those individual plans that have an ABO in excess of
plan assets.
(In millions)
US
December 31,
2017
December 31,
2016
ABO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$443.6
259.7
International
ABO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
469.0
209.6
$373.2
228.4
437.5
176.2
Expected Net Pension and OPEB Plan Payments for the Next 10 Years
(In millions)
U.S.
pensions
International
pensions
OPEB
(U.S.)
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 through 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6.0
7.7
9.2
10.7
12.2
84.3
$ 28.1
20.7
22.2
24.3
25.4
134.8
$0.4
0.5
0.6
0.8
0.9
6.8
The expected net benefit payments reflect the Company’s share of the total net benefits expected to be
paid from the plans’ assets (for funded plans) or from the Company’s assets (for unfunded plans) as of
December 31, 2017. The federal subsidies relating to the Medicare Prescription Drug, Improvement and
Modernization Act are not expected to be significant.
S-51
Amounts Recognized in AOCI
The pension and OPEB plans’ gains or losses not yet recognized in net periodic benefit cost are
recognized in AOCI and amortized from AOCI to net periodic benefit cost in the future. The following is a
summary of the pre-tax net gain/(losses) recorded in AOCI:
December 31, 2017
December 31, 2016
(In millions)
U.S.
pensions
International
pensions
(Loss)/gain arising during the year . . . . . . . . . . . .
. . . .
Reclassification of gain to income statement
$(14.9)
—
$41.2
(1.3)
Pension and other employee benefit (loss)/gain,
OPEB
(U.S.)
$10.1
—
U.S.
pensions
International
pensions
OPEB
(U.S.)
$ 83.4
(69.4)
$(10.3)
—
$ 0.1
—
pre-tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(14.9)
$39.9
$10.1
$ 14.0
$(10.3)
$ 0.1
Refer to Note 20, Accumulated Other Comprehensive Income/(Loss), for the net of tax balances
included in AOCI as of December 31, 2017 and 2016. The Company does not expect to amortize a significant
amount of AOCI to net periodic benefit cost in 2018.
In 2016, the reclassification of gain to the income statement represents the recognition of the curtailment
gain associated with the U.S. pension plans as further described above.
Net Periodic Benefit Cost
The net periodic benefit cost is as follows:
(In millions)
December 31, 2017
December 31, 2016
U.S.
pensions
International
pensions
OPEB
(U.S.)
U.S.
pensions
International
pensions
OPEB
(U.S.)
Net periodic benefit cost
Service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost
Expected return on plan assets . . . . . . . . . . . . . . . .
Curtailment and other . . . . . . . . . . . . . . . . . . . . . . .
$ 14.6
15.6
(15.9)
—
Net periodic benefit cost
. . . . . . . . . . . . . . . . . . . .
$ 14.3
$39.4
4.9
(7.4)
1.9
$38.8
$ 1.5
1.0
—
—
$ 2.5
$ 13.0
11.1
(8.9)
(69.4)
$(54.2)
$18.6
3.2
(3.9)
20.0
$37.9
$ 0.8
0.6
—
—
$ 1.4
In 2016, the net periodic benefit cost is from June 3, 2016, the date the Company assumed the
obligations from Baxalta, through December 31, 2016.
In 2016 Curtailments and other relates to the recognition of a curtailment gain of $69.4 million
associated with the U.S. pension plans as described above and a loss of $20.0 million for the recognition of a
defined benefit plan in Switzerland.
S-52
Weighted-Average Assumptions Used in Determining Benefit Obligations at the Measurement Date
The following weighted-average assumptions were used in calculating measurement of benefit
obligations:
December 31, 2017
December 31, 2016
U.S.
pensions
International
pensions
OPEB
(U.S.)
U.S.
pensions
International
pensions
OPEB
(U.S.)
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . .
Health care cost trend rate . . . . . . . . . . . . . . . . . . .
Rate decreased to . . . . . . . . . . . . . . . . . . . . . . . . . .
by the year ended . . . . . . . . . . . . . . . . . . . . . .
3.7%
n/a
n/a
n/a
n/a
1.0%
3.0%
n/a
n/a
n/a
3.5% 4.2%
3.8%
n/a
6.0% n/a
5.0% n/a
n/a
2022
1.0%
2.9%
n/a
n/a
n/a
4.3%
n/a
6.3%
5.0%
2022
Weighted-Average Assumptions Used in Determining Net Periodic Benefit Cost
The following weighted-average assumptions were used in determining net periodic benefit cost:
December 31, 2017
December 31, 2016
U.S.
pensions
International
pensions
OPEB
(U.S.)
U.S.
pensions
International
pensions
OPEB
(U.S.)
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . .
Health care cost trend rate . . . . . . . . . . . . . . . . . . .
Rate decreased to . . . . . . . . . . . . . . . . . . . . . . . . . .
by the year end . . . . . . . . . . . . . . . . . . . . . . . .
4.2%
7.0%
3.8%
n/a
n/a
n/a
1.0%
3.4%
3.0%
n/a
n/a
n/a
4.2% 4.1%
7.0%
n/a
n/a
3.8%
6.0% n/a
5.0% n/a
n/a
2022
1.0%
4.5%
3.2%
n/a
n/a
n/a
4.2%
n/a
n/a
6.5%
5.0%
2022
The Company establishes the expected return on plan assets assumption based primarily on a review of
historical compound average asset returns, both Company-specific and the broad market (and considering the
Company’s asset allocations), an analysis of current market and economic information and future expectations.
The effect of a one-percent change in the assumed healthcare cost trend rate would not have a
significant impact on the OPEB plan benefit obligation as of December 31, 2017 or the plan’s service and interest
cost during 2017.
Pension Plan Assets
A committee of members of senior management
is responsible for supervising, monitoring and
evaluating the invested assets of the Company’s funded pension plans. The committee abides by policies and
procedures relating to investment goals, targeted asset allocations, risk management practices, allowable and
prohibited investment holdings, diversification, use of derivatives, the relationship between plan assets and
benefit obligations, and other relevant factors and considerations. In the United States, Goldman Sachs Asset
Management acts as an outsourced chief investment officer (oCIO) to perform the day-to-day management of
pension assets.
The policies and procedures include the following:
•
•
•
Ability to pay all benefits when due;
Targeted long-term performance expectations relative to applicable market
Standard & Poor’s, Russell, MSCI EAFE, and other indices;
indices, such as
Targeted asset allocation percentage ranges (summarized below), and periodic reviews of these
allocations;
S-53
•
•
•
Specified investment holding and transaction prohibitions (for example, private placements or other
restricted securities, securities that are not traded in a sufficiently active market, short sales, certain
derivatives, commodities and margin transactions);
Specified portfolio percentage limits on foreign holdings; and
Periodic monitoring of oCIO performance and adherence to policies.
Plan assets are invested using a total return investment approach whereby a mix of equity securities,
debt securities and other investments are used to preserve asset values, diversify risk and exceed the planned
benchmark investment return. Investment strategies and asset allocations are based on consideration of plan
liabilities, the plans’ funded status and other factors, such as the plans’ demographics and liability durations.
Investment performance is reviewed on a quarterly basis and asset allocations are reviewed at least annually.
Plan assets are managed in a balanced equity and fixed income portfolio. The target allocations for plan
assets are 75% in an equity portfolio and 25% in a fixed income portfolio. The policy includes an allocation
range based on each individual investment type within the major portfolios that allows for a variance from the
target allocations of approximately 5%. The equity portfolio may include common stock of U.S. and international
companies, common/collective trust funds, mutual funds, hedge funds and real asset investments. The fixed
income portfolio may include cash, money market funds with an original maturity of three months or less, U.S.
and foreign government and governmental agency issues, common/collective trust funds, corporate bonds,
municipal securities, derivative contracts and asset-backed securities.
While the committee provides oversight over plan assets for U.S. and international plans, the summary
above is specific to the plans in the U.S. The plan assets for international plans are managed and allocated by the
entities in each country, with input and oversight provided by the committee.
The following pension assets are recorded at fair value on a recurring basis using quoted prices in active
markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable
inputs (Level 3). Investments that are measured at fair value using the net asset value per share or its equivalent
as a practical expedient are not classified in the fair value hierarchy. The fair value amounts presented in this
table is intended to permit reconciliation of the fair value hierarchy and the fair value of plan assets.
U.S. pension plan assets
(In millions)
As of December 31, 2017
Assets
Equity
Fair value
Level 1 Level 2 Level 3
Total
Mutual fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17.9
$— $— $ 17.9
Total investments at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17.9
$— $— $ 17.9
Fixed income
Cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collective trust funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity
Collective trust funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedge fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of pension plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S-54
6.2
52.4
12.7
116.6
42.0
11.9
$259.7
U.S. pension plan assets
(In millions)
As of December 31, 2016
Assets
Equity
Fair value
Level 1
Level 2 Level 3
Total
Mutual fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16.5
$— $— $ 16.5
Total investments at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16.5
$— $— $ 16.5
Fixed Income
Cash equivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collective trust funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity
Collective trust funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedge fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of pension plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.7
46.4
11.4
100.4
36.9
11.1
$228.4
International pension plan assets
(In millions)
As of December 31, 2017
Assets
Fixed income
Fair value
Level 1
Level 2 Level 3
Total
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government agency issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Equity
3.8
1.7 —
14.4 —
32.4 —
—
—
—
$ — $— $
Common stock - large cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24.3 —
50.3 —
14.3
—
—
—
6.4 —
89.6 —
3.8
1.7
14.4
32.4
24.3
50.3
20.7
89.6
Fair value of pension plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$141.2
$96.0
$— $237.2
S-55
International pension plan assets
(In millions)
As of December 31, 2016
Assets
Fixed income
Fair value
Level 1
Level 2 Level 3
Total
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government agency issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Equity
Common Stock:
6.2
0.6 —
21.1 —
24.4 —
Large cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mid cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19.9 —
1.6 —
—
—
—
—
—
$ — $— $
Total common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21.5 —
40.6 —
8.4
—
—
—
3.7 —
71.4 —
6.2
0.6
21.1
24.4
19.9
1.6
21.5
40.6
12.1
71.4
Fair value of pension plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$122.8
$75.1
$— $197.9
The assets and liabilities of the Company’s pension plans are valued using the following valuation
methods:
Investment category
Valuation methodology
Cash and cash equivalents
Government agency issues
Corporate bonds
Common stock
Mutual funds
Collective trust funds and hedge funds
Real estate funds
Other holdings
These largely consist of a short-term investment fund, U.S. dollars
and foreign currency. The fair value of the short-term investment
fund is based on the net asset value
Values are based on quoted prices in an active market
Values are based on the valuation date in an active market
Values are based on the closing prices on the valuation date in an
active market
Values are based on the net asset value of the units held in the
respective fund which are obtained from active markets or as
reported by the fund managers
Values are based on the net asset value of the units held at year end
The value of these assets are either determined by the net asset
value of the units held in the respective fund which are obtained
from active markets or based on the net asset value of the
underlying assets of the fund provided by the fund manager
These primarily consist of insurance contracts whose value is based
on the underlying assets and other holdings valued primarily based
on reputable pricing vendors that typically use pricing matrices or
models
Expected Pension and OPEB Plan Funding
The Company’s funding policy for its pension plans is to contribute amounts sufficient to meet legal
funding requirements, plus any additional amounts that
the Company may determine to be appropriate
considering the funded status of the plans, tax deductibility, the cash flows generated by the Company, and other
factors. Volatility in the global financial markets could have an unfavorable impact on future funding
requirements.
S-56
The Company had no obligation to fund its principal plans in the U.S. for the year ended December 31,
2017 and did not make any voluntary contributions for the year ended December 31, 2017 and 2016. The
Company is expected to make cash contributions of at least $13.0 million during 2018. During 2017 and 2016,
the Company contributed to its international plans $20.6 million and $7.1 million, respectively and expects to
make cash contributions of at least $18.6 million during 2018. Cash outflows related to OPEB plan were less
than $1.0 million during the year ended December 31, 2017 and the Company expects to have less than
$1.0 million cash outflows during 2018.
The Company continually reassesses the amount and timing of any discretionary contributions, which
could be significant in any period.
The table below details the funded status percentage of the Company’s pension plans as of
December 31, 2017 and 2016 including certain plans that are unfunded in accordance with the guidelines of the
Company’s funding policy outlined above.
(In millions, except %)
As of December 31, 2017
United States
International
Qualified
plan
Nonqualified
plan
Funded
plans
Unfunded
plans
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
PBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funded status percentage . . . . . . . . . . . . . . . . . . . . . . . . . .
$259.7
412.1
63%
n/a
31.5
n/a
$237.2
430.8
55%
n/a
187.1
n/a
(In millions, except %)
As of December 31, 2016
United States
International
Qualified
plan
Nonqualified
plan
Funded
plans
Unfunded
plans
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
PBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funded status percentage . . . . . . . . . . . . . . . . . . . . . . . . . .
$228.4
352.8
65%
n/a
31.3
n/a
$197.9
413.7
48%
n/a
167.7
n/a
Total
$ 496.9
1,061.5
47%
Total
$ 426.3
965.5
44%
U.S. Defined Contribution Plans
In addition to benefits provided under the pension and OPEB plans described above, the Company
provides benefits under defined contribution plans. The Company’s most significant defined contribution plans
are in the United States. The Company recognized expenses related to U.S. defined contribution plans of
$60.0 million, $68.1 million and $38.9 million during 2017, 2016 and 2015, respectively.
S-57
20. Accumulated Other Comprehensive Income/(Loss)
The changes in Accumulated other comprehensive income/(loss) (AOCI), net of their related tax effects,
for the year ended December 31, 2017 are as follows:
(In millions)
As of January 1, 2017 . . . . . . . . . . . . . . . . . . . . . . .
Current period change:
Other comprehensive income/(loss) before
Foreign
currency
translation
adjustment
Pension
and other
employee
benefits
Unrealized
holding
gain/(loss)
on
available-for-
sale securities
Accumulated
other
comprehensive
(loss)/income
Hedging
activities
$(1,505.4)
$ (5.2)
$ 6.6
$ 6.4
$(1,497.6)
reclassifications . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from AOCI . . . . . . . . . .
2,785.0
—
33.4
(0.7)
75.2
(13.9)
(0.6)
(5.8)
2,893.0
(20.4)
Net current period other comprehensive income/
(loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,785.0
32.7
As of December 31, 2017 . . . . . . . . . . . . . . . . . . . .
$ 1,279.6
$27.5
61.3
$ 67.9
(6.4)
2,872.6
$—
$ 1,375.0
The following is a summary of the amounts reclassified from AOCI to net income during the year ended
December 31, 2017.
(In millions)
Pension and other employee benefits
Amortization of actuarial loss . . . . . . . . . . . . . . .
Curtailment gain . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale securities
Gain on available-for-sale securities . . . . . . . . . .
Hedging activities
Foreign exchange contracts . . . . . . . . . . . . . . . . .
Amounts reclassified from AOCI
Location of impact in
Statements of Operations
Net periodic benefit cost
Cost of sales
Total before tax
Tax expense
Net of tax
Other (expense)/income, net
Total before tax
Tax expense
Net of Tax
Cost of sales
Total before tax
Tax expense
Net of tax
2017
$ (1.8)
3.1
1.3
(0.6)
0.7
13.9
13.9
—
13.9
8.8
8.8
(3.0)
5.8
Total reclassifications for the period . . . . . . . . . . . . . .
$20.4
Total net of tax
S-58
The changes in Accumulated other comprehensive income/(loss) (AOCI), net of their related tax effects,
for the year ended December 31, 2016 are as follows:
(In millions)
As of January 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . .
Current period change:
Other comprehensive (loss)/income before
Foreign
currency
translation
adjustment
Pension
and other
employee
benefits
Unrealized
holding
loss on
available-
for-sale
securities
Accumulated
other
comprehensive
loss
Hedging
activities
$ (182.1)
$ —
$(1.7)
$—
$ (183.8)
reclassifications . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from AOCI . . . . . . . . . . . .
(1,323.3)
—
38.3
(43.5)
8.3
—
9.9
(3.5)
(1,266.8)
(47.0)
Net current period other comprehensive (loss)/
income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,323.3)
(5.2)
8.3
As of December 31, 2016 . . . . . . . . . . . . . . . . . . . . . .
$(1,505.4)
$ (5.2)
$ 6.6
6.4
$ 6.4
(1,313.8)
$(1,497.6)
The following is a summary of the amounts reclassified from AOCI to net income during the year ended
December 31, 2016.
(In millions)
Pension and employee benefits
Amounts reclassified from AOCI
2016
Location of impact in
Statements of Operations
Curtailment gain . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 69.4
Integration and acquisition costs
Losses on hedging activities
Foreign exchange contracts . . . . . . . . . . . . . . . . .
69.4
(25.9)
Total before tax
Tax expense
43.5
Net of tax
4.9
4.9
(1.4)
3.5
Cost of sales
Total before tax
Tax expense
Net of tax
Total reclassifications for the period . . . . . . . . . . . . . .
$ 47.0
Total net of tax
21. Taxation
The components of pre-tax income from continuing operations are as follows:
(In millions)
Years ended December 31,
2017
2016
2015
Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of the world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 350.8
625.2
917.4
$214.3
(75.3)
347.1
$ (11.4)
975.8
421.4
$1,893.4
$486.1
$1,385.8
S-59
The provision for income taxes on continuing operations by location of the taxing jurisdiction for the
years ended December 31, 2017, 2016 and 2015 consisted of the following:
(In millions)
Current income taxes:
Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. federal tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. state and local taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of the world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total current taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes:
Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. federal tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. state and local taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of the world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years ended December 31,
2017
2016
2015
46.6
373.8
55.8
90.4
566.6
$
5.2 $
318.6
30.2
68.9
422.9
0.8
191.7
17.3
17.8
227.6
22.3
(3,050.3)
260.1
(156.3)
18.2
(433.8)
(74.1)
(59.3)
(38.8)
(151.2)
(1.7)
10.2
Total deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,924.2)
(549.0)
(181.5)
Total income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(2,357.6) $(126.1) $ 46.1
On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act (Tax Act) into
legislation. We have recorded a tax benefit of $2.5 billion, related to the remeasurement of deferred tax assets
and liabilities offset by a tax expense of $90.0 million relating to the impact of the transition tax on the deemed
repatriation of foreign income. Due to enactment late in the Company’s annual reporting period, the Company
was unable to obtain all of the requisite information and perform computations for all consequences of the Tax
Act. In addition, it is expected that significant guidance will be issued that may change how the Company has
computed the provisional amounts included in its annual financial statements for the year ended December 31,
2017. The Company will continue to assess the impact of the Tax Act during the measurement period and will
record any adjustments to its provisional estimates as needed during 2018.
The Company determines the amount of income tax expense or benefit allocable to continuing
operations using the incremental approach. The amount of income tax attributed to discontinued operations is
disclosed in Note 7, Results of Discontinued Operations, in these Consolidated Financial Statements.
S-60
The reconciliation of income from continuing operations before income taxes and equity in earnings/
(losses) of equity method investees at the statutory tax rate to the provision for income taxes is shown in the table
below:
Years ended December 31,
2017
2016
2015
Income from continuing operations before income taxes and equity in (losses)/
earnings of equity method investees (in millions)
. . . . . . . . . . . . . . . . . . . . . .
$1,893.4
$486.1
$1,385.8
Statutory tax rate (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. R&D credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intra-group items (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other permanent items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Domestic Manufacturing Deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition Related Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Irish Treasury Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Difference in taxation rates (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in provisions for uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . .
Prior year adjustment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . .
Change in tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
US Tax Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
US Transition Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25.0%
25.0% 25.0%
(6.6)% (25.9)%
(7.7)%
(13.5)% (44.4)% (18.6)%
1.1%
2.5%
4.5%
(1.6)%
(1.4)% (4.0)%
1.1%
— %
8.5%
0.6%
(4.1)% (8.6)%
1.0%
(0.5)%
7.9%
7.3%
3.6% 13.0%
(0.4)%
(2.7)% (1.5)%
(1.6)%
1.0%
(0.1)%
(3.8)%
— %
3.7%
0.9%
(1.2)% (5.1)%
— %
(130.3)% — %
— %
4.8% — %
Provision for income taxes on continuing operations
. . . . . . . . . . . . . . . . . . . . .
(124.5)% (25.9)%
3.3%
(1)
(2)
In addition to being subject to the Irish corporation tax rate of 25.0% in 2017, the Company is also subject
to income tax in other territories in which the Company operates, including: Canada (15.0%); France
(33.3%); Germany (15.0%); Italy (24.0%); Japan (23.4%); Luxembourg (19.0%); the Netherlands (25.0%);
Belgium (33.99%); Singapore (17.00%); Spain (25.0%); Sweden (22.0%); Switzerland (8.5%); United
Kingdom (19.3%) and the U.S. (35.0%). The rates quoted represent the statutory federal income tax rates in
each territory, and do not include any state taxes or equivalents or surtaxes or other taxes charged in
individual territories, and do not purport to represent the effective tax rate for the Company in each territory.
Intra-group items principally relate to the effect of intra-territory eliminations, the pre-tax effect of which
has been eliminated in arriving at the Company’s consolidated income from continuing operations before
income taxes, noncontrolling interests, and equity in earnings/(losses) of equity method investees. The
Company’s intra-group items primarily arise from its acquisition of third parties that result in income and
expense being received and taxed in different jurisdictions at various tax rates.
(3) The expense from the difference in taxation rates reflects the impact of the higher income tax rates in the
United States offset by the impact of lower foreign jurisdiction income tax rates.
As detailed in the income tax rate reconciliation above, the Company’s effective tax rate differs from the
Irish statutory rate each year due to foreign taxes that are different than the Irish statutory rate and certain
operations that are subject to tax incentives. In addition, the effective tax rate can be impacted each period by
certain discrete factors and events, which, in 2017, included items related to U.S. tax reform.
Provisions for uncertain tax positions
The Company files income tax returns in the Republic of Ireland, the U.S. (both federal and state) and
various other jurisdictions (see footnote 1 to the table above for major jurisdictions). With few exceptions, the
Company is no longer subject to income tax examinations by tax authorities for years before 2013. Tax
authorities in various jurisdictions are in the process of auditing the Company’s tax returns for fiscal periods
S-61
primarily after 2012, with the earliest being 2007; these tax audits cover primarily transfer pricing, but may
include other areas.
While tax audits remain open, the Company also considers it reasonably possible that issues may be
raised by tax authorities resulting in increases to the balance of unrecognized tax benefits, however, an estimate
of such an increase cannot be made.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(In millions)
Balance as of January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . . .
Decreases based on tax positions taken in the current year . . . . . . . . . . . . . . . . . . . . .
Increases for tax positions taken in prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases for tax positions taken in prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition related items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases resulting from settlements with the taxing authorities . . . . . . . . . . . . . . . .
Decreases as a result of expiration of the statute of limitations . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
2016
2015
$216.3
$ 236.3
132.6
34.3
(128.5) —
0.5
(17.8)
29.5
(24.4)
(2.4)
0.3
3.1
(43.7)
(1.8)
—
(8.2)
0.7
$207.8
27.0
—
3.9
(30.6)
17.9
(1.2)
(4.4)
(4.1)
Balance as of December 31 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 190.5
$236.3
$216.3
(1) Foreign currency translation adjustments are recognized within Other Comprehensive Income.
(2) As of December 31, 2017, approximately $185.0 million (2016: $227.0 million, 2015: $207.0 million) of
which would affect the effective rate if recognized.
There is no requirement to record any reserves or other contingencies related to the receipt of the break
fee from AbbVie in 2014. The relevant tax return was submitted on September 23, 2015.
The Company does not anticipate any material changes in the next 12 months to the total amount of
unrecognized tax benefits recorded as of December 31, 2017. As of the balance sheet date, the Company believes
that its reserves for uncertain tax positions are adequate to cover the resolution of these audits. However, the
resolution of these audits could have a significant impact on the financial statements if the settlement differs from
the amount reserved.
The Company recognizes interest and penalties accrued related to unrecognized tax positions within
income taxes. During the years ended December 31, 2017, 2016 and 2015, the Company recognized a charge/
(credit) to income taxes of ($14.2 million), $4.2 million and $0.8 million in interest and penalties and the
Company had a liability of $16.5 million, $30.8 million and $26.5 million for the payment of interest and
penalties accrued as of December 31, 2017, 2016 and 2015, respectively.
S-62
Deferred taxes
The significant components of deferred tax assets and liabilities and their balance sheet classifications,
as of December 31, are as follows:
(In millions)
Deferred tax assets:
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory & warranty provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Losses carried forward (including tax credits)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions for sales deductions and doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess of tax value over book value of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals and provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, December 31,
2017
2016
$
3.5
64.2
1,687.1
119.4
50.3
93.3
11.5
249.4
26.2
2,304.9
(635.7)
1,669.2
$
16.8
88.7
1,907.3
191.6
79.7
137.5
14.2
448.6
78.5
2,962.9
(569.4)
2,393.5
Deferred tax liabilities:
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess of book value over tax value in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess of book value over tax value of assets and investments . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
(5,501.2)
(9.6)
(650.0)
(67.8)
(9,073.4)
(150.3)
(1,304.2)
(91.6)
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,559.4)
(8,226.0)
Balance sheet classifications:
Deferred tax assets - non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities - non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
188.8
(4,748.2)
96.7
(8,322.7)
$(4,559.4)
$(8,226.0)
As of December 31, 2017,
the Company had a valuation allowance of $635.7 million (2016:
$569.4 million; 2015: $416.1 million) to reduce its deferred tax assets to estimated realizable value. These
valuation allowances related primarily to operating losses, capital losses, and tax-credit carry-forwards in
Switzerland (2017: $200.0 million; 2016: $176.8 million; 2015: $131.5 million); U.S. (2017: $148.9 million;
2016: $155.1 million; 2015: $125.9 million); Ireland (2017: $22.3 million; 2016: $22.4 million; 2015: $22.2
million); and other foreign tax jurisdictions (2017: $264.5 million; 2016: $215.1 million; 2015: $136.5 million).
Management is required to exercise judgment in determining whether deferred tax assets will more
likely than not be realized. A valuation allowance is established where there is an expectation that on the balance
of probabilities management considers it is more likely than not that the relevant deferred tax assets will not be
realized. In assessing the need for a valuation allowance, management weighs all available positive and negative
evidence including cumulative losses in recent years, projections of future taxable income, carry forward and
carry back potential under relevant tax law, expiration period of tax attributes, taxable temporary differences, and
prudent and feasible tax-planning strategies.
The net increase in valuation allowances of $66.3 million includes (i) increases of $81.4 million relating
to operating losses in various jurisdictions for which management considers that there is insufficient positive
evidence related to the factors described above to overcome negative evidence, such as cumulative losses and
expiration periods and therefore it is more likely than not that the relevant deferred tax assets will not be realized
in full, and (ii) decreases of $15.1 million primarily related to U.S. state tax losses, which based on the
S-63
assessment of factors described above now provides sufficient positive evidence to support the losses are more
likely than not to be realized.
As of December 31, 2017, based upon a consideration of the factors described above management
believes it is more likely than not that the Company will realize the benefits of these deductible differences, net
of the valuation allowances. However, the amount of the deferred tax asset considered realizable could be
adjusted in the future if these factors are revised in future periods.
The approximate tax effect of NOLs, capital losses and tax credit carry-forwards as of December 31, are
as follows:
(In millions)
U.S. federal tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. state tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Republic of Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
R&D and other tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
2016
$ 489.6
140.3
29.4
723.8
303.9
$ 687.1
170.7
45.1
614.9
389.5
$1,687.0
$1,907.3
The approximate gross value of net operating losses (NOLs) and capital losses at December 31, 2017 is
$11,137.5 million (2016: $10,843.1 million). The tax effected NOLs, capital losses and tax credit carry-forwards
shown above have the following expiration dates:
(In millions)
December 31,
2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Within 1 year
Within 1 to 2 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Within 2 to 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Within 3 to 4 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Within 4 to 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Within 5 to 6 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
After 6 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indefinitely . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1.4
34.4
18.4
44.3
50.1
31.8
919.5
587.1
The Company does not provide for deferred taxes on the excess of the financial reporting over the tax
basis of investments in foreign subsidiaries that are essentially permanent in duration. As of December 31, 2017,
that excess totaled $14.4 billion (2016: $16.6 billion). On December 22, 2017, President Trump signed tax
reform legislation (HR 1) which includes a broad range of tax reform proposals affecting businesses, including
the payment of a one-time tax or “toll charge” on previously unremitted earnings of certain non-US subsidiaries.
Accordingly, the Company will no longer assert that any of the earnings that will be taxed as part of the toll
charge are indefinitely reinvested (approximately $7.6 billion).
S-64
22. Earnings Per Share
The following table reconciles net
income and loss and the weighted average ordinary shares
outstanding for basic and diluted earnings per share (EPS) for the periods presented:
(In millions)
Years ended December 31,
2017
2016
2015
Income from continuing operations, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain/(loss) from discontinued operations, net of taxes . . . . . . . . . . . . . . . . . . . . .
$4,253.5
18.0
$ 603.5
(276.1)
$1,337.5
(34.1)
Numerator for basic and diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . .
$4,271.5
$ 327.4
$1,303.4
Weighted average number of shares:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of dilutive shares:
Share-based awards to employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
906.5
770.1
590.4
5.5
6.1
2.7
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
912.0
776.2
593.1
Earnings per Ordinary Share – basic
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings/(loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per Ordinary Share – basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per Ordinary Share – diluted
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings/(loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per Ordinary Share – diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.69
0.02
4.71
4.66
0.02
4.68
0.78
(0.35)
0.43
0.77
(0.35)
0.42
2.27
(0.06)
2.21
2.26
(0.06)
2.20
Weighted average number of basic shares excludes shares purchased by the Employee Benefit Trust and
those under the shares buy-back program, which are both presented by Shire as treasury stock. Share-based
awards to employees are calculated using the treasury method.
The share equivalents not included in the calculation of the diluted weighted average number of shares
are shown below:
(Number of shares in millions)
Share-based awards to employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years ended December 31,
2017
15.2
2016
2015
4.1
3.4
Certain stock options have been excluded from the calculation of diluted EPS for the years ended
December 31, 2017, 2016 and 2015 because either their exercise prices exceeded Shire’s average share price
during the calculation period, the required performance conditions were not satisfied as of the balance sheet date
or their inclusion would have been antidilutive.
S-65
23. Share-based Compensation Plans
Total share-based compensation recorded by the Company during the years ended December 31, 2017,
2016 and 2015 by line item is as follows:
(In millions)
Years ended December 31,
2017
2016
2015
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Integration and acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reorganization costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 35.6
27.3
97.2
14.8
—
$ 23.3
46.9
67.1
181.2
—
$
7.6
28.6
37.4
—
26.7
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
174.9
(43.4)
318.5
(85.3)
100.3
(28.4)
$131.5
$233.2
$ 71.9
During the year ended December 31, 2017, the Company incurred total expense of $61.6 million (2016:
$223.1 million, 2015: $nil) related to replacement awards held by Baxalta employees as further described below.
This includes integration related expenses of $14.8 million during the year ended December 31, 2017 (2016:
$171.0 million, 2015: $nil), primarily due to the acceleration of unrecognized expense associated with certain
employees impacted by the integration.
There were no capitalized share-based compensation costs as of December 31, 2017, 2016 and 2015.
As of December 31, 2017, $218.3 million (2016: $244.2 million, 2015: $115.3 million) of total
unrecognized compensation cost relating to non-vested awards is expected to be recognized over a period of
three years.
Share-based compensation plans
Prior to February 28, 2015, the Company granted stock-settled share appreciation rights (SARs) and
performance share awards (PSAs) over ordinary shares and ADSs to Executive Directors and employees under
the Shire Portfolio Share Plan (PSP) (Parts A and B). The SARs and PSAs granted under the PSP (Parts A and B)
to Executive Directors are exercisable subject to performance and service criteria. Substantially all SARs and
PSAs granted to employees are exercisable subject only to service criteria.
The principal terms and conditions of SARs and PSAs under the PSP (Parts A and B) are as follows:
(i) the contractual life of SARs is seven years, (ii) the vesting period of SARs and PSAs granted to employees
below the level of Executive Vice President allows for graded vesting over three years, and (iii) awards granted
to the level of Executive Director and Executive Vice President cliff vest after three years, of which awards to the
level of Executive Director contain performance conditions based on growth in Non-GAAP adjusted return on
invested capital
taxation, depreciation and
amortization (Non-GAAP EBITDA). In 2014, the Company granted PSAs under the PSP to employees at
Executive Vice President level and to a select group of senior employees, which are exercisable subject to
performance and service criteria. These PSAs cliff vested after three years and contain performance conditions as
explained above.
(Adjusted ROIC) and Non-GAAP earnings before interest,
Since February 28, 2015, the Company has granted awards under the Shire Long Term Incentive Plan
2015 (LTIP). Under the LTIP, the Company grants stock-settled share appreciation rights (SARs), restricted
stock units (RSUs) and performance share units (PSUs) over ordinary shares and ADSs to Executive Directors
and employees. The PSUs granted under the LTIP and SARs granted to Executive Directors are exercisable
subject to performance and service criteria. RSUs granted under the LTIP and SARs granted to all other
employees are exercisable subject only to service criteria.
S-66
The principal terms and conditions of SARs, RSUs and PSUs granted under the LTIP are as follows:
(i) the contractual life of SARs is seven years, (ii) the vesting period of SARs and RSUs granted to employees
below the level of Executive Vice President allows for graded vesting, and (iii) all SARs granted to Executive
Directors and employees at Executive Vice President level and all PSUs granted cliff vest after three years and,
with the exception of SARs granted to employees at Executive Vice President level, contain performance
conditions based on Product sales and Non-GAAP EBITDA targets; a Non-GAAP Adjusted ROIC underpin is
also used at the end of the three year performance period to assess the underlying performance of the Company
before determining the final vesting levels for awards with performance conditions. In addition, a further two
year holding period will apply to all awards granted to Executive Directors post vesting.
The Company also operates a Global Employee Stock Purchase Plan and UK/Irish Sharesave Plans.
Replacement Awards Issued to Baxalta Employees
In connection with the acquisition of Baxalta and pursuant to the merger agreement associated with the
acquisition, outstanding Baxalta equity awards held by Baxalta employees or employees of Baxter were
cancelled and exchanged for Shire equity awards. The outstanding Baxalta equity awards consisted primarily of
stock options and RSUs and hence were replaced with Shire’s stock options and RSUs. The replacement Shire
awards generally have the same terms and conditions (including vesting) as the former Baxalta awards for which
they were exchanged.
The value of the replacement share-based awards granted was designed to generally preserve both the
intrinsic value and the fair value of the award immediately prior to the acquisition. Following the acquisition, the
Company records share-based compensation expense associated with the acquisition-date fair value of acquired
Baxalta employees’ replacement options and RSUs that is attributable to post-acquisition service requirements,
as well as share-based compensation expense for post-acquisition service requirements associated with certain
remaining unvested Baxter share-based awards held by the acquired Baxalta employees. The portions of the
acquisition-date fair values of the awards that are attributable to post-combination service are recognized over the
remaining service period of the awards.
S-67
The following awards were outstanding as of December 31, 2017:
Stock-settled SARs . . . . . . . . . .
SARs 15,693,527
7 years
Compensation
type
Number of
awards
Expiration period
from date
of issue
UK/Irish Sharesave Plans . . . . .
Stock options
184,647
6 months after
vesting
Global Employee Stock
Vesting period
3 years graded vesting
and/or 3 years cliff
vesting subject to
performance criteria
for Executive Directors
only
3 or 5 years
Purchase Plan . . . . . . . . . . . .
Stock options
315,646 On vesting date
1 to 5 years
Baxalta Replacement
Options . . . . . . . . . . . . . . . . .
Stock options
9,425,001
10 years
3 years graded vesting
Stock-settled SARs and stock
options . . . . . . . . . . . . . . . . .
RSUs, PSUs and PSAs . . . . . . .
25,618,821
3,258,380
3 years
RSUs, PSUs
and PSAs
Baxalta Replacement RSUs . . .
RSUs/PSUs and PSAs . . . . . .
RSU
701,340
3 years
3,959,720
3 years graded
vesting, 3 years cliff
vesting subject to
performance criteria
for Executive Directors
and certain senior
employees only
3 years graded vesting
Stock-settled SARs and stock options
SARs under LTIP and PSP (Part A)
Stock-settled share appreciation rights (SARs) granted to Executive Directors are exercisable subject to
service and performance criteria.
In respect of any award made to Executive Directors under the LTIP, performance criteria are based on
Product sales and Non-GAAP EBITDA targets, with a Non-GAAP Adjusted ROIC underpin. In respect of any
award made to Executive Directors under the PSP (Part A), performance criteria are based on growth in
Non-GAAP Adjusted ROIC and Non-GAAP EBITDA. These performance measures are an important measure of
the Company’s ability to meet the strategic objective to grow value for all of its stakeholders.
Awards granted to employees below Executive Director level are not subject to performance conditions
and are only subject to service conditions.
Once awards have vested, participants will have until the seventh anniversary of the date of grant to
exercise their awards.
UK/Irish Sharesave Plans (Sharesave Plans)
Options granted under the Sharesave Plans are granted with an exercise price equal to 80% and 75% of
the mid-market price on the day before invitations are issued to UK and Ireland employees, respectively.
Employees may enter into three or five year savings contracts. No performance conditions apply.
S-68
Shire Global Employee Stock Purchase Plan (Stock Purchase Plan)
Under the Stock Purchase Plan, options are granted with an exercise price equal to 85% of the fair
market value of a share on the day before the enrollment date (the first day of the offering period) or the day
before the exercise date (the last day of the offering period), whichever is the lower. Employees agree to save for
a period up to 12 months. No performance conditions apply.
Baxalta Replacement Options
The replacement stock options were issued consistent with the vesting conditions of the replaced award
(as explained above). Replacement stock options had contractual terms of 10 years from the initial grant date.
The majority of stock options outstanding vested in one-third increments over a three year period, although
certain awards cliff vest or have longer or shorter service periods. The fair value on the acquisition date
attributable to post-combination service, adjusted for estimated forfeitures, is recognized as expense on a
straight-line basis over the remaining vesting period.
A summary of the status of the Company’s SARs and stock options including replacement awards as of
December 31, 2017 and of the related activity during the period then ended is presented below:
Year ended December 31, 2017
Outstanding as of beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding as of end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercisable as of end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted
average
exercise
price
£
38.98
45.11
34.99
44.00
39.75
35.11
Number of
shares
21,869,833
9,865,956
(3,312,318)
(2,804,650)
25,618,821
13,329,159
Intrinsic
value
(In millions)
£
31.4
29.3
Excluded from the table above are replacement stock options issued to Baxter employees as part of the
acquisition of Baxalta. The Company issued 8.8 million stock options to Baxter employees on June 3, 2016, out
of which 6.2 million and 6.2 million were outstanding and exercisable, respectively, as of December 31, 2017.
The weighted average grant date fair value of SARs and stock options granted in the year ended
December 31, 2017 was £9.72 (2016: £8.25; 2015: £10.36).
SARs and stock options including Baxalta Replacement Options, outstanding as of December 31, 2017
have the following characteristics:
Number of
awards
outstanding
2,373,820
9,537,750
13,707,251
25,618,821
Exercise
prices
£
9.27-28.00
28.01-40.00
40.01-70.48
Weighted
Average
remaining
contractual
term (Years)
2.4
6.3
5.5
Weighted
average
exercise price
of awards
outstanding
£
24.47
33.64
46.65
Weighted
average
exercise price
of awards
exercisable
£
24.48
33.30
48.55
Number of
awards
exercisable
2,367,984
8,010,506
2,950,669
13,329,159
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RSUs, PSUs and PSAs
RSUs and PSUs under LTIP and PSAs under PSP (Part B)
PSUs and PSAs granted to Executive Directors and employees at Executive Vice President level are
exercisable subject to certain performance and service criteria.
RSUs and PSAs granted to all other employees are not subject to performance criteria and are only
subject to service conditions.
The performance criteria for PSUs granted under the LTIP is based on Product sales and Non-GAAP
EBITDA targets, typically with a Non-GAAP Adjusted ROIC underpin. The performance criteria for PSAs under
the PSP (Part B) is based on growth in Non-GAAP Adjusted ROIC and Non-GAAP EBITDA.
Baxalta Replacement RSUs
The replacement RSUs were issued consistent with the vesting conditions of the replaced award (as
explained above) and generally continue to vest in one-third increments over a three-year period. The fair value
on the acquisition date attributable to post-combination service, adjusted for estimated forfeitures, is recognized
as expense on a straight-line basis over the remaining vesting period.
A summary of the status of the Company’s RSUs, PSUs and PSAs as of December 31, 2017 and of the
related activity during the period then ended is presented below:
RSUs, PSUs and PSAs
Outstanding as of beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
shares
3,976,657
2,520,239
(1,779,205)
(757,971)
Outstanding as of end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,959,720
Exercisable as of end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Weighted
average grant
date fair value
£
Weighted
average
remaining life
41.31
45.38
43.23
44.99
42.33
—
4.9
N/A
Excluded from the table above are replacement RSUs issued to Baxter employees as part of the
acquisition of Baxalta. The Company issued 0.5 million RSUs to Baxter employees on June 3, 2016, out of
which $nil were outstanding as of December 31, 2017.
Exercises of share-based awards
The total intrinsic values of share-based awards exercised, including those held by Baxter employees,
for the years ended December 31, 2017, 2016 and 2015 were $147.1 million, $214.6 million and $198.8 million,
respectively. The total cash received as a result of share option exercises for the period ended December 31,
2017, 2016 and 2015 was approximately $134.1 million, $169.2 million and $16.6 million, respectively. In
connection with these exercises, the tax benefit credited to additional paid-in capital for the years ended
December 31, 2017, 2016 and 2015 was $nil, $8.8 million and $31.6 million, respectively. With the adoption of a
new accounting standard on accounting for stock-based compensation, effective January 1, 2017, excess tax
benefits were recognized as a component of income tax expense rather than Additional paid-in capital.
The Company will settle future awards with either newly listed ordinary shares or with shares held in
the EBT. The number of shares that the EBT will purchase in 2018 is dependent on the number of awards granted
and exercised during the year and Shire plc’s share price. As of December 31, 2017, the EBT held 0.5 million
ordinary shares and 0.2 million ADSs.
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Valuation methodologies
The Company estimates the fair value of its share-based awards using a Black-Scholes valuation model.
Key input assumptions used to estimate the fair value of share-based awards include the grant price of the award,
the expected stock-based award term, volatility of the Company’s share price, the risk-free rate and the
Company’s dividend yield. The Company believes that the valuation technique and the approach utilized to
develop the underlying assumptions are appropriate in estimating the fair values of Shire’s stock-based awards.
Estimates of fair value are not intended to predict actual future events or the value ultimately realized by
employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the
original estimates of fair value made by the Company.
The fair value of share awards granted was estimated using the following assumptions:
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeiture rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.4-1.9% 0.29-1.6% 0.6-1.8%
0.3-0.6% 0.3-0.5% 0.2-0.4%
1-3.88 years
1-4 years
1-4 years
25-29% 26-29% 23-26%
5-7%
5-7%
0%
Years ended December 31,
2017
2016
2015
The following assumptions were used to value share-based awards:
•
•
•
•
•
risk-free interest rate - for awards granted over ADSs, the U.S. Federal Reserve treasury constant
maturities rate with a term consistent with the expected life of the award is used. For awards
granted over ordinary shares, the yield on UK government bonds with a term consistent with the
expected life of the award is used;
expected dividend yield - measured as the average annualized dividend estimated to be paid by the
Company over the expected life of the award as a percentage of the share price at the grant date;
expected life - estimated based on the contractual term of the awards and the effects of employees’
expected exercise and post-vesting employment termination behavior;
expected volatility - measured using historical daily price changes of the Company’s share price
over the respective expected life of the share-based awards at the date of the award; and
forfeiture rate - estimated using historical trends of the number of awards forfeited prior to vesting.
Upon the 2017 adoption of a new rule on accounting for stock-based compensation, the Company
elected to account for forfeitures in relation to service conditions as they occur. As such, the
estimated forfeiture rate was 0% starting in 2017.
24. Commitments and Contingencies
Leases
Future minimum lease payments under operating leases as of December 31, 2017 are presented below:
(In millions)
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases
$ 188.5
164.8
155.2
146.6
128.8
795.8
$1,579.7
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The Company leases land, facilities, motor vehicles and certain equipment under operating leases
expiring through 2032. Lease and rental expense amounted to $167.6 million, $100.8 million and $40.7 million
for the year ended December 31, 2017, 2016 and 2015, respectively, which is predominately included in Cost of
sales and SG&A expenses in the Company’s Consolidated Statement of Operations.
Letters of credit and guarantees
As of December 31, 2017 and December 31, 2016, the Company had irrevocable standby letters of
credit and guarantees with various banks and insurance companies totaling $224.8 million and $139.7 million
(being the contractual amounts), respectively, providing security for the Company’s performance of various
obligations. These obligations are primarily in respect of the recoverability of insurance claims, lease obligations
and supply commitments.
Commitments
Clinical testing
As of December 31, 2017, the Company had committed to pay approximately $1,409.9 million
(December 31, 2016: $1,037.4 million) to contract vendors for administering and executing clinical trials. The
timing of these payments is dependent upon actual services performed by the organizations as determined by
patient enrollment levels and related activities.
Contract manufacturing
As of December 31, 2017,
the Company had committed to pay approximately $467.2 million
(December 31, 2016: $528.9 million) in respect of contract manufacturing. The Company expects to pay
$216.5 million of these commitments in 2018.
Other purchasing commitments
As of December 31, 2017, the Company had committed to pay approximately $1,692.5 million
(December 31, 2016: $1,745.4 million) for future purchases of goods and services, predominantly relating to
active pharmaceutical ingredients sourcing. The Company expects to pay $960.0 million of these commitments
in 2018.
Investment commitments
As of December 31, 2017, the Company had outstanding commitments to purchase common stock and
interests in companies and partnerships, respectively, for amounts totaling $48.9 million (December 31, 2016:
$76.4 million) which may all be payable in 2018, depending on the timing of capital calls. The investment
commitments include additional funding to certain variable interest entities (VIEs) for which Shire is not the
primary beneficiary.
Capital commitments
As of December 31, 2017, the Company had committed to spend $328.2 million (December 31, 2016:
$100.5 million) on capital projects.
Baxter related tax indemnification
Baxter International Inc. (Baxter) and Baxalta entered into a tax matters agreement, effective on the date
of Baxalta’s separation from Baxter, which employs a direct tracing approach, or where direct tracing approach is
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not feasible, an allocation methodology, to determine which company is liable for pre-separation income tax
items for U.S. federal, state and foreign jurisdictions. With respect to tax liabilities that are directly traceable or
allocated to Baxalta but for which Baxalta was not the primary obligor, Baxalta recorded a tax indemnification
amount that would be due to Baxter upon Baxter discharging the associated tax liability to the taxing authority.
25. Legal and Other Proceedings
The Company expenses legal costs when incurred.
The Company recognizes loss contingency provisions for probable losses when management is able to
reasonably estimate the loss. When the estimated loss lies within a range,
the Company records a loss
contingency provision based on its best estimate of the probable loss. If no particular amount within that range is
a better estimate than any other amount, the minimum amount is recorded. Estimates of losses may be developed
before the ultimate loss is known, and are therefore refined each accounting period as additional information
becomes known. An outcome that deviates from the Company’s estimate may result in an additional expense or
release in a future accounting period. As of December 31, 2017, provision for litigation losses, insurance claims
and other disputes totaled $76.2 million (December 31, 2016: $415.0 million).
The Company’s principal pending legal and other proceedings are disclosed below. The outcomes of
these proceedings are not always predictable and can be affected by various factors. For those legal and other
proceedings for which it is considered at least reasonably possible that a loss has been incurred, the Company
discloses the possible loss or range of possible loss in excess of the recorded loss contingency provision, if any,
where such excess is both material and estimable.
MYDAYIS
On October 12, 2017, Shire was notified that Teva Pharmaceuticals USA, Inc. had submitted an
abbreviated new drug application (ANDA) to the FDA seeking permission to market a generic version of
MYDAYIS. Within the requisite 45-day period, Shire filed a lawsuit in the U.S. District Court for the District of
Delaware against Teva Pharmaceuticals USA, Inc., Actavis Laboratories, Inc. and Teva Pharmaceutical
Industries Limited (collectively the “Teva entities”). No dates for a Markman hearing or trial have been set.
Petitions to institute inter partes reviews (IPRs) against US Patent numbers 8,846,100 and 9,173,857
were filed by KVK Tech. Both of these patents are listed in the Orange Book as covering MYDAYIS and are
among the patents-in-suit in the infringement action brought against the Teva entities as noted above. A decision
on whether to institute the IPRs is expected on or before July 10, 2018. If one or both IPRs are instituted, a
decision on the merits is expected on or before July 10, 2019.
LIALDA
In May 2010, Shire was notified that Zydus Pharmaceuticals USA, Inc. (Zydus) had submitted an
ANDA under the Hatch-Waxman Act seeking permission to market a generic version of LIALDA. Within the
requisite 45-day period, Shire filed a lawsuit in the U.S. District Court for the District of Delaware against Zydus
and Cadila Healthcare Limited, doing business as Zydus Cadila. A Markman hearing took place on January 29,
2015 and a Markman ruling was issued on July 28, 2015. A trial took place between March 28, 2016 and April 1,
2016. On September 16, 2016 the court issued its ruling finding that the proposed generic product would not
infringe the asserted claims. Shire appealed the ruling to the Court of Appeals for the Federal Circuit (CAFC).
On May 9, 2017, the CAFC affirmed the ruling of the district court. Zydus’ ANDA has been approved and the
generic product is now available in the U.S.
In February 2012, Shire was notified that Osmotica Pharmaceutical Corporation (Osmotica) had
submitted an ANDA under the Hatch-Waxman Act seeking permission to market a generic version of LIALDA.
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Within the requisite 45-day period, Shire filed a lawsuit in the U.S. District Court for the Northern District of
Georgia against Osmotica. A Markman hearing took place on August 22, 2013 and a Markman ruling was issued
on September 25, 2014. The court issued an Order on February 27, 2015 in which all dates in the scheduling
order were stayed. Osmotica’s ANDA was withdrawn as of March 31, 2017 and the case was dismissed.
In March 2012, Shire was notified that Watson Laboratories Inc.-Florida had submitted an ANDA under
the Hatch-Waxman Act seeking permission to market a generic version of LIALDA. Within the requisite 45-day
period, Shire filed a lawsuit in the U.S. District Court for the Southern District of Florida against Watson
Laboratories Inc.-Florida and Watson Pharmaceuticals, Inc., Watson Pharma, Inc. and Watson Laboratories, Inc.
(collectively, “Watson”) were subsequently added as defendants. A trial took place in April 2013 and on May 9,
2013 the trial court issued a decision finding that the proposed generic product infringes the patent-in-suit and
that the patent is not invalid. Watson appealed the trial court’s ruling to the CAFC and a hearing took place on
December 2, 2013. The ruling of the CAFC was issued on March 28, 2014 overruling the trial court on the
interpretation of two claim terms and remanding the case for further proceedings. Shire petitioned the Supreme
Court for a writ of certiorari which was granted on January 26, 2015. The Supreme Court also vacated the CAFC
decision and remanded the case to the CAFC for further consideration in light of the Supreme Court’s recent
decision in Teva v. Sandoz. On June 3, 2015, the CAFC reaffirmed their previous decision to reverse the District
Court’s claims construction and remanded the case to the U.S. District Court for the Southern District of Florida.
A trial was held on January 25-27, 2016. A ruling was issued on March 28, 2016 upholding the validity of the
patent and finding that Watson’s proposed ANDA product infringes the patent-in-suit. Watson appealed the
ruling to the CAFC and oral argument took place on October 5, 2016. The CAFC issued a ruling on February 10,
2017 reversing the trial court’s ruling of infringement and remanding the case to the lower court for entry of a
ruling of non-infringement. On May 18, 2017, the lower court entered judgment of non-infringement.
In April 2012, Shire was notified that Mylan had submitted an ANDA under the Hatch-Waxman Act
seeking permission to market a generic version of LIALDA. Within the requisite 45-day period, Shire filed a
lawsuit in the U.S. District Court for the Middle District of Florida against Mylan. A Markman hearing took
place on December 22, 2014. A Markman ruling was issued on March 23, 2015. Following a four-day bench trial
in September 2016 in the U.S. District Court for the Middle District of Florida, the court handed down a ruling
that Mylan’s proposed generic version of LIALDA infringes claims 1 and 3 of the Orange Book listed patent for
LIALDA. In connection with this finding of infringement, the court also entered an injunction prohibiting Mylan
from making, using, selling, offering for sale and/or importing their proposed ANDA product before the
expiration of the patent (June 8, 2020) and requiring that the approval date for their ANDA be on or after the
expiration of the patent. On June 14, 2017, the U.S. District Court for the Middle District of Florida granted
Mylan’s Motion for Reconsideration and entered judgment of non-infringement. Shire filed an appeal with the
Court of Appeals of the Federal Circuit on July 7, 2017. No date for oral argument has been set.
In March 2015, Shire was notified that Amneal had submitted an ANDA under the Hatch-Waxman Act
seeking permission to market a generic version of LIALDA. Within the requisite 45 day period, Shire filed a
lawsuit in the U.S. District Court for the District of New Jersey against Amneal, Amneal Pharmaceuticals of New
York, LLC and Amneal Pharmaceuticals Co. India Pvt. Ltd. A Markman hearing took place on July 25, 2016. A
Markman ruling was issued on August 2, 2016. No trial date has been set.
In September 2015, Shire was notified that Lupin Ltd. had submitted an ANDA under the Hatch-
Waxman Act seeking permission to market a generic version of LIALDA. Within the requisite 45 day period,
Shire filed a lawsuit
in the U.S. District Court for the District of Maryland against Lupin Ltd., Lupin
Pharmaceuticals Inc., Lupin Inc. and Lupin Atlantis Holdings SA. A Markman hearing originally scheduled to
take place on November 10, 2016, was cancelled and has not yet been rescheduled. No trial date has been set.
VANCOCIN
On April 6, 2012, ViroPharma Incorporated (ViroPharma) received a notification that the United States
Federal Trade Commission (FTC) was conducting an investigation into whether ViroPharma had engaged in
S-74
unfair methods of competition with respect to VANCOCIN which Shire acquired in January 2014. Following the
divestiture of VANCOCIN in August 2014, Shire retained certain liabilities including any potential liabilities
related to the VANCOCIN citizen petition.
On August 3, 2012, and September 8, 2014, ViroPharma and Shire respectively received Civil
Investigative Demands from the FTC requesting additional information related to this matter. Shire has fully
cooperated with the FTC’s investigation.
On February 7, 2017, the FTC filed a Complaint against Shire alleging that ViroPharma engaged in
conduct in violation of U.S. antitrust laws arising from a citizen petition ViroPharma filed in 2006 related to
Food & Drug Administration’s policy for evaluating bioequivalence for generic versions of VANCOCIN. The
complaint seeks equitable relief, including an injunction and disgorgement. The Company filed a motion to
dismiss on April 10, 2017.
At this time, Shire is unable to predict the outcome or duration of this case.
ELAPRASE
On September 24, 2014, Shire’s Brazilian affiliate, Shire Farmaceutica Brasil Ltda, was served with a
lawsuit brought by the State of Sao Paulo and in which the Brazilian Public Attorney’s office has intervened
alleging that Shire is obligated to provide certain medical care including ELAPRASE for an indefinite period at
no cost to patients who participated in ELAPRASE clinical trials in Brazil, and seeking recoupment to the
Brazilian government for amounts paid on behalf of these patients to date, and moral damages associated with
these claims.
On May 6, 2016, the trial court judge ruled on the case and dismissed all the claims under the class
action, which was appealed. On February 20, 2017, the Court of Appeals in Sao Paulo issued the final decision
on merit in favor of Shire and dismissed all the claims under the class action. On July 12, 2017, the Public
Prosecutor filed an appeal addressed to the Supreme Court. During the last quarter of 2017, the State of Sao
Paulo filed appeals addressed to the Superior Court of Justice and to the Supreme Court.
26. Shareholders’ Equity
Authorized common stock
The authorized stock of Shire plc as of December 31, 2017, was 1,500,000,000 ordinary shares and 2
subscriber ordinary shares.
Dividends
Under Jersey law, Shire plc is entitled to fund payments of dividends from any source (other than a
capital redemption reserve or nominal capital account) subject to the Directors authorizing the distribution
making a solvency statement in the prescribed statutory form. As of December 31, 2017, Shire plc’s distributable
reserves were approximately $4.2 billion.
Treasury stock
The Company records the purchase of its own shares by the EBT and under the share buy-back program
as a reduction of shareholders’ equity based on the price paid for the shares. As of December 31, 2017, the EBT
held 0.5 million in ordinary shares (2016: 0.5 million; 2015: 0.6 million) and 0.2 million ADSs (2016:
0.2 million; 2015: 0.2 million) and shares held under the share buy-back program were 7.4 million ordinary
shares (2016: 8.0 million; 2015: 8.5 million). During the years ended December 31, 2017 and 2016 the Company
did not purchase any shares either through the EBT or under any share buy-back program.
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Income Access Share Arrangements
Shire has put into place income access share arrangements which enable ordinary shareholders, other
than ADS holders, to choose whether they receive their dividends from Shire plc, a company tax resident in the
Republic of Ireland, or from Shire Biopharmaceuticals Holdings (Old Shire), a Shire group company tax resident
in the UK.
Old Shire has issued one income access share to the Income Access Trust (IAS Trust), which is held by
the trustee of the IAS Trust (Trustee). The mechanics of the arrangements are as follows:
(i)
(ii)
If a dividend is announced or declared by Shire plc on its ordinary shares, an amount is paid by Old
Shire by way of a dividend on the income access share to the Trustee, and such amount is paid by
the Trustee to ordinary shareholders who have elected to receive dividends under
these
arrangements. The dividend which would otherwise be payable by Shire plc to its ordinary
shareholders will be reduced by an amount equal to the amount paid to its ordinary shareholders by
the Trustee.
If the dividend paid on the income access share and on-paid by the Trustee to ordinary shareholders
is less than the total amount of the dividend announced or declared by Shire plc on its ordinary
shares, Shire plc will be obliged to pay a dividend on the relevant ordinary shares equivalent to the
amount of the shortfall. In such a case, any dividend paid on the ordinary shares will generally be
subject to Irish withholding tax at the rate of 20.0% or such lower rate as may be applicable under
exemptions from withholding tax contained in Irish law.
(iii) An ordinary shareholder is entitled to make an income access share election such that he/she will
receive his/her dividends (which would otherwise be payable by Shire plc) under
these
arrangements from Old Shire. This can be done by submitting an IAS arrangement election form
to Shire plc’s Articles of
containing information on the participating shareholders pursuant
Association.
The ADS Depositary has made an election on behalf of all holders of ADSs such that they will receive
dividends from Old Shire under the income access share arrangements. Dividends paid by Old Shire under the
income access share arrangements will not, under current legislation, be subject to any UK or Irish withholding
taxes. If a holder of ADSs does not wish to receive dividends from Old Shire under the income access share
arrangements, he/she must withdraw his/her ordinary shares from the ADS program prior to the dividend record
date set by the ADS Depositary and request delivery of the Shire plc ordinary shares. This will enable him/her to
receive dividends from Shire plc.
It is the expectation, although there can be no certainty, that Old Shire will distribute dividends on the
income access share to the Trustee for the benefit of all ordinary shareholders who make an income access share
election in an amount equal to what would have been such ordinary shareholders’ entitlement to dividends from
Shire plc in the absence of the income access share election. If any dividend paid on the income access share and
or paid to the ordinary shareholders is less than such ordinary shareholders’ entitlement to dividends from Shire
plc in the absence of the income access share election, the dividend on the income access share will be allocated
pro rata among the ordinary shareholders and Shire plc will pay the balance to these ordinary shareholders by
way of dividend. In such circumstances, there will be no grossing up by Shire plc in respect of, and Old Shire and
Shire plc will not compensate those ordinary shareholders for, any adverse consequences including any Irish
withholding tax consequences.
Shire will be able to suspend or terminate these arrangements at any time, in which case the full Shire
plc dividend will be paid directly by Shire plc to those ordinary shareholders (including the Depositary) who
have made an income access share election. In such circumstances, there will be no grossing up by Shire plc in
respect of, and Old Shire and Shire plc will not compensate those ordinary shareholders for, any adverse
consequences including any Irish withholding tax consequences.
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In the year ended December 31, 2017, Old Shire paid dividends totaling $245.6 million (2016:
$150.6 million; 2015: $127.7 million) on the income access share to the Trustee in an amount equal to the
dividend ordinary shareholders would have received from Shire plc.
27. Segment Reporting
Shire comprises one operating and reportable segment engaged in the research, development, licensing,
manufacturing, marketing, distribution and sale of innovative specialist medicines to meet significant unmet
patient needs. This is consistent with how the financial information is viewed for the purposes of evaluating
performance, allocating resources, and planning and forecasting future periods and how the operations are
managed by the Executive Committee (Shire’s chief operating decision maker).
This segment is supported by several key functions: a Pipeline Committee, an In-Line Committee, a
Technical Operations group and a Corporate group. The Pipeline Committee consists of R&D and Corporate
Development and is responsible for prioritizing the activities towards progressing and acquiring development
programs across a variety of therapeutic areas. The Technical Operations group is responsible for the Company’s
global supply chain. The In-line Committee focuses on commercializing marketed products and support of the
development of the Company’s pipeline candidates. The business is also supported by a simplified, centralized
corporate function group. None of these functional groups meets all of the criteria to be considered an individual
operating segment.
Geographic information
Revenues (based on the geographic location from which the sale originated):
(In millions)
Years ended December 31,
2017
2016
2015
Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of the world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
55.5
9,642.1
5,463.0
$
41.6
7,666.9
3,688.1
$
14.1
4,659.2
1,743.4
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,160.6
$11,396.6
$6,416.7
Long-lived assets comprise all non-current assets, (excluding goodwill and intangible assets, deferred
contingent consideration assets, deferred tax assets, investments and financial instruments) based on their
relevant geographic location.
(In millions)
Years ended December 31,
2017
2016
Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Austria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of the world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
94.0
4,603.0
737.3
1,314.3
$
41.2
6,449.4
—
84.0
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,748.6
$6,574.6
S-77
Material customers
In the periods set out below, certain customers accounted for greater than 10% of the Company’s
Product sales:
(in millions, except %)
Years ended December 31,
2017
2017
2016
2016
2015
2015
%
Product
sales
%
Product
sales
%
Product
sales
AmerisourceBergen Corp . . . . . . . . . . . . . . . . . . . . .
McKesson Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cardinal Health Inc. . . . . . . . . . . . . . . . . . . . . . . . . .
$1,408.1
1,333.1
1,079.2
10
9
7
$1,695.3
1,336.7
1,052.2
16
12
10
$1,048.3
1,044.1
796.9
17
17
13
Amounts outstanding in respect of these material customers were as follows:
(In millions)
December 31,
2017
2016
AmerisourceBergen Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
McKesson Corp.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cardinal Health Inc.
$469.9
512.4
325.3
$427.2
312.9
278.4
S-78
In the periods set out below, Revenues by franchise were as follows. In 2017, Immunology includes
HAE from Genetic Diseases; prior year amounts have been reclassified to conform with current year
presentation.
(In millions)
Product sales by franchise
IMMUNOGLOBULIN THERAPIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HEREDITARY ANGIOEDEMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BIO THERAPEUTICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Immunology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HEMOPHILIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INHIBITOR THERAPIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hematology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VYVANSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADDERALL XR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MYDAYIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Neuroscience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Neuroscience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIALDA/MEZAVANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GATTEX/REVESTIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PENTASA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NATPARA/NATPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Internal Medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years ended December 31,
2017
2016
2015
$ 2,236.6
1,429.6
704.1
$ 1,143.9
1,310.9
372.2
$ —
1,062.7
—
4,370.3
2,957.3
828.3
3,785.6
2,161.1
348.0
21.6
133.4
2,664.1
569.4
335.5
313.2
147.4
304.8
2,827.0
1,062.7
1,789.0
451.8
2,240.8
2,013.9
363.8
—
112.8
—
—
—
1,722.2
362.8
—
115.4
2,490.5
2,200.4
792.1
219.4
309.4
85.3
349.3
684.4
141.7
305.8
24.4
344.3
Internal Medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,670.3
1,755.5
1,500.6
ELAPRASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REPLAGAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VPRIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
615.7
472.1
349.9
589.0
452.4
345.7
552.6
441.2
342.4
Genetic Diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,437.7
1,387.1
1,336.2
Oncology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ophthalmics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
261.7
259.2
130.5
54.4
—
—
Total Product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,448.9
10,885.8
6,099.9
Royalties and other revenues
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total royalties and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
448.4
263.3
711.7
382.6
128.2
510.8
300.5
16.3
316.8
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,160.6
$11,396.6
$6,416.7
28. Agreements and Transactions with Baxter
In connection with Baxalta’s separation from Baxter on July 1, 2015, Baxalta and Baxter entered into
several separation-related agreements that provided a framework for Baxalta’s relationship with Baxter after the
separation. These agreements, among others, included a manufacturing and supply agreement, a transition
services agreement and a tax matters agreement.
Under the terms of the manufacturing and supply agreement, the Company manufactures certain
products and materials and sells them to Baxter at an agreed-upon price reflecting the Company’s cost plus a
S-79
mark-up for certain products and materials. The Company reported revenues associated with the manufacturing
and supply agreement with Baxter during the year ended December 31, 2017 and 2016 of approximately
$137.3 million and $81.0 million, respectively. The 2016 reported revenues were for the period from June 3,
2016 acquisition date through December 31, 2016.
Under the terms of the transition services agreement, the Company and Baxter provide various services
to each other on an interim, transitional basis. The services provided by Baxter to the Company include certain
finance, information technology, human resources, quality, supply chain and other administrative services and
functions, and are generally provided on a cost-plus basis. Certain of these services extend through June 30,
2018. The Company reported Selling, general and administrative expenses associated with the transition services
agreement with Baxter during the year ended December 31, 2017 and 2016 of approximately $52.3 million and
$54.0 million, respectively. The 2016 reported expenses were for the period from June 3, 2016 acquisition date
through December 31, 2016.
For a certain portion of Baxalta’s non U.S. operations, the legal transfer of net assets from Baxter had
not occurred by the June 3, 2016 acquisition date due to the time required to transfer marketing authorizations
and other regulatory requirements in each of these countries. Under the terms of the international commercial
operations agreement with Baxter, the Company is responsible for the business activities conducted by Baxter on
its behalf, and is subject to the risks and entitled to the benefits generated by these operations and assets. As a
result, the related assets and liabilities and results of operations are reported in the Company’s Consolidated
Financial Statements following the acquisition of Baxalta. The majority of these operations were transferred to
the Company on December 31, 2016. Net sales related to these operations for the year ended December 31, 2017
were $nil (2016: $101.0 million). The outstanding balance of the assets and liabilities related to these operations
was $nil as of December 31, 2017. As of December 31, 2016 the assets and liabilities of these operations
consisted of $11.0 million of inventories, which were reported in Inventories on the Consolidated Balance Sheet,
other assets of $50.0 million, which were reported as Prepaid expenses and other current assets, and liabilities of
$3.0 million, which were reported in Other current liabilities.
The tax matters agreement governs Baxter and Baxalta’s and now the Company’s respective rights,
responsibilities and obligations after the distribution with respect to taxes for any tax period ending on or before
the distribution date, as well as tax periods beginning before and ending after the distribution date. In addition,
the tax matters agreement addresses the allocation of liability for taxes that were incurred as a result of
restructuring activities undertaken to effectuate the distribution and provides for Baxalta to indemnify Baxter
against any tax liabilities resulting from Baxalta’s action or inaction that causes the merger-related transactions to
be taxable. Net tax-related indemnification liabilities as of December 31, 2017 associated with the tax matters
agreement with Baxter are discussed in Note 24, Commitments and Contingencies, of these Consolidated
Financial Statements.
As of December 31, 2017, the Company had total amounts due from or to Baxter of $103.1 million
(2016: $189.0 million) reported in Prepaid expenses and other current assets, $63.2 million (2016: $72.0 million)
reported in Other current liabilities and $59.6 million (2016: $92.0 million) reported in Other non-current
liabilities.
29. Subsequent Events
On January 25, 2018, Shire entered into a licensing agreement with AB Biosciences Inc (AB
Biosciences). The license grants Shire exclusive worldwide rights to develop and commercialize a recombinant
immunoglobulin product candidate. Under the terms of the agreement, AB Biosciences will grant Shire an
exclusive, worldwide license to its intellectual property relating to its pan receptor interacting molecule program.
AB Biosciences will receive an upfront license fee payment and is eligible to receive contingent research,
development, and commercialization milestones as well as royalty payments.
S-80
On January 8, 2018, Shire announced that the first stage of its strategic review of its Neuroscience
business was completed. The Board concluded that the Neuroscience business warrants additional focus and
investment and that there is a strong business rationale for creating two distinct businesses within Shire: a Rare
Disease business and a Neuroscience business. The Company expects to report the operational performance
metrics of each business separately beginning with the first quarter of 2018.
30. Guarantor Financial Information
On June 3, 2016, Shire plc provided full and unconditional, joint and several guarantees of the floating
rate senior notes due 2018, 2.0% senior notes due 2018, 2.875% senior notes due 2020, 3.6% senior notes due
2022, 4.0% senior notes due 2025 and 5.25% senior notes due 2045 (collectively, “Baxalta Notes”), of Baxalta
Inc., a 100% owned subsidiary of the Company. Amounts related to Baxalta Inc. and its subsidiaries are included
in the condensed consolidating financial information for periods subsequent to June 3, 2016, the date of Baxalta
Inc.’s acquisition.
On September 23, 2016, Shire plc provided full and unconditional, joint and several guarantees of the
1.90% senior notes due 2019, 2.40% senior notes due 2021, 2.875% senior notes due 2023 and 3.20% senior
notes due 2026, of SAIIDAC (collectively, “SAIIDAC Notes”), a 100% owned subsidiary of the Company.
On December 1, 2016, Baxalta Inc., a wholly-owned subsidiary of Shire plc, became a guarantor to the
SAIIDAC Notes. Accordingly, both Baxalta Inc. and Shire plc are now co-guarantors of the SAIIDAC Notes.
In accordance with the requirements of SEC Regulation S-X Rule 3-10 “Financial Statements of
Guarantors and Issuers of Guaranteed Securities Registered or Being Registered”, the following tables present
Condensed Consolidating Financial Statements of the two separate guarantee structures of the Baxalta Notes and
SAIIDAC Notes, for:
•
•
•
•
•
•
Shire plc - Parent Guarantor;
SAIIDAC Subsidiary Issuer - issuer subsidiary of the SAIIDAC Notes; (a)
Baxalta Inc. - issuer subsidiary of the Baxalta Notes and guarantor subsidiary of the SAIIDAC
Notes; (b)
Non-Guarantor Non-Issuer Subsidiaries - presents all other subsidiaries of the Parent Guarantor on
a combined basis, none of which guarantee the Baxalta Notes or SAIIDAC Notes; (c)
Non-Guarantor Subsidiaries of Baxalta Notes - presents combined Non-Guarantor Non-Issuer
Subsidiaries, including SAIIDAC, under the guarantee structure where Baxalta Inc. is the subsidiary
issuer (a+c); and
Eliminations - primarily relate to eliminations of investments in subsidiaries and intercompany
balances and transactions.
S-81
The Condensed Consolidating Financial Statements present investments in subsidiaries using the equity
method of accounting.
Condensed Consolidating Balance Sheets
(In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
Shire plc
(Parent
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
As of December 31, 2017
ASSETS
Current assets:
Cash and cash
— $
—
— $
—
equivalents . . . . . . . . $
Restricted cash . . . . . . .
Accounts receivable,
net . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . .
Prepaid expenses and
other current assets . .
Intercompany
receivables . . . . . . . . .
Short term intercompany
loan receivable . . . . .
Total current assets . . . .
Investments . . . . . . . . . .
Property, plant and
equipment (PP&E),
net . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . .
Intangible assets, net . . .
Deferred tax asset . . . . .
Long term intercompany
loan receivable . . . . .
Other non-current
assets . . . . . . . . . . . . .
—
—
—
—
—
—
43,204.3
—
—
—
—
—
—
0.5
—
—
—
95.2
—
—
95.7
38,924.6
7.6
—
—
304.1
—
—
1.6
120.2
2,006.3
2,128.1
—
—
—
—
—
12,050.2
1,609.3
2.8
—
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes
Eliminations Consolidated
$
471.9
39.4
$
471.9
39.4
$
— $
—
472.4
39.4
3,009.8
3,291.5
698.5
4,682.3
—
12,193.4
13,059.4
6,627.8
19,831.7
33,046.1
188.8
—
202.6
3,009.8
3,291.5
700.1
—
—
—
4,802.5
(4,802.5)
2,006.3
14,321.5
13,059.4
6,627.8
19,831.7
33,046.1
188.8
(2,006.3)
(6,808.8)
(94,947.2)
—
—
—
(304.1)
12,050.2
(13,659.5)
205.4
—
3,009.8
3,291.5
795.3
—
—
7,608.4
241.1
6,635.4
19,831.7
33,046.1
188.8
—
205.4
Total assets . . . . . . . . . . $ 43,204.3 $ 14,181.1 $ 40,941.3
$ 85,149.8
$ 99,330.9
$ (115,719.6) $ 67,756.9
LIABILITIES AND
EQUITY
Current liabilities:
Accounts payable and
accrued expenses . . . . $
0.2 $
85.9 $
18.1
$
4,080.3
$
4,166.2
$
— $
4,184.5
liabilities . . . . . . . . . .
573.5
Short term borrowings
and capital leases . . . .
Intercompany
payables . . . . . . . . . . .
Short term intercompany
loan payable . . . . . . .
Other current
Total current
liabilities . . . . . . . . . .
Long term borrowings
and capital leases . . . .
Deferred tax liability . . .
Long term intercompany
loan payable . . . . . . .
—
2,006.3
748.8
3,585.3
—
—
—
—
1,217.2
—
10.7
4,159.0
2,092.2
1,994.8
—
—
12,050.2
—
4,308.9
—
33.6
—
2,006.3
324.6
6,444.8
393.3
5,052.3
2,039.9
—
2,788.7
—
(4,802.5)
2,006.3
(2,006.3)
—
—
324.6
—
908.8
8,537.0
(6,808.8)
7,882.0
12,443.5
5,052.3
—
(304.1)
16,752.4
4,748.2
2,868.9
—
—
10,790.6
10,790.6
(13,659.5)
—
S-82
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
Shire plc
(Parent
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
As of December 31, 2017
Other non-current
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes
Eliminations Consolidated
liabilities . . . . . . . . . .
—
—
70.0
Total liabilities . . . . . . .
7,027.9
14,142.4
6,373.7
Total equity . . . . . . . . . .
36,176.4
38.7
34,567.6
2,127.9
24,808.9
60,340.9
2,127.9
38,951.3
60,379.6
—
(20,772.4)
(94,947.2)
2,197.9
31,580.5
36,176.4
Total liabilities and
equity . . . . . . . . . . . . . $ 43,204.3 $ 14,181.1 $ 40,941.3
$ 85,149.8
$ 99,330.9
$ (115,719.6) $ 67,756.9
S-83
Condensed Consolidating Balance Sheets
(In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
As of December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents . . . . . $
Restricted cash . . . . . . . . . . . . . .
Accounts receivable, net . . . . . .
Inventories . . . . . . . . . . . . . . . . .
Prepaid expenses and other
current assets . . . . . . . . . . . . .
Intercompany receivables . . . . .
Short term intercompany loan
— $
—
—
—
— $
—
—
—
1.8
—
—
120.5
41.7
—
—
—
97.1
—
$
487.1
25.6
2,616.5
3,562.3
707.4
5,154.4
$
487.1 $
25.6
2,616.5
3,562.3
— $
—
—
—
528.8
25.6
2,616.5
3,562.3
707.4
5,274.9
—
(5,274.9)
806.3
—
receivable . . . . . . . . . . . . . . . .
— 2,594.8
—
—
2,594.8
(2,594.8)
—
Total current assets . . . . . . . . . .
1.8
Investments . . . . . . . . . . . . . . . . 35,656.1
Property, plant and equipment
2,715.3
138.8
— 34,644.2
12,553.3
12,571.8
15,268.6
12,571.8
(7,869.7)
(82,680.5)
7,539.5
191.6
(PP&E), net . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . .
. . . . . . . . . . .
Deferred tax asset
Long term intercompany loan
receivable . . . . . . . . . . . . . . . .
Other non-current assets . . . . . .
—
—
—
—
—
—
—
—
— 14,431.0
—
3.9
27.4
—
—
273.0
480.7
33.8
6,442.2
17,888.2
34,697.5
96.7
6,442.2
17,888.2
34,697.5
96.7
—
6,469.6
— 17,888.2
— 34,697.5
96.7
(273.0)
—
114.6
14,431.0
114.6
(14,911.7)
—
—
152.3
Total assets . . . . . . . . . . . . . . . . $35,661.8 $17,146.3 $35,597.9
$84,364.3
$101,510.6 $(105,734.9) $67,035.4
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued
expenses . . . . . . . . . . . . . . . . . $
1.3 $
85.7 $
20.0
$ 4,205.4
$
4,291.1 $
— $ 4,312.4
Short term borrowings and
capital leases . . . . . . . . . . . . .
Intercompany payables . . . . . . .
Short term intercompany loan
payable . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . .
Total current liabilities . . . . . . .
Long term borrowings and
capital leases . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . .
Long term intercompany loan
payable . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . .
450.0
5,247.1
2,594.8
—
—
—
—
—
—
27.8
—
64.6
5,698.4
2,680.5
112.4
— 14,431.0
—
—
5,063.6
—
23.2
—
2,594.8
298.3
7,121.7
405.2
8,595.7
2,618.0
—
2,594.8
298.3
9,802.2
—
(5,274.9)
3,068.0
—
(2,594.8)
—
—
362.9
(7,869.7)
7,743.3
14,836.2
8,595.7
— 19,899.8
8,322.7
(273.0)
610.1
405.3
—
—
—
61.8
14,301.6
1,654.5
14,301.6
1,654.5
(14,911.7)
—
—
2,121.6
Total liabilities . . . . . . . . . . . . . .
6,713.8 17,111.5
5,237.8
32,078.7
49,190.2
(23,054.4) 38,087.4
Total equity . . . . . . . . . . . . . . . . 28,948.0
34.8 30,360.1
52,285.6
52,320.4
(82,680.5) 28,948.0
Total liabilities and equity . . . . . $35,661.8 $17,146.3 $35,597.9
$84,364.3
$101,510.6 $(105,734.9) $67,035.4
S-84
Condensed Consolidating Statements of Operations
(In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
$ —
$—
$ —
$14,448.9
$14,448.9
$
— $14,448.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13.6
2.2
110.6
—
—
126.4
711.7
711.7
15,160.6
15,160.6
4,700.8
4,700.8
1,763.3
1,763.3
3,511.5
3,511.5
1,766.2
1,766.2
615.7
47.9
(0.4)
615.7
47.9
(0.4)
12,405.0
12,405.0
(126.4)
2,755.6
2,755.6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
711.7
15,160.6
4,700.8
1,763.3
3,530.9
1,768.4
894.5
47.9
(0.4)
12,705.4
2,455.2
(569.2)
7.4
(561.8)
net . . . . . . . . . . . . . . . . . . .
(145.8)
3.6
(91.4)
(335.6)
(332.0)
Other income/(expense),
net . . . . . . . . . . . . . . . . . . .
2.2
—
4.4
0.8
0.8
(143.6)
3.6
(87.0)
(334.8)
(331.2)
Year ended December 31, 2017
Revenues:
Product sales . . . . . . . . . . . . .
Royalties and other
revenues . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . .
Costs and expenses:
Cost of sales . . . . . . . . . . . . .
Research and
development . . . . . . . . . . .
Selling, general and
administrative . . . . . . . . . .
Amortization of acquired
intangible assets . . . . . . . .
Integration and acquisition
costs . . . . . . . . . . . . . . . . .
Reorganization costs . . . . . . .
Gain on sale of product
rights . . . . . . . . . . . . . . . . .
—
—
—
—
5.8
—
168.2
—
—
Total operating expenses . . .
174.0
Operating income/(loss) from
continuing operations . . . .
Interest income/(expense),
(174.0)
Total other income/
(expense), net
. . . . . . . . . .
Income/(loss) from
continuing operations
before income taxes and
equity in earnings/(losses)
of equity method
investees . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . .
Equity in earnings/(losses) of
equity method investees,
net of taxes . . . . . . . . . . . .
Income/(loss) from
continuing operations, net
of taxes . . . . . . . . . . . . . . .
Gain from discontinued
(317.6)
3.5
3.6
(0.9)
(213.4)
7.5
2,420.8
2,347.5
2,424.4
2,346.6
—
—
1,893.4
2,357.6
4,585.6
—
1,572.8
2.5
2.5
(6,158.4)
2.5
4,271.5
2.7
1,366.9
4,770.8
4,773.5
(6,158.4)
4,253.5
operations, net of taxes . . .
—
Net income/(loss) . . . . . . . . .
4,271.5
—
2.7
—
1,366.9
18.0
4,788.8
18.0
—
18.0
4,791.5
(6,158.4)
4,271.5
Comprehensive income/
(loss) . . . . . . . . . . . . . . . . .
$7,144.1
$ 2.7
$3,963.5
$ 7,655.6
$ 7,658.3
$(11,621.8) $ 7,144.1
S-85
Condensed Consolidating Statements of Operations
(In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Year ended December 31, 2016
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
Revenues:
Product sales . . . . . . . . . . . . . . . $ — $ — $ — $10,885.8
510.8
Royalties and other revenues . .
—
—
—
$10,885.8
510.8
$ — $10,885.8
510.8
—
Total revenues . . . . . . . . . . . . .
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . .
Research and development . . . .
Selling, general and
—
—
—
administrative . . . . . . . . . . . .
59.8
Amortization of acquired
intangible assets . . . . . . . . . .
Integration and acquisition
costs . . . . . . . . . . . . . . . . . . .
Reorganization costs . . . . . . . .
Gain on sale of product
rights . . . . . . . . . . . . . . . . . . .
—
—
—
—
Total operating expenses . . . . .
59.8
Operating income/(loss) from
—
—
—
—
—
—
—
—
—
—
11,396.6
11,396.6
— 11,396.6
—
0.4
3,816.5
1,439.4
3,816.5
1,439.4
29.4
2,926.0
2,926.0
—
1,173.4
1,173.4
302.0
—
581.9
121.4
581.9
121.4
—
(16.5)
(16.5)
—
—
—
—
—
—
—
3,816.5
1,439.8
3,015.2
1,173.4
883.9
121.4
(16.5)
331.8
10,042.1
10,042.1
— 10,433.7
continuing operations . . . . . .
(59.8) —
(331.8)
1,354.5
1,354.5
Interest income/(expense),
net . . . . . . . . . . . . . . . . . . . . .
. .
Other income/(expense), net
(100.6)
0.9
36.5
—
(45.1)
2.7
(342.0)
(29.2)
(305.5)
(29.2)
Total other income/(expense),
net . . . . . . . . . . . . . . . . . . . . .
(99.7)
36.5
(42.4)
(371.2)
(334.7)
Income/(loss) from continuing
operations before income
taxes and equity in earnings/
(losses) of equity method
investees . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . .
Equity in earnings/(losses) of
equity method investees, net
of taxes . . . . . . . . . . . . . . . . .
Income/(loss) from continuing
(159.5)
4.3
36.5
(9.1)
(374.2)
88.9
983.3
42.0
1,019.8
32.9
482.6
—
(657.5)
(8.7)
(8.7)
174.9
(8.7)
operations, net of taxes . . . . .
327.4
27.4
(942.8)
1,016.6
1,044.0
174.9
603.5
Loss from discontinued
operations, net of taxes . . . . .
—
Net income/(loss) . . . . . . . . . . .
327.4
Comprehensive
—
27.4
—
(942.8)
(276.1)
740.5
(276.1)
767.9
—
174.9
(276.1)
327.4
income/(loss) . . . . . . . . . . . . $(986.4)
$27.4
$(2,148.9) $ (572.9)
$ (545.5) $2,694.4 $ (986.4)
S-86
—
—
—
—
—
—
962.9
(451.2)
(25.6)
(476.8)
486.1
126.1
Condensed Consolidating Statements of Operations
(In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Year ended December 31, 2015
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
Revenues:
Product sales . . . . . . . . . . . . . . . $ — $—
—
Royalties and other revenues . .
—
Total revenues . . . . . . . . . . . . .
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . .
Research and development . . . .
Selling, general and
—
—
—
—
—
—
administrative . . . . . . . . . . . .
24.9 —
Amortization of acquired
intangible assets . . . . . . . . . .
—
Integration and acquisition
costs . . . . . . . . . . . . . . . . . . .
Reorganization costs . . . . . . . .
Gain on sale of product
rights . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
Total operating expenses . . . . .
24.9 —
Operating income/(loss) from
continuing operations . . . . . .
(24.9) —
Interest income/(expense),
net . . . . . . . . . . . . . . . . . . . . .
. .
Other income/(expense), net
(63.6)
(1.7)
0.9 —
Total other income/(expense),
net . . . . . . . . . . . . . . . . . . . . .
(62.7)
(1.7)
Income/(loss) from continuing
operations before income
taxes and equity in earnings/
(losses) of equity method
investees . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . .
Equity in earnings/(losses) of
(87.6)
(1.7)
2.9 —
equity method investees, net
of taxes . . . . . . . . . . . . . . . . . 1,388.1 —
Income/(loss) from continuing
operations, net of taxes . . . . . 1,303.4
(1.7)
Loss from discontinued
operations, net of taxes . . . . .
—
—
Net income/(loss) . . . . . . . . . . . 1,303.4
(1.7)
Comprehensive
$—
—
—
$6,099.9
316.8
6,416.7
$6,099.9
316.8
6,416.7
$ — $6,099.9
316.8
—
— 6,416.7
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
969.0
1,564.0
969.0
1,564.0
—
969.0
— 1,564.0
1,816.2
1,816.2
1.4
1,842.5
498.7
498.7
39.8
97.9
39.8
97.9
(14.7)
(14.7)
—
—
—
—
498.7
39.8
97.9
(14.7)
4,970.9
4,970.9
1.4
4,997.2
1,445.8
1,445.8
(1.4)
1,419.5
27.9
2.8
30.7
26.2
2.8
29.0
—
—
—
(37.4)
3.7
(33.7)
1,476.5
(49.0)
1,474.8
(49.0)
(1.4)
—
1,385.8
(46.1)
(2.2)
(2.2)
(1,388.1)
(2.2)
1,425.3
1,423.6
(1,389.5)
1,337.5
(34.1)
(34.1)
—
(34.1)
1,391.2
1,389.5
(1,389.5)
1,303.4
income/(loss) . . . . . . . . . . . . $1,151.1
$(1.7)
$—
$1,238.9
$1,237.2
$(1,237.2) $1,151.1
S-87
Condensed Consolidating Statements of Cash Flows
(In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
Shire plc
(Parent
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
Year ended December 31, 2017
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net cash provided by/(used in)
operating activities . . . . . . . . $
— $
6.6 $
(13.1) $ 4,263.2
$ 4,269.8
$
— $ 4,256.7
CASH FLOWS FROM
INVESTING ACTIVITIES:
Transactions with
subsidiaries . . . . . . . . . . . . .
Purchases of PP&E . . . . . . . . .
Proceeds/(payment) from sale
of investments . . . . . . . . . . .
Movements in restricted
cash . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . .
Net cash provided by/(used in)
investing activities . . . . . . . .
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from revolving line
of credit, long term and short
term borrowings . . . . . . . . . .
Repayment of revolving line of
credit, long term and short
term borrowings . . . . . . . . . .
Proceeds from intercompany
borrowings . . . . . . . . . . . . . .
Payment of dividend . . . . . . . .
Proceeds from issuance of
stock for share-based
compensation . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . .
Net cash provided by/(used in)
financing activities . . . . . . . .
Effect of foreign exchange rate
changes on cash and cash
equivalents . . . . . . . . . . . . . .
Net decrease in cash and cash
equivalents . . . . . . . . . . . . . .
Cash and cash equivalents at
beginning of period . . . . . . .
Cash and cash equivalents at
(10,349.3)
(2,670.2)
(5,604.9)
—
—
—
—
—
—
—
—
—
(9.7)
—
—
(21,427.5)
(798.8)
(24,097.7)
(798.8)
40,051.9
—
—
(798.8)
98.3
(13.7)
23.0
98.3
(13.7)
23.0
—
—
—
88.6
(13.7)
23.0
(10,349.3)
(2,670.2)
(5,614.6)
(22,118.7)
(24,788.9)
40,051.9
(700.9)
2,110.0
1,610.0
(2,560.0)
(4,600.0)
—
—
516.7
2,126.7
—
4,236.7
(521.4)
(5,121.4)
— (7,681.4)
10,801.5
(35.8)
5,653.6
—
5,582.6
—
18,014.2
(245.5)
23,667.8
(245.5)
33.6
—
—
—
4.8
(0.9)
95.7
(26.5)
95.7
(26.5)
(40,051.9)
—
—
—
—
(281.3)
134.1
(27.4)
10,349.3
2,663.6
5,586.5
17,833.2
20,496.8
(40,051.9)
(3,619.3)
—
—
—
—
—
—
—
7.1
7.1
(41.2)
(15.2)
(15.2)
41.7
487.1
487.1
—
—
—
7.1
(56.4)
528.8
end of period . . . . . . . . . . . . $
— $ — $
0.5
$
471.9
$
471.9
$
— $
472.4
S-88
Condensed Consolidating Statements of Cash Flows
(In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
Year ended December 31, 2016
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net cash provided by/(used
in) operating activities . . . $ (136.9) $
232.8
$ (51.0)
$ 2,614.0
$ 2,846.8
$
— $ 2,658.9
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Transactions with
subsidiaries . . . . . . . . . . .
Purchases of PP&E . . . . . . .
Purchases of businesses, net
of cash acquired . . . . . . . .
Proceeds from sale of
investments . . . . . . . . . . .
Movements in restricted
cash . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . .
Net cash provided by/(used
(2,890.0)
(18,228.8)
—
—
—
—
—
—
—
—
—
—
(480.7)
(11.1)
(4,707.3)
(637.6)
(22,936.1)
(637.6)
26,306.8
—
—
(648.7)
—
—
—
—
(17,476.2)
(17,476.2)
0.9
62.8
(31.0)
0.9
62.8
(31.0)
—
—
—
—
(17,476.2)
0.9
62.8
(31.0)
in) investing activities . . .
(2,890.0)
(18,228.8)
(491.8)
(22,788.4)
(41,017.2)
26,306.8
(18,092.2)
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Proceeds from revolving line
of credit, long term and
short term borrowings . . .
Repayment of revolving line
of credit, long term and
short term borrowings . . .
Proceeds from intercompany
borrowings . . . . . . . . . . . .
Payment of dividend . . . . . .
Debt issuance costs . . . . . . .
Proceeds from issuance of
stock for share-based
compensation . . . . . . . . . .
Other, net . . . . . . . . . . . . . . .
Net cash provided by/(used
2,355.0
30,079.9
(3,405.0)
(13,009.2)
—
—
8.5
30,088.4
—
32,443.4
9.9
(12,999.3)
—
(16,404.3)
4,077.8
(20.7)
—
1,097.6
—
(172.3)
521.9
—
—
20,609.5
(150.6)
—
21,707.1
(150.6)
(172.3)
19.8
—
—
—
132.9
(70.3)
16.5
31.4
16.5
31.4
(26,306.8)
—
—
—
—
—
(171.3)
(172.3)
169.2
(38.9)
in) financing activities . . .
3,026.9
17,996.0
584.5
20,525.2
38,521.2
(26,306.8)
15,825.8
Effect of foreign exchange
rate changes on cash and
cash equivalents . . . . . . . .
Net decrease in cash and
cash equivalents . . . . . . . .
Cash and cash equivalents at
beginning of period . . . . .
Cash and cash equivalents at
—
—
—
—
—
—
—
41.7
—
0.8
351.6
135.5
0.8
351.6
135.5
—
—
—
0.8
393.3
135.5
end of period . . . . . . . . . . $ — $
— $ 41.7
$
487.1
$
487.1
$
— $
528.8
S-89
Condensed Consolidating Statements of Cash Flows
(In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
Year ended December 31, 2015
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net cash provided by/(used
in) operating activities . . . $ (133.5)
$—
$—
$ 2,470.5
$ 2,470.5
$ —
$ 2,337.0
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Transactions with
subsidiaries . . . . . . . . . . . .
Purchases of PP&E . . . . . . . .
Purchases of businesses, net
of cash acquired . . . . . . . .
Proceeds from sale of
investments . . . . . . . . . . . .
Movements in restricted
cash . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Other, net
Net cash provided by/(used
(3,570.0)
—
—
—
—
—
in) investing activities . . . .
(3,570.0)
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Proceeds from revolving line
of credit, long term and
short term borrowings . . . .
Repayment of revolving line
of credit, long term and
short term borrowings . . . .
Proceeds from intercompany
borrowings . . . . . . . . . . . .
Payment of dividend . . . . . . .
Debt issuance costs . . . . . . . .
Proceeds from issuance of
stock for share-based
compensation . . . . . . . . . .
. . . . . . . . . . . . . . .
Other, net
Net cash provided by/(used
3,760.0
(3,110.0)
3,048.2
(6.8)
(4.5)
16.6
—
in) financing activities . . .
3,703.5
Effect of foreign exchange
rate changes on cash and
cash equivalents . . . . . . . .
Net decrease in cash and cash
equivalents . . . . . . . . . . . .
Cash and cash equivalents at
beginning of period . . . . . .
Cash and cash equivalents at
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(3,048.2)
(114.7)
(3,048.2)
(114.7)
6,618.2
—
(5,553.4)
(5,553.4)
85.7
(32.0)
(5.5)
85.7
(32.0)
(5.5)
—
—
—
—
—
(114.7)
(5,553.4)
85.7
(32.0)
(5.5)
(8,668.1)
(8,668.1)
6,618.2
(5,619.9)
0.8
0.8
(0.9)
(0.9)
3,570.0
(127.6)
(19.6)
3,570.0
(127.6)
(19.6)
—
(69.0)
—
(69.0)
—
—
(6,618.2)
—
—
—
—
3,760.8
(3,110.9)
—
(134.4)
(24.1)
16.6
(69.0)
3,353.7
3,353.7
(6,618.2)
439.0
(3.0)
(3.0)
(2,846.9)
(2,846.9)
2,982.4
2,982.4
—
—
—
(3.0)
(2,846.9)
2,982.4
end of period . . . . . . . . . . . $ —
$—
$—
$
135.5
$
135.5
$ —
$
135.5
S-90
Quarterly results of operations (Unaudited)
The following table presents summarized unaudited quarterly results for the years to December 31, 2017
and 2016:
2017
Q1
Q2
Q3
Q4
(In millions, except per share data)
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations, net of taxes . . . . . . . . . . . . . . . .
Gain/(loss) from discontinued operations, net of taxes . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per ordinary share - basic
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
Gain from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share - basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per ordinary share - diluted
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
Gain from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share - diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,572.3
1,327.0
354.8
20.2
375.0
$3,745.8
1,108.9
241.5
(1.2)
240.3
$3,697.6
1,001.4
551.2
(0.4)
550.8
$4,144.9
1,263.5
3,106.0
(0.6)
3,105.4
$
$
$
$
0.39
0.02
0.41
0.39
0.02
0.41
$
$
$
$
0.27
—
0.27
0.26
—
0.26
$
$
$
$
0.61
—
0.61
0.60
—
0.60
$
$
$
$
3.42
—
3.42
3.41
—
3.41
2016
Q1
Q2
Q3
Q4
(In millions, except per share data)
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income/(loss) from continuing operations, net of taxes . . . . . . . . . . .
Gain/(loss) from discontinued operations, net of taxes . . . . . . . . . . . .
Net income/(loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per ordinary share - basic
Earnings/(loss) from continuing operations . . . . . . . . . . . . . . . . . . . .
Gain/(loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . .
Earnings/(loss) per share - basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per ordinary share - diluted
Earnings/(loss) from continuing operations . . . . . . . . . . . . . . . . . . . .
Earnings/(loss) from discontinued operations . . . . . . . . . . . . . . . . . . .
Earnings/(loss) per share - diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,709.3
248.6
409.5
9.5
419.0
$2,429.1
778.1
86.6
(248.7)
(162.1)
$3,452.1
1,736.2
(368.5)
(18.3)
(386.8)
$3,806.1
1,053.6
475.9
(18.6)
457.3
$
$
$
$
0.69
0.02
$
0.12
(0.36)
$ (0.41) $
(0.02)
0.53
(0.02)
0.71
$ (0.24) $ (0.43) $
0.51
0.69
0.02
$
0.12
(0.36)
$ (0.41) $
(0.02)
0.52
(0.02)
0.71
$ (0.24) $ (0.43) $
0.50
S-91
Schedule II - Valuation and Qualifying Accounts
Provision for sales rebates, returns, coupons and deferred tax
asset valuation allowance
Beginning
balance
Provision
charged
to income
Additions
through
acquisitions
Utilization /
cash
payments
Ending
balance
(In millions)
2017:
Accrued rebates - Medicaid and HMOs . . . . . . . . . . . .
Sales returns reserve . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued coupons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset valuation allowance . . . . . . . . . . . . .
2016:
Accrued rebates - Medicaid and HMOs . . . . . . . . . . . .
Sales returns reserve . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued coupons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset valuation allowance . . . . . . . . . . . . .
2015:
Accrued rebates - Medicaid and HMOs . . . . . . . . . . . .
Sales returns reserve . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued coupons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset valuation allowance . . . . . . . . . . . . .
$1,431.3
118.4
71.3
569.4
$3,069.8
105.0
291.5
81.4
$ 982.4
128.3
26.6
416.1
$2,702.4
19.5
236.9
166.4
$ 882.1
131.7
20.1
324.7
$2,128.0
19.4
140.5
81.5
$ —
—
—
—
$185.8
—
—
—
$ —
—
—
98.9
$(2,888.4) $1,612.7
175.7
52.4
635.7
(47.7)
(310.4)
(15.1)
$(2,439.3) $1,431.3
118.4
71.3
569.4
(29.4)
(192.2)
(13.1)
$(2,027.7) $ 982.4
128.3
26.6
416.1
(22.8)
(134.0)
(89.0)
In the analysis above, due to systems limitations, it is not practical and has not been necessary to break
out current versus prior year activity. When applicable, Shire has performed general ledger reviews of sales
deduction provisions charged to income, and the utilization of these provisions in subsequent years. Shire has
determined that adjustments made in each year as a result of changes to estimates that related to prior year sales,
and adjustments made as a result of differences between prior period provisions and actual payments, did not
have a material impact on the Company’s financial performance or position either in each individual year, or in
the Company’s performance over the reported period.
S-92
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Consolidated Financial Statements of Shire plc
Unaudited Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 . . . . . . . . . . . . . H-2
Unaudited Consolidated Statements of Operations for the three months and nine months ended
September 30, 2018 and September 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-3
Unaudited Consolidated Statements of Comprehensive Income for the three months and nine months
ended September 30, 2018 and September 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-5
Unaudited Consolidated Statements of Changes in Equity for the nine months ended September 30,
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-6
Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and
September 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-7
Notes to the Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-8
H-1
SHIRE PLC
CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions, except par value of shares)
September 30,
2018
December 31,
2017
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment (PP&E), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
193.2
39.9
3,207.4
3,458.7
900.1
7,799.3
470.7
6,453.0
19,095.0
29,625.4
151.2
171.3
$
472.4
39.4
3,009.8
3,291.5
795.3
7,608.4
241.1
6,635.4
19,831.7
33,046.1
188.8
205.4
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$63,765.9
$67,756.9
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short term borrowings and capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long term borrowings and capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,025.1
4,248.7
237.8
8,511.6
11,098.0
4,571.2
2,294.9
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,475.7
$ 4,184.5
2,788.7
908.8
7,882.0
16,752.4
4,748.2
2,197.9
31,580.5
Commitments and contingencies
Equity:
Common stock of 5p par value; 1,500 shares authorized; and 922.1 shares issued
and outstanding (2017: 1,500 shares authorized; and 917.1 shares issued and
outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock: 7.5 shares (2017: 8.4 shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81.9
25,390.2
(260.7)
626.4
11,452.4
81.6
25,082.2
(283.0)
1,375.0
9,920.6
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,290.2
36,176.4
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$63,765.9
$67,756.9
The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.
H-2
SHIRE PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except per share amounts)
Three months ended
September 30,
Nine months ended
September 30,
2018
2017
2018
2017
Revenues:
Product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalties and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,752.8
118.9
$3,533.8
163.8
$11,198.5
358.4
$10,537.9
477.8
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,871.7
3,697.6
11,556.9
11,015.7
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . .
Amortization of acquired intangible assets . . . . . . . . . . . . . . .
Integration and acquisition costs . . . . . . . . . . . . . . . . . . . . . . .
Reorganization costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain)/loss on sale of Oncology and product rights . . . . . . . .
1,157.6
407.2
836.8
433.7
93.0
254.8
(267.2)
1,001.4
402.8
859.7
482.4
237.0
5.4
0.3
3,398.3
1,240.0
2,549.3
1,375.3
512.0
268.9
(267.2)
3,437.3
1,324.5
2,647.7
1,280.5
696.7
24.5
(0.4)
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,915.9
2,989.0
9,076.6
9,410.8
Operating income from continuing operations . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (expense)/income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
955.8
1.3
(125.2)
(96.1)
708.6
1.5
(141.8)
(0.2)
2,480.3
4.8
(378.1)
(43.9)
1,604.9
5.7
(425.4)
6.8
Total other expense, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(220.0)
(140.5)
(417.2)
(412.9)
Income from continuing operations before income taxes and
equity in earnings of equity method investees . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings/(losses) of equity method investees, net of
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations, net of taxes . . . . . . . . . . . . . .
(Loss)/gain from discontinued operations, net of taxes . . . . . . . . .
735.8
(203.3)
4.7
537.2
—
568.1
(13.5)
(3.4)
551.2
(0.4)
2,063.1
(371.0)
1,192.0
(44.6)
11.2
1,703.3
—
0.1
1,147.5
18.6
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 537.2
$ 550.8
$ 1,703.3
$ 1,166.1
The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.
H-3
SHIRE PLC
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(Unaudited, in millions, except per share amounts)
Three months ended
September 30,
Nine months ended
September 30,
2018
2017
2018
2017
Earnings per Ordinary Share – basic
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.59
—
Earnings per Ordinary Share – basic . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.59
Earnings per Ordinary Share – diluted
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.58
—
Earnings per Ordinary Share – diluted . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.58
$ 0.61
—
$ 0.61
$ 0.60
—
$ 0.60
$ 1.87
—
$ 1.87
$ 1.86
—
$ 1.86
$ 1.27
0.02
$ 1.29
$ 1.26
0.02
$ 1.28
Weighted average number of shares:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
914.0
921.1
907.2
911.6
912.0
916.9
905.9
912.1
The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.
H-4
SHIRE PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in millions)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . .
Pension and other employee benefits (net of tax expense of $nil
for the three and nine months ended September 30, 2018 and
$nil and $0.9 for the three and nine months ended
September 30, 2017, respectively) . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on available-for-sale securities (net of tax
expense of $nil for the three and nine months ended
September 30, 2018 and $5.5 and $7.2 for the three and nine
months ended September 30, 2017, respectively)
. . . . . . . . . .
Hedging activities (net of tax benefit of $nil for the three and
nine months ended September 30, 2018 and $nil and $3.2 for
the three and nine months ended September 30, 2017,
respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three months ended
September 30,
Nine months ended
September 30,
2018
2017
2018
2017
$ 537.2
$ 550.8
$1,703.3
$1,166.1
(100.7)
744.6
(679.2)
2,441.1
(0.5)
0.4
(1.5)
11.0
—
23.8
(67.9)
20.3
—
0.2
—
(5.7)
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 436.0
$1,319.8
$ 954.7
$3,632.8
The components of Accumulated other comprehensive income as of September 30, 2018 and
December 31, 2017 are as follows:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other employee benefits, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized holding gain on available-for-sale securities, net of taxes . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30,
2018
December 31,
2017
$600.4
26.0
—
$626.4
$1,279.6
27.5
67.9
$1,375.0
The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.
H-5
SHIRE PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited, in millions)
Common
stock
number
of shares
917.1
—
Common
stock
Additional
paid-in
capital
Treasury
stock
Accumulated
other
comprehensive
income
Retained
earnings
Total equity
$81.6
—
$25,082.2
—
$(283.0)
—
$1,375.0
—
$ 9,920.6
1,703.3
$36,176.4
1,703.3
As of January 1, 2018 . . . . . . .
Net income . . . . . . . . . . . . . . . .
Other comprehensive loss, net
of tax . . . . . . . . . . . . . . . . . .
—
—
—
Shares issued under employee
benefit plans and other . . . . .
5.0
0.3
172.3
—
—
Cumulative-effect adjustment
from adoption of ASU
2014-09, Revenue from
Contracts with Customers . .
Cumulative-effect adjustment
from adoption of ASU
2016-01, Financial
Instruments – Overall
. . . . .
Cumulative-effect adjustment
from adoption of ASU
2016-16, Income Taxes . . . .
Share-based compensation . . . .
Shares released by employee
benefit trust to satisfy
exercise of stock options . . .
Dividends . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
135.7
—
—
—
—
—
22.3
—
(748.6)
—
—
—
—
—
—
—
—
—
(748.6)
172.6
52.0
52.0
67.9
67.9
7.5
—
7.5
135.7
(22.3)
(276.6)
—
(276.6)
As of September 30, 2018 . . . .
922.1
$81.9
$25,390.2
$(260.7)
$ 626.4
$11,452.4
$37,290.2
Dividends per share
During the nine months ended September 30, 2018, Shire plc declared and paid dividends of $0.2979
U.S. per ordinary share (equivalent of $0.8937 U.S. per ADS) totaling $276.6 million. During the nine months
ended September 30, 2017, Shire plc declared and paid dividends of $0.257 U.S. per ordinary share (equivalent
to $0.771 U.S. per ADS) totaling $234.7 million.
The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.
H-6
SHIRE PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expense related to the unwind of inventory fair value adjustments . . . . . . . . . . . . . . . . . . . . . . . .
Change in deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of PP&E and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of Oncology franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Increase in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease)/increase in sales deduction accrual
Increase in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in prepayments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nine months ended
September 30,
2018
2017
$ 1,703.3
$ 1,166.1
1,808.1
135.7
40.9
14.2
100.4
169.5
(267.2)
(7.2)
(362.0)
(22.6)
(305.4)
44.6
(244.8)
1,644.0
159.7
688.7
(392.4)
144.3
167.6
—
99.2
(301.5)
94.0
(245.2)
70.4
(557.8)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,807.5
2,737.1
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of Oncology franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of PP&E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of business, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,412.2
(564.6)
(104.7)
31.8
(97.9)
Net cash provided by/(used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,676.8
—
(565.5)
—
48.1
34.8
(482.6)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit, long term and short term borrowings . . . . . . . . . . . . . . . . . . . .
Repayment of revolving line of credit, long term and short term borrowings . . . . . . . . . . . . . . . . . . . . .
Payment of contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of stock for share-based compensation arrangements . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,735.3
(7,969.0)
(396.0)
(276.6)
180.8
(25.6)
3,261.6
(5,664.5)
—
(234.7)
92.2
(26.2)
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,751.1)
(2,571.6)
Effect of foreign exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease in cash, cash equivalents, and restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents, and restricted cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(11.9)
(278.7)
511.8
6.2
(310.9)
554.5
Cash, cash equivalents, and restricted cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
233.1
$
243.6
Supplemental information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes paid, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents, and restricted cash information:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents, and restricted cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
427.1
528.4
193.2
39.9
233.1
$
$
$
$
434.9
308.0
209.3
34.3
243.6
The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.
H-7
SHIRE PLC
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Operations
Shire plc and its subsidiaries (collectively referred to as either “Shire” or the “Company”) is the leading
global biotechnology company focused on serving people with rare diseases.
Some of the Company’s marketed products include GAMMAGARD, HYQVIA, and CINRYZE for
Immunology, ADVATE/ADYNOVATE, VONVENDI, and FEIBA for Hematology, ELAPRASE and
REPLAGAL for Genetic Diseases, VYVANSE, ADDERALL XR, and MYDAYIS for Neuroscience, GATTEX/
REVESTIVE and NATPARA/NATPAR for Internal Medicine, and XIIDRA for Ophthalmics.
The Company has grown both organically and through acquisition, completing a series of major
transactions that have brought therapeutic, geographic, and pipeline growth and diversification. The Company
will continue to conduct its own research and development (R&D) focused on rare diseases, as well as evaluate
companies, products and pipeline opportunities that offer a strategic fit and have the potential to deliver value to
all of the Company’s stakeholders: patients, physicians, policy makers, payers, partners,
investors, and
employees.
On August 31, 2018, Shire completed the sale of its Oncology franchise to Servier S.A.S. (Servier) for
$2.4 billion.
On May 8, 2018, the boards of Takeda Pharmaceutical Company Limited (Takeda) and Shire announced
that they have reached agreement on the terms of a recommended offer pursuant to which Takeda will acquire
the entire issued and to be issued ordinary share capital of Shire (the “Acquisition”). Shire shareholders will be
entitled to receive $30.33 in cash for each Shire ordinary share and either 0.839 of a new share in Takeda (as
proposed to be issued in connection with the Acquisition) (each a “New Takeda Share”) or 1.678 ADSs in
Takeda (one ADS equals 0.5 New Takeda Share).
2.
Summary of Significant Accounting Policies
Basis of Presentation
These interim financial statements of Shire plc and its subsidiaries are unaudited. They have been
prepared in accordance with generally accepted accounting principles in the United States of America
(U.S. GAAP).
The Consolidated Balance Sheet as of December 31, 2017 was derived from the Audited Consolidated
Financial Statements as of that date.
These interim Unaudited Consolidated Financial Statements should be read in conjunction with the
Consolidated Financial Statements and accompanying notes included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2017, as filed with the SEC on February 20, 2018.
Certain information and footnote disclosures normally included in financial statements prepared in
accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. However,
these interim financial statements include all adjustments, consisting of normal recurring adjustments, which are,
in the opinion of management, necessary to fairly state the results of the interim period and the Company
believes that the disclosures are adequate to make the information presented not misleading. Interim results are
not necessarily indicative of results to be expected for the full year.
H-8
Use of Estimates
The preparation of Financial Statements, in conformity with U.S. GAAP and SEC regulations, requires
management to make estimates, judgments, and assumptions that affect the reported and disclosed amounts of
assets, liabilities, and equity at the date of the Unaudited Consolidated Financial Statements and reported
amounts of revenues and expenses during the period. On an on-going basis, the Company evaluates its estimates,
judgments, and methodologies. Estimates are based on historical experience, current conditions, and on various
other assumptions that are reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets, liabilities, and equity and the amounts of revenues and expenses.
Actual results may differ from these estimates under different assumptions or conditions.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards
Board (FASB) or other standard setting bodies that the Company adopts as of the specified effective date. Unless
otherwise discussed below, the Company does not believe that the impact of recently issued standards that are
not yet effective will have a material impact on the Company’s financial position or results of operations upon
adoption.
Adopted during the current period
Revenue from Contracts with Customers
In May 2014,
the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers
(Topic 606). The FASB subsequently issued several additional ASUs amending the guidance and deferred
effective date to January 1, 2018. This standard applies to all contracts with customers, except for contracts that
are within the scope of other standards, such as leases, insurance, collaboration arrangements, and financial
instruments. Under this accounting standard, an entity recognizes revenue when its customer obtains control of
promised goods or services, in an amount that reflects the consideration which the entity expects to receive in
exchange for those goods or services. The Company adopted this new standard on January 1, 2018, using the
modified retrospective transition method. Under this method, the Company recognized the cumulative-effect of
initially applying the standard as an adjustment to the opening balance of retained earnings. As a result, the
Company recorded a cumulative-effect adjustment to increase Retained earnings by $52.0 million, net of tax of
$15.6 million. The modified retrospective transition method was applied only to the contracts that were not
completed as of the adoption date.
For a complete discussion of accounting for revenue with customers, refer to Note 3, Revenue
Recognition, to these Unaudited Consolidated Financial Statements.
H-9
Impact of adoption
As a result of adopting the new accounting for revenue with customers on January 1, 2018, the
following financial statement line items as of and for the three and nine months ended September 30, 2018 were
affected. The following tables provide the amounts as reported in these Unaudited Consolidated Financial
Statements and as if the previous accounting guidance was in effect.
Unaudited Consolidated Balance Sheets
(In millions)
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unaudited Consolidated Statements of Operations
As of September 30, 2018
As reported
$
900.1
237.8
2,294.9
11,452.4
Before
Adoption of
Topic 606
$
844.5
238.8
2,296.9
11,414.5
(In millions, except per share)
Product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalties and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per share applicable to common shareholders –
basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per share applicable to common shareholders –
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unaudited Consolidated Statements of Cash Flows
Three months ended
September 30, 2018
Nine months ended
September 30, 2018
As reported
$3,752.8
118.9
537.2
Before
Adoption of
Topic 606
$3,741.5
128.0
535.5
As reported
$11,198.5
358.4
1,703.3
Before
Adoption of
Topic 606
$11,162.5
412.7
1,717.4
0.59
0.58
0.59
0.58
1.87
1.86
1.88
1.87
(In millions)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating
activities:
Nine months ended
September 30, 2018
As reported
$1,703.3
Before
Adoption of
Topic 606
$1,717.4
Decrease in prepayments and other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in accounts payable and other liabilities . . . . . . . . . . . . . . . . . . .
44.6
(244.8)
100.2
(241.8)
Financial Instrument Accounting
In January 2016,
the FASB issued ASU No. 2016-01, Financial
- Overall
(Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new
standard amends certain aspects of accounting and disclosure requirements of financial instruments, including the
requirement that equity investments with readily determinable fair values be measured at fair value with changes
in fair value recognized in the results of operations. The new standard was effective January 1, 2018. The
Instruments
H-10
Company adopted ASU No. 2016-01 in the first quarter of 2018. As a result of the adoption, the Company
recorded a cumulative-effect adjustment to Retained earnings of $67.9 million to reclassify unrealized gains from
available-for-sale equity securities previously recognized in the Other comprehensive income.
Statement of Cash Flows
In August 2016,
the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments. The new standard clarifies certain aspects of the
statement of cash flows, and aims to reduce diversity in practice regarding how certain transactions are classified
in the statement of cash flows. This standard was effective January 1, 2018. The Company adopted ASU
No. 2016-15 in the first quarter of 2018. The adoption of this guidance did not have a material impact on the
Company’s financial position and results of operations.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted
Cash. The new guidance is intended to reduce diversity in the presentation of restricted cash and restricted cash
equivalents in the statement of cash flows. The guidance requires that restricted cash and restricted cash
equivalents be included as components of total cash and cash equivalents as presented on the statement of cash
flows. This standard was effective January 1, 2018. The Company adopted ASU No. 2016-18 in the first quarter
of 2018 and amended the presentation of its statements of cash flows for the nine months ended September 30,
2018 and 2017 accordingly. The adoption of this guidance did not have a material impact on the Company’s
financial position and results of operations.
Income Taxes
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers
Other than Inventory. This standard removes the current exception in U.S. GAAP prohibiting entities from
recognizing current and deferred income tax expenses or benefits related to transfer of assets, other than
inventory, within the consolidated entity. The current exception to defer the recognition of any tax impact on the
transfer of inventory within the consolidated entity until it is sold to a third party remains unaffected. The
standard was effective January 1, 2018. The Company adopted the new standard in the first quarter of 2018 using
a modified retrospective approach with a cumulative-effect adjustment
to opening retained earnings. The
adoption of this guidance did not have a material impact on the Company’s financial position and results of
operations.
Retirement Benefits Income Statement Presentation
In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The
standard amends the income statement presentation of the components of net periodic benefit cost for defined
benefit pension and other postretirement plans. The standard requires entities to (1) disaggregate the current-
service-cost component from the other components of net benefit cost (the “other components”) and present it
with other current compensation costs for related employees in the income statement and (2) present the other
components elsewhere in the income statement and outside of income from operations if such a subtotal is
presented. It also requires entities to disclose the income statement lines that contain the other components if they
are not presented on appropriately described separate lines. The standard was effective January 1, 2018. The
Company adopted ASU No. 2017-07 in the first quarter of 2018. Adoption of this standard did not have a
material impact on the Company’s financial position and results of operations.
Share-Based Payment Accounting
In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718):
Scope Modification Accounting. The new standard clarifies when changes to the terms or conditions of a share-
H-11
based payment award must be accounted for as modifications. This standard was effective January 1, 2018. The
Company adopted ASU No. 2017-09 in the first quarter of 2018. Adoption of this standard did not have a
material impact on the Company’s financial position and results of operations.
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350):
Simplifying the Test of Goodwill Impairment. This new standard simplifies how an entity is required to test
goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill
impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of
that goodwill. The Company adopted ASU No. 2017-04 in the first quarter of 2018. Adoption of this standard did
not have a material impact on the Company’s financial position and results of operations.
To be adopted in future periods
Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new accounting
guidance will require the recognition of all long-term lease assets and lease liabilities by lessees and sets forth
new disclosure requirements for those lease assets and liabilities. The standard requires lessees to recognize
right-of-use assets and lease liabilities on the balance sheet using a modified retrospective approach at the
beginning of the earliest comparative period in the financial statements. This standard will be effective for the
Company on January 1, 2019. Early adoption is permitted. The Company is currently evaluating the potential
impact on its financial position and results of operations of adopting this guidance. The Company expects the
adoption of this new standard may have a material impact on total assets and total liabilities within the
Company’s Consolidated Balance Sheets, with no material impact to its Consolidated Statements of Operations.
Derivatives and Hedging
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted
Improvements to Accounting for Hedging Activities. The standard amends its hedge accounting model to enable
entities to better portray the economics of their risk management activities in the financial statements. The new
guidance also expands an entity’s ability to hedge non-financial and financial risk components and reduces
complexity in fair value hedges of interest rate risk. Additionally, it eliminates the requirement to separately
measure and report hedge ineffectiveness, eases certain assessment requirements and modifies the accounting for
components excluded from the assessment of hedge effectiveness. This standard will be effective for the
Company on January 1, 2019. Early adoption is permitted. The adoption of this guidance is not expected to have
a significant impact on the Company’s Consolidated Financial Statements.
Fair Value Measurement
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure
Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The new standard
eliminates, adds and modifies certain disclosure requirements for fair value measurement as part of its disclosure
framework project. The amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy
will no longer be required to be disclosed, but public companies will be required to disclose the range and
weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This
standard will be effective for the Company on January 1, 2020. Early adoption is permitted. The adoption of this
guidance is not expected to have a significant impact on the Company’s Consolidated Financial Statements.
Retirement Benefits - Defined Benefit Plans
In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined
Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for
H-12
Defined Benefit Plans. The new standard changes the disclosure requirements for employers that sponsor defined
benefit pension and/or other postretirement benefits plans. The guidance eliminates requirements for certain
disclosures that are no longer considered cost beneficial and requires new ones that the FASB considers
pertinent. This standard will be effective for the Company on January 1, 2020. Early adoption is permitted. The
adoption of this guidance is not expected to have a significant impact on the Company’s Consolidated Financial
Statements.
Intangibles - Goodwill and Other Internal - Use Software
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other Internal-Use
Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement That
Is a Service Contract. The new standard aligns the requirements for capitalizing
implementation costs incurred in a hosting arrangement that is a service contract with the requirements for
capitalizing implementation costs incurred to develop or obtain internal-use software. This standard will be
effective for the Company on January 1, 2020. Early adoption is permitted. The adoption of this guidance is not
expected to have a significant impact on the Company’s Consolidated Financial Statements.
3. Revenue Recognition
Product Revenue, Net
The Company sells its products to major pharmaceutical wholesalers, distributors, and retail pharmacy
the Company’s products to
chains (collectively,
healthcare providers and patients. In addition to distribution agreements with Customers, the Company enters
into arrangements with healthcare providers and payors that provide for government-mandated and/or privately-
negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s products.
its “Customers”). These Customers subsequently resell
Revenues from Product sales are recognized when the Customer obtains control,
typically upon
delivery. When the terms of the contract include customer acceptance provisions, the Company defers revenue
recognition until the customer has accepted the goods, unless the acceptance provision relates only to objective
specifications which the Company can determine will be met upon shipment. Customer acceptance provisions
include temperature checks, government inspections, and other quality control tests. Shipping and handling and
fulfillment costs are accrued for when the related revenue is recognized. Taxes collected from Customers relating
to product sales and remitted to governmental authorities are excluded from revenues.
Estimates of Variable Consideration
Revenues from Product sales are recorded at the net sales price (transaction price), which includes
estimates of variable consideration for reserves related to statutory rebates to State Medicaid and other
government agencies; Medicare Part D rebates; commercial rebates and fees to Managed Care Organizations
(MCOs), Group Purchasing Organizations (GPOs), distributors, and specialty pharmacies; product returns; sales
discounts (including trade discounts); distribution service fees; wholesaler chargebacks; and allowances for
coupon and patient assistance programs relating to the Company’s sales of its products.
These reserves are based on estimates of the amounts earned or to be claimed on the related sales.
Management’s estimates take into consideration historical experience, current contractual and statutory
requirements, specific known market events and trends, industry data, and forecasted customer buying and
payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to
which it is entitled based on the terms of the contract. The amount of variable consideration included in the net
sales price is limited to the amount that is probable not to result in a significant reversal in the amount of the
cumulative revenue recognized in a future period. If actual results vary, the Company may adjust these estimates,
which could have an effect on earnings in the period of adjustment.
•
Trade discounts are generally credits granted to wholesalers, specialty pharmacies, and other
customers for remitting payment on their purchases within established incentive periods and are
H-13
classified as a reduction of accounts receivable, offset by revenue in the same period that the related
revenue is recognized.
•
•
Chargebacks are credits or payments issued to wholesalers and other distributors who provide
products to qualified healthcare providers at prices lower than the list prices charged to the
wholesalers or other distributors. Reserves are estimated based on expected purchases by those
qualified healthcare providers. Chargeback reserves are classified as a reduction of accounts
receivable in the same period that the related revenue is recognized.
Distribution service fees are credits or payments issued to wholesalers, distributors, and specialty
pharmacies for compliance with various contractually-defined inventory management practices or
services provided to support patient access to a product. These fees are generally based on a
percentage of gross purchases but can also be based on additional services these entities provide.
Most of these costs are reflected as a reduction of gross sales; however, to the extent benefit from
services can be separately identified and the fair value determined, costs are classified as Selling,
general and administrative expenses. Distribution service fees reserves are estimated based on the
terms of each individual contract and are classified within accrued expenses.
• Medicaid rebates are payments
to States under
statutory and voluntary reimbursement
arrangements. Reserves for these rebates are generally based on an estimate of expected product
usage by Medicaid patients and expected rebate rates. Statutory rates are generally based on a
percentage of selling price adjusted upwards for price increases in excess of published inflation
indices. As a result, rebates generally increase as a percentage of the selling price over the life of
the product (as prices increase). Medicaid rebate reserves are estimated based on individual product
purchase volumes and are classified within accrued expenses.
• Managed care rebates are payments to third parties, primarily pharmacy benefit managers, and
other health insurance providers. The reserve for these rebates is based on an estimate of customer
buying patterns and applicable contractual rebate rates to be earned over each period. Managed care
rebates reserves are estimated based on the terms of each individual contract and purchase volumes
and are classified within accrued expenses.
•
•
Incentive rebates are generally credits or payments issued to specialty pharmacies, distributors, or
Group Purchasing Organizations for qualified purchases of certain products. Incentive rebate
reserves are estimated based on the terms of each individual contract and purchase volumes and are
classified within accrued expenses.
Other discounts and allowances include Medicare rebates, coupon, and patient co-pay assistance.
Medicare rebates are payments to health insurance providers of Medicare Part D coverage to
qualified patients. Reserve estimates are based on customer buying patterns and applicable
contractual rebate rates to be earned over each period. Coupon and co-pay assistance programs
provide discounts to qualified patients. Reserve estimates are based on expected claim volumes
under these programs and estimated cost per claim that the Company expects to pay. Reserves for
Medicare and coupon and patient co-pay programs are classified within accrued expenses.
Product Returns: The Company typically accepts customer product
returns in the following
circumstances: (a) expiration of shelf life on certain products; (b) product damaged while in the Company’s
possession; (c) under sales terms that allow for unconditional return (guaranteed sales); or (d) following product
recalls or product withdrawals. Generally, returns for expired product are accepted three months before and up to
one year after the expiration date of the related product and the related product is destroyed after it is returned.
Depending on the product and the Company’s return policy with respect to that product, the Company may either
refund the sales price paid by the customer by issuance of a credit, or exchange the returned product with
replacement inventory. The Company typically does not provide cash refunds. The Company estimates the
H-14
proportion of recorded revenue that will result in a return by considering relevant factors, including but not
limited to:
•
•
•
•
•
•
•
historical returns experience;
the duration of time taken for products to be returned;
the estimated level of inventory in the distribution channel;
product recalls and discontinuances;
the shelf life of products;
the launch of new drugs or new formulations; and
the loss of patent protection, exclusivity or new competition.
The estimation process for product returns involves, in each case, a number of interrelating assumptions,
which vary for each combination of product and customer. The Company estimates the amount of its product
sales that may be returned by its Customers and records this estimate as a reduction of revenue from Product
sales in the period the related revenue is recognized.
Royalties and other revenues
The Company enters into agreements, where it licenses certain rights to its products to customers. The
terms of these arrangements typically include payment to the Company of one or more of the following:
non-refundable, up-front license fees; development, regulatory and commercial milestone payments; payments
for manufacturing supply services the Company provides; and royalties on net sales of licensed products. Each of
these payments is recognized as Royalties and other revenues.
As part of the accounting for these arrangements, the Company must develop estimates that require
judgment to determine the stand-alone selling price for each performance obligation, identified in the contract.
Performance obligations are promises in a contract to transfer a distinct good or service to the customer. The
Company uses key assumptions to determine the stand-alone selling price, which may include forecasted
revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of
technical, regulatory and commercial success.
Licenses of intellectual property: If the license to the Company’s intellectual property is distinct from
the other performance obligations identified in the arrangement,
the Company recognizes revenues from
non-refundable, up-front fees when the license is transferred to the licensee and the licensee is able to use and
benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to
assess the nature of the combined performance obligation to determine whether the combined performance
obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring
progress for purposes of recognizing revenue from non-refundable, up-front fees. If the performance obligation is
satisfied over time, the Company evaluates the measure of progress each reporting period and, if necessary,
adjusts the measure of performance and related revenue recognition. Measures of progress for revenue
recognition vary depending on the nature of the performance obligation.
Milestone Payments: At the inception of each arrangement that includes milestone payments, the
Company evaluates the recognition of milestone payments. Typically, milestone payments that are not within the
control of the Company or the licensee, such as regulatory approvals, are included in the transaction price upon
achievement of the milestone. Milestone payments included in transaction price are recognized when or as the
performance obligations are satisfied. At the end of each subsequent reporting period, the Company re-evaluates
the probability of achievement of such milestones and any related constraint, and if necessary, adjusts its estimate
of the overall transaction price.
H-15
Royalties: For arrangements that include sales-based royalties, including milestone payments based on
the level of sales, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the
license is transferred.
The Company receives payments from its customers based on billing schedules established in each
contract, which vary across Shire’s locations, but generally range between 30 to 90 days. Amounts are recorded
as accounts receivable when the Company’s right to consideration is unconditional. The Company does not
assess whether a contract has a significant financing component if the expectation is that customer will pay for
the product or services in one year or less of receiving those products or services.
The following table presents changes in the Company’s contract assets and liabilities during the nine
months ended September 30, 2018:
(In millions)
Contract assets:
As of
January 1,
2018
Increase, net
As of
September 30,
2018
Unbilled receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$42.7
$12.9
$55.6
Contract liabilities:
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
7.4
7.4
Contract assets consist of unbilled receivables typically resulting from sales under contracts when
revenue recognized exceeds the amount billed to the customer. The contract assets are included in Other current
assets in these Unaudited Consolidated Balance Sheets. Contract liabilities consist of advance payments from
customers for future performance obligations. Contract liabilities are included in Other current liabilities in these
Unaudited Consolidated Balance Sheets.
4. Acquisition
In September 2018, Shire acquired 100 percent of the voting equity interests in a source plasma
collection company. The acquisition is expected to increase Shire’s access to plasma in the longer term and add
to its European plasma collection network, complementing existing core capabilities in plasma supply, and
manufacturing.
The total cash consideration for the acquisition was $107.8 million (CHF 105.0 million). Shire recorded
the purchase price as goodwill, intangible assets, and other assets. The $96.3 million goodwill is not deductible
for tax purposes.
5. Dispositions and Assets Held for Sale
On August 31, 2018, the Company completed the sale of its Oncology franchise to Servier. Under the
terms of the agreement, Servier acquired Shire’s Oncology franchise for a net consideration of $2.4 billion, in
cash. The Company recognized $267.2 million as a gain, which is recorded within Total operating expenses in
the Company’s Unaudited Consolidated Statements of Operations.
The assets and liabilities of the Oncology franchise were as follows:
(In millions)
As of August 31, 2018
Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,628.3
565.1
25.6
$2,219.0
$ 116.4
H-16
During the nine months ended September 30, 2018, the Company determined it would divest certain
facilities as part of its integration efforts. As of September 30, 2018, the Company classified $115.4 million of
assets as held for sale and included within Other current assets in these Unaudited Consolidated Financial
Statements. The $115.4 million of held for sale assets consisted primarily of property, plant and equipment and
was net of $145.4 million of impairment charges recorded during the nine months ended September 30, 2018.
The impairment charges were reported within Integration and acquisition costs in these Unaudited Consolidated
Financial Statements.
6. Collaborative and Other Licensing Arrangements
The Company is party to certain collaborative and licensing arrangements.
In some of these
arrangements, Shire and the licensee are both actively involved in the development and commercialization of the
licensed product and have exposure to risks and rewards dependent on its commercial success.
On January 25, 2018, Shire entered into a licensing agreement with AB Biosciences Inc. (AB
Biosciences). The license grants Shire exclusive worldwide rights to develop and commercialize a recombinant
immunoglobulin product candidate. Under the terms of the agreement, AB Biosciences will grant Shire an
exclusive, worldwide license to its intellectual property relating to its pan receptor interacting molecule program.
The Company paid $10.0 million upfront license fee and AB Biosciences is eligible to receive contingent
research, development, and commercialization milestone payments up to $282.5 million as well as tiered royalty
payments.
7.
Integration and Acquisition Costs
For the three and nine months ended September 30, 2018, Shire recorded Integration and acquisition
costs of $93.0 million and $512.0 million, respectively. These costs relate to the continued integration of Baxalta
Inc. (Baxalta), which was acquired in June 2016, Takeda’s proposed acquisition of Shire, and the change in fair
value of contingent consideration, primarily related to TAKHZYRO (lanadelumab-flyo), which was acquired
from Dyax in 2016.
The Company continues its activities to integrate Baxalta. The costs associated with the integration are
primarily related to facility consolidation and professional consulting fees. The Company also drove savings
through the continued re-prioritization of its research and development programs and consolidation of its
commercial operations. For the three and nine months ended September 30, 2018,
these costs include
impairments, $12.4 million and $55.5 million,
$8.0 million and $151.4 million, respectively, of asset
respectively, of third-party professional fees, $4.4 million and $19.2 million, respectively, of expenses associated
with facility consolidations, and $5.7 million and $20.7 million, respectively, of employee severance and
acceleration of stock compensation. The Company expects the majority of these expenses, except for certain
costs related to facility consolidations, to be paid within 12 months from the date the related expenses were
incurred. The integration of Baxalta is estimated to be completed by mid to late 2019.
The following table summarizes the reserve for the Baxalta integration costs for certain types of
activities during the nine months ended September 30, 2018:
(In millions)
Severance and
employee benefits
Lease terminations
Total
As of January 1, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount charged to integration costs . . . . . . . . . . . . . . . . .
Paid/utilized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of September 30,
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 72.9
9.2
(41.0)
$ 41.1
$ 56.6
2.3
(19.9)
$ 39.0
$129.5
11.5
(60.9)
$ 80.1
On May 8, 2018, the Boards of Takeda and Shire announced that they had reached an agreement on the
terms of a recommended offer pursuant to which Takeda will acquire the entire issued and to be issued ordinary
H-17
share capital of Shire. The closing of the acquisition is expected in the first half of 2019, subject to shareholder
approval of both companies as well as the receipt of regulatory approvals. For the three and nine months ended
September 30, 2018, costs associated with this proposed offer include $8.0 million and $72.0 million,
respectively, of third-party professional fees and $36.4 million and $40.4 million, respectively, of employee
incentives. The Company expects the majority of these expenses to be paid within 12 months from the date the
related expenses were incurred.
In the three and nine months ended September 30, 2018, $54.5 million and $100.4 million,
respectively, are included in Integration and acquisition costs relating to the change in fair value of contingent
consideration payable mainly related to TAKHZYRO.
For the three and nine months ended September 30, 2017, Shire recorded Integration and acquisition
costs of $237.0 million and $696.7 million, respectively, primarily related to the acquisition and integration of
Baxalta and Dyax. In the three and nine months ended September 30, 2017, a credit of $3.4 million and a charge
of $144.3 million, respectively, is included in Integration and acquisition costs due to the change in fair value of
contingent consideration payable mainly related to TAKHZYRO. For the three and nine months ended
September 30, 2017, the Baxalta Integration and acquisition costs include $60.2 million and $177.4 million,
respectively, of employee severance and acceleration of stock compensation, $28.4 million and $114.0 million,
respectively, of third-party professional fees, and $29.7 million and $71.4 million, respectively, of expenses
associated with facility consolidations and $114.1 million and $147.8 million, respectively, of asset impairments.
8. Reorganization Costs
For the three and nine months ended September 30, 2018, Shire recorded Reorganization costs of
$254.8 million and $268.9 million, respectively. These costs include $249.2 million and $256.7 million,
respectively, of expenses mainly related to the closure of certain of its Cambridge office facilities and
$5.6 million and $12.2 million, respectively, of asset impairment, employee severance, professional fees, and
consulting fees. For the three and nine months ended September 30, 2018, cash payments associated with these
costs were not significant.
For the three and nine months ended September 30, 2017, Shire recorded Reorganization costs of
$5.4 million and $24.5 million, respectively. These costs include $nil and $10.8 million, respectively, of
expenses related to the closure of certain office facilities and $5.4 million and $13.7 million, respectively, of
employee severance, professional fees, and consulting fees.
9. Results of Discontinued Operations
Following the divestment of the Company’s DERMAGRAFT business in January 2014, the operating
results associated with the DERMAGRAFT business have been classified as discontinued operations in the
Company’s Unaudited Consolidated Statements of Operations for all periods presented.
In January 2017, Shire entered into a final settlement agreement with the Department of Justice (DOJ) in
the amount of $350.0 million, plus interest which was accrued in 2016 and paid during 2017.
After the civil settlement with the DOJ was finalized, Shire and Advanced BioHealing Inc.’s (ABH)
equity holders entered into a settlement agreement and ABH’s equity holders released the $37.5 million escrow
to Shire. Shire released its claims against ABH equity holders upon receiving the entire amount held in escrow.
For the three and nine months ended September 30, 2017, the Company recorded a loss of $0.4 million
(net of immaterial tax benefit) and gain of $18.6 million (net of tax expense of $10.9 million), respectively,
primarily related to legal contingencies related to the divested DERMAGRAFT business and the release of
escrow to Shire, respectively.
H-18
10. Accounts Receivable, Net
Accounts
receivable as of September 30, 2018 of $3,207.4 million (December 31, 2017:
$3,009.8 million), are stated at the invoiced amount and net of reserve for discounts and doubtful accounts of
$331.4 million (December 31, 2017: $271.5 million).
Reserve for discounts and doubtful accounts consists of the following:
(In millions)
2018
2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of January 1,
Provision charged to operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments/credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
271.5
1,884.2
(1,824.3)
$
169.6
1,074.1
(1,000.0)
As of September 30,
$
331.4
$
243.7
Reserve for discounts and doubtful accounts increased for the nine months ended September 30, 2018
compared to the corresponding period in 2017, primarily due to increased usage of biological distributors, higher
invoice price to those distributors, and the resulting increase in chargebacks for the distribution of Shire’s
Hematology and Immunology products.
As of September 30, 2018, Accounts receivable included $44.1 million (December 31, 2017:
$106.6 million) related to royalties receivable.
11. Inventories
Inventories are stated at the lower of cost and net realizable value. The components of Inventories are as
follows:
(In millions)
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30,
2018
December 31,
2017
$ 959.7
1,671.6
827.4
$3,458.7
$ 926.1
1,574.0
791.4
$3,291.5
12. Property, Plant and Equipment, Net
Property, plant and equipment are recorded at historical cost, net of accumulated depreciation.
Components of Property, plant and equipment, net are summarized as follows:
(In millions)
September 30,
2018
December 31,
2017
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery, equipment and other
Assets under construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
296.2
2,975.1
3,942.5
759.4
$
332.3
1,940.7
3,106.3
2,568.2
Total property, plant and equipment at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,973.2
(1,520.2)
7,947.5
(1,312.1)
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,453.0
$ 6,635.4
Depreciation expense for the three and nine months ended September 30, 2018 was $156.8 million and
$432.8 million, respectively, and for the three and nine months ended September 30, 2017 was $119.9 million
and $363.5 million, respectively.
H-19
In the second quarter of 2018, the FDA approved a new plasma manufacturing facility near Covington,
Georgia. Following the approval, $1,840.5 million of assets were reclassified from Asset under construction to
Buildings and leasehold improvements and Machinery, equipment and other assets classes.
13. Intangible assets
The following table summarizes the Company’s Intangible assets:
(In millions)
September 30, 2018
Currently
marketed
products
Other
intangible
assets
IPR&D
Total
Gross acquired intangible assets . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$33,767.4
(5,561.2)
$1,012.7
—
$ 830.8
(424.3)
$35,610.9
(5,985.5)
Intangible assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$28,206.2
$1,012.7
$ 406.5
$29,625.4
December 31, 2017
Gross acquired intangible assets . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$31,973.5
(4,549.2)
$5,113.9
—
$ 835.9
(328.0)
$37,923.3
(4,877.2)
Intangible assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$27,424.3
$5,113.9
$ 507.9
$33,046.1
During the third quarter of 2018, the U.S. Food and Drug Administration (FDA) approved TAKHZYRO
injection, for prophylaxis to prevent attacks of HAE in patients 12 years of age and older. Following the
approval, the Company reclassified the TAKHZRO intangible asset from IPR&D to Currently marketed products
and started amortizing the asset.
Other intangible assets are comprised primarily of royalty rights and other contract rights associated
with Baxalta, Dyax Corp. (Dyax), and NPS Pharmaceuticals Inc.
Activities in the net book value of intangible assets for the nine months ended September 30, 2018 and
2017 are as follows:
(In millions)
As of January 1, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of Oncology franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Measurement period adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization charged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contribution to JV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018
2017
$33,046.1
(1,598.5)
$34,697.5
—
—
(1,375.3)
(314.2)
(163.7)
(10.0)
35.9
5.1
(1,397.0)
(1,280.5)
1,350.3
—
(20.0)
—
—
As of September 30,
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$29,625.4
$33,350.3
Measurement period adjustments included in the nine months ended September 30, 2017 related to the
acquisition of Baxalta.
For further details regarding the sale of the Oncology franchise, refer to Note 5, Dispositions and Assets
Held for Sale.
During the nine months ended September 30, 2018, the Company contributed distributions rights for
certain products to a joint venture formed by the Company. Upon the contribution, the net carrying value
H-20
($163.7 million) related to those products was recorded within Investments in these Unaudited Consolidated
Balance Sheets.
The Company reviews its amortized intangible assets for impairment whenever events or circumstances
suggest that their carrying value may not be recoverable. Unamortized intangible assets are reviewed for
impairment annually or whenever events or circumstances suggest
their carrying value may not be
recoverable.
that
Estimated amortization expense can be affected by various factors including future acquisitions,
disposals of product rights, regulatory approval and subsequent amortization of acquired IPR&D projects,
foreign exchange movements, and the technological advancement and regulatory approval of competitor
products. The estimated future amortization of acquired intangible assets for the next five years is expected to be
as follows:
(In millions)
2018 (remaining three months) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Anticipated
future
amortization
$ 444.4
1,808.0
1,730.7
1,710.9
1,679.3
1,627.3
14. Goodwill
The following table provides a roll-forward of the Goodwill balance for the nine months ended
September 30, 2018 and 2017:
(In millions)
2018
2017
As of January 1, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of Oncology franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$19,831.7
96.3
(565.1)
(267.9)
$17,888.2
1,076.2
—
754.0
September 30,
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$19,095.0
$19,718.4
For further details regarding acquisitions during the nine months ended September 30, 2018, refer to
Note 4, Acquisition.
The increase in Goodwill during the nine months ended September 30, 2017 related to measurement
period adjustments of the acquisition of Baxalta.
H-21
15. Fair Value Measurement
Assets and liabilities that are measured at fair value on a recurring basis
The following financial assets and liabilities are measured at fair value on a recurring basis using quoted
prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and
significant unobservable inputs (Level 3):
(In millions)
Fair value
Total
Level 1
Level 2
Level 3
As of September 30, 2018
Financial assets:
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 161.0
17.0
13.9
$161.0
3.6
—
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 191.9
$164.6
Financial liabilities:
Joint venture net written option . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration payable . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
48.0
30.8
616.2
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 695.0
$ —
—
—
$ —
$ —
13.4
13.9
$27.3
$ —
30.8
—
$30.8
$ —
—
—
$ —
$
48.0
—
616.2
$ 664.2
(In millions)
Fair value
Total
Level 1
Level 2
Level 3
As of December 31, 2017
Financial assets:
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
89.7
17.9
17.9
$ 89.7
3.8
—
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 125.5
$ 93.5
Financial liabilities:
Joint venture net written option . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration payable . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
40.0
14.2
1,168.2
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,222.4
$ —
—
—
$ —
$ —
14.1
17.9
$32.0
$ —
14.2
—
$14.2
$ —
—
—
$ —
$
40.0
—
1,168.2
$1,208.2
Marketable equity and debt securities are included within Investments in these Unaudited Consolidated
liabilities and Other
Balance Sheets. Contingent consideration payable is included within Other current
non-current
information regarding the
Company’s derivative arrangements, refer to Note 16, Financial Instruments, to these Unaudited Consolidated
Financial Statements.
liabilities in these Unaudited Consolidated Balance Sheets. For
Certain estimates and judgments were required to develop the fair value amounts. The estimated fair
value amounts shown above are not necessarily indicative of the amounts that the Company would realize upon
disposition, nor do they indicate the Company’s intent or ability to dispose of the financial instrument.
The following methods and assumptions were used to estimate the fair value of each material class of
financial instrument:
• Marketable equity securities: the fair values of marketable equity securities are estimated based on
quoted market prices for those investments.
H-22
• Marketable debt securities: the fair values of debt securities are obtained from pricing services or
broker/dealers who either use quoted prices in an active market or proprietary pricing applications,
which include observable market information for like or same securities.
•
•
Derivative instruments: the fair values of the swap and forward foreign exchange contracts have
been determined using the month-end interest rate and foreign exchange rates, respectively.
Joint venture net written option and contingent consideration payable: the fair values have been
estimated using the income approach (using a probability weighted discounted cash flow method).
There were no changes in valuation techniques or inputs utilized or transfers between fair value
measurement levels during the three and nine months ended September 30, 2018 and 2017.
Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs
(Level 3)
Contingent consideration payable
(In millions)
2018
2017
Balance as of January 1,
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value included in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,168.2
—
(647.1)
100.4
(5.3)
$1,058.0
(4.0)
—
144.3
(11.4)
Balance as of September 30, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 616.2
$1,186.9
Of the $616.2 million of contingent consideration payable as of September 30, 2018, $82.3 million is
recorded within Other current liabilities and $533.9 million is recorded within Other non-current liabilities in
these Unaudited Consolidated Balance Sheets.
The decrease in contingent consideration payable during the nine months ended September 30, 2018 is
related to payments of contingent consideration following the approval of TAKHZYRO acquired from Dyax in
2016.
Joint venture net written option
In March 2017, Shire executed option agreements related to a joint venture that provides Shire with a
call option on the partner’s investment in joint venture equity and the partner with a put option on its investment
in joint venture equity. The Company had a liability of $48.0 million for the net written option based on the
estimated fair value of these options as of September 30, 2018 and the Company re-measures the instrument to
fair value through the Unaudited Consolidated Statements of Operations.
H-23
Quantitative Information about Assets and Liabilities Measured at Fair Value on a Recurring Basis Using
Significant Unobservable Inputs (Level 3)
Financial liabilities:
As of September 30, 2018
Fair value as of the measurement date
(In millions, except %)
Fair value
Contingent consideration
payable . . . . . . . . . . . . . .
$616.2
Valuation
technique
Income approach
(probability weighted
discounted cash flow)
Significant
unobservable
inputs
Range
• Cumulative
•
10.5 to 90%
probability of
milestones being
achieved
• Assumed market
participant discount
rate
•
•
Periods in which
milestones are
expected to be
achieved
Forecast quarterly
royalties payable on
net sales of relevant
products
•
•
•
3.2 to 9.2%
2018 to 2040
$0.1 to
$16.0 million
Contingent consideration payable represents future milestones and royalties the Company may be
required to pay in conjunction with various business combinations and license agreements. The fair value of the
Company’s contingent consideration payable could significantly increase or decrease due to changes in certain
assumptions which underpin the fair value measurements. Each set of assumptions is specific to the individual
contingent consideration payable.
Financial liabilities:
As of September 30, 2018
Fair value as of the measurement date
(In millions, except %)
Fair value
Joint venture net written
option . . . . . . . . . . . . . . .
$48.0
Valuation
technique
Income approach
(probability weighted
discounted cash flow)
Significant
unobservable
inputs
• Cash flow scenario
probability weighting
• Assumed market
participant discount
rate
Range
100%
14%
•
•
H-24
Financial assets and liabilities that are disclosed at fair value
The carrying amounts and estimated fair values of the Company’s financial assets and liabilities that are
not measured at fair value on a recurring basis are as follows:
(In millions)
September 30, 2018
December 31, 2017
Carrying
amount
Fair value
Carrying
amount
Fair value
Financial liabilities:
SAIIDAC notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Baxalta notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,058.9
1,939.9
366.8
$11,604.7
1,951.3
366.8
$12,050.2
5,057.7
349.2
$11,913.7
5,229.9
349.2
The estimated fair values of long-term debt were based upon recent observable market prices and are
considered Level 2 in the fair value hierarchy. The estimated fair value of capital lease obligations is based on
Level 2 inputs.
The carrying amounts of other financial assets and liabilities approximate their estimated fair value due
to their short-term nature, such as liquidity and maturity of these amounts, or because there have been no
significant changes since the asset or liability was last re-measured to fair value on a non-recurring basis. For
more details on the carrying amount and fair value of Baxalta notes, refer to Note 17, Borrowings and Capital
Leases.
16. Financial Instruments
Foreign Currency Contracts
Due to the global nature of its operations, portions of the Company’s revenues and operating expenses
are recorded in currencies other than the U.S. dollar. The value of revenues and operating expenses measured in
U.S. dollars is therefore subject to changes in foreign currency exchange rates. The main trading currencies of the
Company are the U.S. dollar, Euro, British pound sterling, Swiss franc, Canadian dollar, and Japanese yen.
Transactional exposure arises where transactions occur in currencies different to the functional currency
of the relevant subsidiary. It is the Company’s policy that these exposures are minimized to the extent practicable
by denominating transactions in the subsidiary’s functional currency. Where significant exposures remain, the
Company uses foreign exchange contracts (spot, forward, and swap contracts) to manage the exposure for
balance sheet assets and liabilities that are denominated in currencies different to the functional currency of the
relevant subsidiary.
The Company has master netting agreements with a number of counterparties to these foreign exchange
contracts and on the occurrence of specified events, the Company has the ability to terminate contracts and settle
them with a net payment by one party to the other. The Company has elected to present derivative assets and
derivative liabilities on a gross basis in the Unaudited Consolidated Balance Sheets. The Company does not have
credit risk related contingent features or collateral linked to the derivatives.
Undesignated Foreign Currency Derivatives
The Company uses forward and option contracts to mitigate the foreign currency risk related to certain
balance sheet positions, including intercompany and third-party receivables and payables. The Company has not
elected hedge accounting for these derivative instruments. The changes in fair value of these derivatives are
reported in earnings.
H-25
The table below presents the notional amount, maximum duration, and fair value for the undesignated
foreign currency derivatives:
(In millions, except duration)
September 30, 2018 December 31, 2017
Notional amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value - net (liability)/asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,192.4
$
11 months
(1.3)
$
$ 1,672.3
3 months
11.4
$
The Company considers the impact of its and its counterparties’ credit risk on the fair value of the
contracts as well as the ability of each party to execute its contractual obligations. As of September 30, 2018,
credit risk did not materially change the fair value of the Company’s foreign currency contracts.
Interest Rate - Contracts
The Company is exposed to the risk that its earnings and cash flows could be adversely impacted by
fluctuations in benchmark interest rates relating to its debt obligations on which interest is set at floating rates.
The Company’s policy is to manage this risk to an acceptable level. The Company is principally exposed to
interest rate risk on any borrowings under the Company’s various debt facilities. Interest on these facilities is set
at floating rates, to the extent utilized. Shire’s exposure under these facilities is to changes in U.S. dollar interest
rates. For further details related to interest rates on the Company’s various debt facilities, refer to Note 17,
Borrowings and Capital Leases, to these Unaudited Consolidated Financial Statements.
Designated Interest Rate Derivatives
The Company has elected hedge accounting for interest rate swap contracts designated as fair value
hedges. The effective portion of the changes in the fair value of interest rate swap contracts are recorded as a
component of the underlying Baxalta Notes with the ineffective portion recorded in Interest expense. Any net
interest payments made or received on the interest rate swap contracts are recognized as a component of Interest
expense in the Unaudited Consolidated Statements of Operations.
The table below presents the notional amount, maturity, and fair value for the designated interest rate
derivatives:
(In millions, except maturity)
September 30, 2018
December 31, 2017
Notional amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value - net liability . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
431.0
June 2020 and June 2025
$
1,000.0
June 2020 and June 2025
(7.7)
(15.6) $
In conjunction with the debt tender offer and extinguishment of debt as more fully described in Note 17,
Shire terminated $569.0 million of its interest swaps for a loss of $9.3 million, which is reported in Other
(expense)/income, net in the Unaudited Consolidated Statements of Operations.
Summary of Derivatives
The following tables summarize the effect of the derivative instruments in the Company’s Unaudited
Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017.
H-26
Designated Foreign exchange contracts
(In millions)
2018
2017
Location
2018
2017
Loss recognized in OCI
Gain reclassified from
AOCI into income
Cash flow hedges
Three months ended September 30,
Foreign exchange contracts . . . . . . .
Nine months ended September 30,
Foreign exchange contracts . . . . . . .
$—
$—
$(0.2)
Cost of sales
$(0.9)
Cost of sales
$—
$—
$0.3
$8.6
Undesignated foreign exchange contracts
(In millions)
Three months ended September 30,
Location
Gain/(loss) recognized in
income
2018
2017
Foreign exchange contracts . . . . . . . . . . . . . . . . . . Other (expense)/income, net
$ 4.7
$36.7
Nine months ended September 30,
Foreign exchange contracts . . . . . . . . . . . . . . . . . . Other (expense)/income, net
$(28.6)
$57.4
Designated Interest Rate Derivatives
(In millions)
Fair value hedges
Three months ended September 30,
Location
Loss recognized in income
2018
2017
Interest rate contracts, net . . . . . . . . . . . . . . . . . . .
Interest expense
$(1.0)
$(1.1)
Nine months ended September 30,
Interest rate contracts, net . . . . . . . . . . . . . . . . . . .
Interest expense
$(4.9)
$(2.5)
H-27
Summary of Derivatives
The following table presents the classification and estimated fair value of derivative instruments on the
Company’s Unaudited Consolidated Balance Sheets:
Asset position
Fair value
Liability position
Fair value
Location
September 30,
2018
December 31,
2017
Location
September 30,
2018
December 31,
2017
(In millions)
Undesignated derivative
instruments
Foreign exchange contracts . . . Other current
assets
$13.9
$13.9
$17.9
$17.9
Other current
liabilities
$15.2
$15.2
$ 6.5
$ 6.5
Designated derivative
Instruments
Interest rate contracts . . . . . . . . Long term
borrowings
Total derivative fair value . . .
Potential effect of rights to
offset
. . . . . . . . . . . . . . . . . .
Net derivative . . . . . . . . . . . . .
17. Borrowings and Capital Leases
(In millions)
Long term
borrowings
$ —
$ —
$13.9
(8.3)
$ 5.6
$ —
$ —
$17.9
(2.7)
$15.2
$15.6
$15.6
$30.8
(8.3)
$22.5
$ 7.7
$ 7.7
$14.2
(2.7)
$11.5
Short term borrowings and capital leases:
SAIIDAC Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Baxalta Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings under the Revolving Credit Facilities Agreement . . . . . . . . . . . . . . . . . . .
Borrowings under the November 2015 Facilities Agreement
. . . . . . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long term borrowings and capital leases:
SAIIDAC Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Baxalta Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30,
2018
December 31,
2017
$ 3,295.3
—
915.0
—
9.5
28.9
$
—
748.8
810.0
1,196.3
7.5
26.1
$ 4,248.7
$ 2,788.7
$ 8,763.6
1,939.9
357.3
37.2
$12,050.2
4,308.9
341.7
51.6
$11,098.0
$16,752.4
Total borrowings and capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,346.7
$19,541.1
For a more detailed description of the Company’s financing agreements, refer below and to Note 17,
Borrowings and Capital Leases, of Shire’s Annual Report on Form 10-K for the year ended December 31, 2017.
H-28
Debt Tender Offer
On September 11, 2018, Shire purchased an aggregate of $2.3 billion in principal amount of Baxalta
Notes from existing holders consisting of its 2.875% Notes due June 2020, 3.600% Notes due June 2022, 4.000%
Notes due June 2025 and 5.250% Notes due June 2045 pursuant to a debt tender offer. Shire paid approximately
$2.4 billion, including accrued and unpaid interest and tender premium, to purchase such notes. As a result of the
debt tender offer, the Company recognized a loss on extinguishment of debt in the third quarter of 2018 of
$40.6 million, which is included in Other (expense)/income, net within the Unaudited Consolidated Statements of
Operations.
SAIIDAC Notes
On September 23, 2016, Shire Acquisitions Investments Ireland Designated Activity Company
(SAIIDAC), a wholly owned subsidiary of Shire plc, issued unsecured senior notes with a total aggregate
principal value of $12.1 billion (SAIIDAC Notes), guaranteed by Shire plc and, as of December 1, 2016, by
Baxalta. Below is a summary of the SAIIDAC Notes as of September 30, 2018:
(In millions, except %)
Fixed-rate notes due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aggregate
amount
Coupon
rate
Carrying
amount as of
September 30,
2018
$ 3,300.0
3,300.0
2,500.0
3,000.0
$12,100.0
1.900% $ 3,295.3
3,289.0
2.400%
2,490.8
2.875%
2,983.8
3.200%
$12,058.9
As of September 30, 2018, there were $41.1 million of debt issuance costs and discounts recorded as a
reduction of the carrying amount of debt. These costs will be amortized as additional interest expense using the
effective interest rate method over the period from issuance through maturity.
Baxalta Notes
Shire plc guaranteed senior notes issued by Baxalta in connection with the acquisition of Baxalta
(Baxalta Notes). Following repayment of the $375.0 million floating-rate notes and the $375.0 million fixed-rate
notes due in June 2018 and the subsequent $2.3 billion bond tender offer on September 11, 2018, the remaining
Baxalta Notes as of September 30, 2018 are shown below:
(In millions, except %)
Fixed-rate notes due 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-rate notes due 2045 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assumed Senior Notes
Aggregate
principal
Coupon
rate
Carrying
amount as of
September 30,
2018
$ 404.5
219.4
800.5
500.4
$1,924.8
2.875% $ 403.0
221.9
3.600%
799.7
4.000%
515.3
5.250%
$1,939.9
The book values above include any premiums, discounts, and adjustments related to hedging
instruments. For further details related to the interest rate derivative contracts, please see Note 16, Financial
Instruments, to these Unaudited Consolidated Financial Statements.
H-29
Revolving Credit Facilities Agreement
On December 12, 2014, Shire entered into a $2.1 billion revolving credit facilities agreement (RCF)
with a number of financial institutions. As of September 30, 2018, the Company utilized $915.0 million of the
RCF. The RCF, which terminates on December 12, 2021, may be used for financing the general corporate
purposes of Shire. The RCF incorporates a $250.0 million U.S. dollar and Euro swingline facility operating as a
sub-limit thereof.
Term Loan Facilities Agreements
November 2015 Facilities Agreement
On November 2, 2015, Shire entered into a $5.6 billion facilities agreement (November 2015 Facilities
Agreement), which comprised of three amortizing credit facilities with ultimate maturity on November 2, 2018.
As of September 30, 2018, there were no amounts outstanding under the November 2015 Facilities Agreement as
it was fully repaid and canceled on September 28, 2018.
Short-term uncommitted lines of credit (Credit lines)
Shire has access to various Credit lines from a number of banks which are available to be utilized from
time to time to provide short-term cash management flexibility. These Credit lines can be withdrawn by the
banks at any time. The Credit lines are not relied upon for core liquidity. As of September 30, 2018, these lines of
credit were not utilized.
Capital Lease Obligations
The capital leases are primarily related to office and manufacturing facilities. As of September 30, 2018,
the total capital lease obligations, including current portions, were $366.8 million.
18. Retirement and Other Benefit Programs
The Company sponsors various pension and other post-employment benefit (OPEB) plans in the U.S.
and other countries. Net periodic benefit cost for the three and nine months ended September 30, 2018 and 2017
is as follows:
Three months ended September 30,
2018
2017
(In millions)
U.S.
pensions
International
pensions
OPEB
(U.S.)
U.S.
pensions
International
pensions
OPEB
(U.S.)
Net periodic benefit cost
Service cost . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . .
Amortization of net prior service cost . . .
Amortization of actuarial (gain)/loss . . .
Net periodic benefit cost . . . . . . . . . . . . .
$—
3.9
(4.3)
—
—
$(0.4)
$ 9.5
1.3
(2.0)
—
(0.3)
$ 8.5
$—
0.1
—
(0.2)
—
$(0.1)
$ 3.7
3.9
(4.0)
—
—
$ 3.6
$ 9.4
1.2
(1.8)
—
0.4
$ 9.2
$ 0.4
0.3
—
—
—
$ 0.7
H-30
Nine months ended September 30,
2018
2017
(In millions)
U.S.
pensions
International
pensions
OPEB
(U.S.)
U.S.
pensions
International
pensions
OPEB
(U.S.)
Net periodic benefit cost
Service cost . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . .
Amortization of net prior service cost . . .
Amortization of actuarial (gain)/loss . . .
$ —
11.7
(12.9)
—
—
Net periodic benefit cost . . . . . . . . . . . . .
$ (1.2)
$28.5
3.9
(6.0)
—
(0.9)
$25.5
$—
0.3
—
(0.6)
—
$(0.3)
$ 11.1
11.7
(12.0)
—
—
$ 10.8
$28.2
3.6
(5.4)
—
1.3
$27.7
$ 1.2
0.9
—
—
—
$ 2.1
The components of net periodic benefit cost other than the service cost component are included in the
line item Other (expense)/income, net in these Unaudited Consolidated Statements of Operations.
19. Accumulated Other Comprehensive Income/(Loss)
The changes in Accumulated other comprehensive income/(loss) (AOCI), net of their related tax effects,
for the nine months ended September 30, 2018 and 2017 are as follows:
(In millions)
As of January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current period change:
Other comprehensive loss before reclassifications . . . . . .
Amounts reclassified from AOCI . . . . . . . . . . . . . . . . . . .
Net current period other comprehensive loss . . . . . . . . . . . . . .
Foreign
currency
translation
adjustment
Pension
and other
employee
benefits
Unrealized
holding
gain/(loss)
on available-
for-sale debt
securities
Accumulated
other
comprehensive
income/(loss)
$1,279.6
$27.5
$ 67.9
$1,375.0
(679.2)
—
(679.2)
—
(1.5)
(1.5)
—
(67.9)
(67.9)
(679.2)
(69.4)
(748.6)
As of September 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 600.4
$26.0
$ —
$ 626.4
On January 1, 2018, the Company adopted a new standard related to accounting for investments in
equity securities. Upon adoption, the Company reclassified unrealized holding gain on available-for-sale equity
securities totaling $67.9 million to Retained earnings. For further information, refer to Note 2, Summary of
Significant Accounting Policies, to these Unaudited Consolidated Financial Statements.
(In millions)
As of January 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . .
Current period change:
Other comprehensive income before
Foreign
currency
translation
adjustment
Pension
and other
employee
benefits
Unrealized
holding
loss on
available-
for-sale
securities
Accumulated
other
comprehensive
(loss)/income
Hedging
activities
$(1,505.4)
$ (5.2)
$ 6.6
$ 6.4
$(1,497.6)
reclassifications . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from AOCI . . . . . . . . . . . .
2,441.1
—
9.7
1.3
24.7
(4.4)
0.5
(6.2)
2,476.0
(9.3)
Net current period other comprehensive income/
(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,441.1
11.0
As of September 30, 2017 . . . . . . . . . . . . . . . . . . . . . .
$
935.7
$ 5.8
20.3
$26.9
(5.7)
2,466.7
$ 0.7
$
969.1
H-31
Reclassifications from AOCI to net income during the three and nine months ended September 30,
2018 and 2017 were not material.
20. Taxation
For the three and nine months ended September 30, 2018, the effective tax rate on income from
continuing operations was 28% (2017: 2%) and 18% (2017:4%), respectively.
The effective tax rate for the three and nine months ended September 30, 2018 has been affected by
certain provisions of the U.S. Tax Cuts and Jobs Act (Tax Act) passed in December, 2017, which reduces the
U.S. federal corporate income tax rate from 35% to 21% along with anti-deferral provisions related to non-U.S.
operations, new limitations on certain deductions required under the Tax Act, and reductions in the quantum of
and tax benefit associated with U.S. integration costs over the prior year.
The Company continued to assess the financial statement impact of the applicable provisions of the Tax
Act upon enactment during the three and nine months ended September 30, 2018 and based on these assessments,
income tax expense increased by $60.0 million and $37.9 million during these periods, respectively. The increase
in tax expense recorded during the three and nine months ended September 30, 2018 was due to i) an adjustment
to the U.S. deferred tax balances recorded as of December 31, 2017 related to the corporate income tax rate
reduction of a $15.0 million tax expense and $7.1 million tax benefit, respectively; and ii) an increase to income
tax expense of $45.0 million related to the repatriation toll charge. The change in the toll charge was partially
driven by an adjustment of $31.0 million related to the tax rates applied to certain drivers of the provisional
repatriation toll charge in 2017, as well as the finalization of inputs to the calculation of the repatriation toll
charge and the refinement of the Company’s computation for the various guidance and regulations issued during
2018. The changes to its original tax reform impacts increased the effective tax rate for the three and nine months
ended September 30, 2018 by 8% and 2%, respectively.
It is expected that additional interpretive guidance will be issued during the measurement period that
may change how the Company has computed the provisional amounts for the year ended December 31, 2017.
The Company will continue to assess the impact of the Tax Act during the measurement period and will record
any adjustments to its provisional estimates as needed during the remainder of the measurement period and
continues to assert that all amounts recorded and disclosed to date remain provisional.
The effective tax rate for the three and nine months ended September 30, 2017 was affected by the
combined impact of the relative quantum of the profit before tax for the period by jurisdiction as well as
significant acquisition and integration costs. Additionally, certain discrete tax adjustments were recorded during
the year, which contributed to the low effective rate, including a tax benefit associated with the filing of the US
tax returns and reversal of prior period income tax reserves.
H-32
21. Earnings Per Share
The following table reconciles net income and the weighted average ordinary shares outstanding for
basic and diluted earnings per share (EPS) for the periods presented:
(In millions)
Three months ended
September 30,
Nine months ended
September 30,
2018
2017
2018
2017
Income from continuing operations, net of taxes . . . . . . . . . . . . . . . .
(Loss)/Gain from discontinued operations, net of taxes . . . . . . . . . . .
$537.2
—
$551.2
(0.4)
$1,703.3
—
$1,147.5
18.6
Numerator for basic and diluted earnings per share . . . . . . . . . . . . . .
$537.2
$550.8
$1,703.3
$1,166.1
Weighted average number of shares:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of dilutive shares:
Share-based awards to employees . . . . . . . . . . . . . . . . . . . . . . . . . . . .
914.0
907.2
912.0
905.9
7.1
4.4
4.9
6.2
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
921.1
911.6
916.9
912.1
Weighted average number of basic shares excludes shares purchased by the Employee Benefit Trust and
those under the shares buy-back program, which are both presented by Shire as treasury stock. Share-based
awards to employees are calculated using the treasury method.
The share equivalents not included in the calculation of the diluted weighted average number of shares
are shown below:
(Number of shares in millions)
Share-based awards to employees . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three months ended
September 30,
Nine months ended
September 30,
2018
10.0
2017
16.2
2018
13.4
2017
14.8
Certain stock options have been excluded from the calculation of diluted EPS for three and nine months
ended September 30, 2018 and 2017 because either their exercise prices exceeded Shire’s average share price
during the calculation period, the required performance conditions were not satisfied as of the balance sheet date
or their inclusion would have been antidilutive.
22. Share-based Compensation Plans
Total share-based compensation recorded by the Company during the three and nine months ended
September 30, 2018 and 2017 by line item is as follows:
Three months ended
September 30,
Nine months ended
September 30,
(In millions)
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . .
Integration and acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018
$ 6.3
10.0
29.5
3.0
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48.8
(7.8)
2017
2018
2017
$ 17.4
3.2
30.9
1.8
53.3
(13.3)
$ 21.2
35.5
75.2
3.8
$ 30.1
22.9
94.1
12.6
135.7
(22.2)
159.7
(42.9)
$41.0
$ 40.0
$113.5
$116.8
H-33
For further details on existing share-based compensation plans, refer to Note 23, Share-based
Compensation Plans, of Shire’s Annual Report on Form 10-K for the year ended December 31, 2017.
The Company amended the mix of performance share units to include market condition, based on
relative total shareholder return, commencing with the 2018 annual grant.
During the nine months ended September 30, 2018, the Company made equity compensation grants to
employees consisting of 10.8 million stock-settled share appreciation rights (SARs), 3.0 million restricted stock
units (RSUs), and 0.9 million performance share units (PSUs) equivalent in ordinary shares.
23. Commitments and Contingencies
Leases
The Company leases land, facilities, motor vehicles, and certain equipment under operating leases
expiring through 2045. For the three and nine months ended September 30, 2018 lease and rental expense
amounted to $49.4 million and $136.9 million (2017: $41.7 million and $126.7 million, respectively), which is
predominately included within Cost of sales and SG&A expenses in these Unaudited Consolidated Statement of
Operations.
Letters of credit and guarantees
As of September 30, 2018 and December 31, 2017, the Company had irrevocable standby letters of
credit and guarantees with various banks and insurance companies totaling $249.5 million and $224.8 million
(being the contractual amounts), respectively, providing security for the Company’s performance of various
obligations. These obligations are primarily in respect of the recoverability of insurance claims, lease obligations,
and supply commitments.
Commitments
Clinical testing
As of September 30, 2018, the Company had committed to pay approximately $1,451.3 million
(December 31, 2017: $1,409.9 million) to contract vendors for administering and executing clinical trials. The
timing of these payments is dependent upon actual services performed by the organizations as determined by
patient enrollment levels and related activities.
Contract manufacturing
As of September 30, 2018,
the Company had committed to pay approximately $910.8 million
(December 31, 2017: $467.2 million) in respect of contract manufacturing. The Company expects to pay
$169.5 million of these commitments in 2018.
Other purchasing commitments
As of September 30, 2018, the Company had committed to pay approximately $1,363.0 million
(December 31, 2017: $1,692.5 million) for future purchases of goods and services, predominantly relating to
active pharmaceutical ingredients sourcing. The Company expects to pay $839.4 million of these commitments
in 2018.
Investment commitments
As of September 30, 2018, the Company had outstanding commitments to purchase common stock and
interests in companies and partnerships, respectively, for amounts totaling $48.0 million (December 31, 2017:
H-34
$48.9 million), which may all be payable during 2018, depending on the timing of capital calls. The investment
commitments include additional funding to certain variable interest entities (VIEs) for which Shire is not the
primary beneficiary.
Capital commitments
As of September 30, 2018, the Company had committed to spend $348.8 million (December 31, 2017:
$328.2 million) on capital projects.
Baxter related tax indemnification
Baxter International Inc. (Baxter) and Baxalta entered into a tax matters agreement, effective on the date
of Baxalta’s separation from Baxter, which employs a direct tracing approach, or where direct tracing approach is
not feasible, an allocation methodology, to determine which company is liable for pre-separation income tax
items for U.S. federal, state, and foreign jurisdictions. With respect to tax liabilities that are directly traceable or
allocated to Baxalta but for which Baxalta was not the primary obligor, Baxalta recorded a tax indemnification
amount that would be due to Baxter upon Baxter discharging the associated tax liability to the taxing authority.
24. Legal and Other Proceedings
The Company expenses legal costs when incurred.
The Company recognizes loss contingency provisions for probable losses when management is able to
the Company records a loss
reasonably estimate the loss. When the estimated loss lies within a range,
contingency provision based on its best estimate of the probable loss. If no particular amount within that range is
a better estimate than any other amount, the minimum amount is recorded. Estimates of losses may be developed
before the ultimate loss is known, and are therefore refined each accounting period as additional information
becomes known. An outcome that deviates from the Company’s estimate may result in an additional expense or
release in a future accounting period. As of September 30, 2018, provision for litigation losses, insurance claims,
and other disputes totaled $82.0 million (December 31, 2017: $76.2 million).
The Company’s principal pending legal and other proceedings are disclosed below. The outcomes of
these proceedings are not always predictable and can be affected by various factors. For those legal and other
proceedings for which it is considered at least reasonably possible that a loss has been incurred, the Company
discloses the possible loss or range of possible loss in excess of the recorded loss contingency provision, if any,
where such excess is both material and estimable.
MYDAYIS
On October 12, 2017, Shire was notified that Teva Pharmaceuticals USA, Inc. had submitted an
abbreviated new drug application (ANDA) to the FDA seeking permission to market a generic version of
MYDAYIS. Within the requisite 45-day period, Shire filed a lawsuit in the U.S. District Court for the District of
Delaware against Teva Pharmaceuticals USA, Inc., Actavis Laboratories, Inc. and Teva Pharmaceutical
Industries Limited (collectively the “Teva entities”). A Markman hearing is scheduled to take place on
January 23, 2019. A trial is scheduled to take place beginning on December 9, 2019.
On March 8, 2018, Shire was notified that Impax Laboratories, Inc. (Impax) had submitted an ANDA to
the FDA seeking permission to market a generic version of MYDAYIS. Within the requisite 45-day period, Shire
filed a lawsuit in the U.S. District Court for the District of Delaware against Impax. A Markman hearing is
scheduled to take place on January 23, 2019. A trial is scheduled to take place beginning on December 9, 2019.
On April 19, 2018, Shire was notified that SpecGX LLC (SpecGX) had submitted an ANDA to the FDA
seeking permission to market a generic version of MYDAYIS. Within the requisite 45-day period, Shire filed a
lawsuit in the U.S. District Court for the District of Delaware against SpecGx. No dates for a Markman hearing
or trial have been set.
H-35
Petitions to institute inter partes reviews (IPRs) against U.S. Patent numbers 8,846,100 and 9,173,857
were filed by KVK Tech in January 2018 and the petitions were granted in July 2018. Both of these patents are
listed in the Orange Book as covering MYDAYIS and are among the patents-in-suit in the infringement action
brought against the Teva entities and Impax as noted above. A decision on the merits is expected on or before
July 10, 2019.
VANCOCIN
On April 6, 2012, ViroPharma Incorporated (ViroPharma) received a notification that the United States
Federal Trade Commission (FTC) was conducting an investigation into whether ViroPharma had engaged in
unfair methods of competition with respect to VANCOCIN, which Shire acquired in January 2014. Following the
divestiture of VANCOCIN in August 2014, Shire retained certain liabilities including any potential liabilities
related to the VANCOCIN citizen petition.
On August 3, 2012, and September 8, 2014, ViroPharma and Shire respectively received Civil
Investigative Demands from the FTC requesting additional information related to this matter. Shire has fully
cooperated with the FTC’s investigation.
On February 7, 2017, the FTC filed a Complaint against Shire alleging that ViroPharma engaged in
conduct in violation of U.S. antitrust laws arising from a citizen petition ViroPharma filed in 2006 related to
Food & Drug Administration’s policy for evaluating bioequivalence for generic versions of VANCOCIN. The
complaint seeks equitable relief, including an injunction and disgorgement. The Company filed a motion to
dismiss on April 10, 2017. On March 20, 2018, the court granted the Company’s motion. On April 11, 2018, the
FTC filed a Notice of Appeal. The FTC’s appeal is still pending.
At this time, Shire is unable to predict the outcome or duration of this case.
ELAPRASE
In 2014, Shire’s Brazilian affiliate, Shire Farmaceutica Brasil Ltda, was served with a lawsuit brought
by the State of Sao Paulo and in which the Brazilian Public Attorney’s office has intervened alleging that Shire is
obligated to provide certain medical care including ELAPRASE for an indefinite period at no cost to patients
who participated in ELAPRASE clinical trials in Brazil, and seeking recoupment to the Brazilian government for
amounts paid on behalf of these patients to date, and moral damages associated with these claims.
On May 6, 2016, the trial court judge ruled on the case and dismissed all the claims under the class
action, which was appealed. On February 20, 2017, the Court of Appeals in Sao Paulo issued the final decision
on merit in favor of Shire and dismissed all the claims under the class action. On July 12, 2017, the Public
Prosecutor filed an appeal addressed to the Supreme Court. During the last quarter of 2017, the State of Sao
Paulo filed appeals addressed to the Superior Court of Justice and to the Supreme Court.
25. Segment Reporting
In the first quarter of 2018, the Company announced a change to its internal structure to create two
distinct business segments within Shire: a Rare Disease division and a Neuroscience division. The change was
based on the Board’s conclusion that the Neuroscience business warranted additional focus and investment and
that there was a strong business rationale for creating the two divisions.
In the second quarter of 2018, the Company returned to a single segment approach to managing its
business. This decision was precipitated by the Shire Board’s acceptance of Takeda’s offer to acquire the
Company and reflects the Company’s focus on the performance of the entire business as it operates in this
current environment. This step was taken to more closely align with how the financial information is viewed by
H-36
the Executive Committee (Shire’s chief operating decision maker) for the purposes of making resource allocation
decisions and assessing the performance of the business. Additionally, in the second quarter of 2018, the
Company introduced a new product franchise called Established Brands to capture revenue for its non-promoted
products that are facing or could face generic competition, such as LIALDA and PENTASA. Comparative
financial information for 2017 was retrospectively restated herein.
In the periods set out below, U.S. and International Product sales by franchise were as follows:
(In millions)
Product sales by franchise
IMMUNOGLOBULIN THERAPIES . . . .
HEREDITARY ANGIOEDEMA . . . . . . . .
BIO THERAPEUTICS . . . . . . . . . . . . . . . .
Immunology . . . . . . . . . . . . . . . . . . . . . . . .
HEMOPHILIA . . . . . . . . . . . . . . . . . . . . . .
INHIBITOR THERAPIES . . . . . . . . . . . . .
Hematology . . . . . . . . . . . . . . . . . . . . . . . .
VYVANSE . . . . . . . . . . . . . . . . . . . . . . . . .
ADDERALL XR . . . . . . . . . . . . . . . . . . . .
MYDAYIS . . . . . . . . . . . . . . . . . . . . . . . . .
Other Neuroscience(1) . . . . . . . . . . . . . . . . .
Neuroscience . . . . . . . . . . . . . . . . . . . . . . .
ELAPRASE . . . . . . . . . . . . . . . . . . . . . . . .
REPLAGAL . . . . . . . . . . . . . . . . . . . . . . . .
VPRIV . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Genetic Diseases . . . . . . . . . . . . . . . . . . . .
LIALDA/MEZAVANT . . . . . . . . . . . . . . .
PENTASA . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Other Established Brands(2)
913.9
386.6
44.7
431.3
528.5
71.5
19.3
0.9
620.2
41.7
—
39.0
80.7
88.9
65.7
10.7
Established Brands . . . . . . . . . . . . . . . . . .
165.3
GATTEX/REVESTIVE . . . . . . . . . . . . . . .
NATPARA/NATPAR . . . . . . . . . . . . . . . .
Other Internal Medicine(3) . . . . . . . . . . . . . .
82.2
47.8
0.1
Internal Medicine . . . . . . . . . . . . . . . . . . .
130.1
Ophthalmics . . . . . . . . . . . . . . . . . . . . . . .
Oncology(4) . . . . . . . . . . . . . . . . . . . . . . . . .
92.1
33.4
Three months ended
September 30, 2018
September 30, 2017
U.S.
Sales
International
Sales
Total
Sales
U.S.
Sales
International
Sales
Total
Sales
$ 530.7
291.3
91.9
$ 125.2
37.7
120.4
$ 486.6
235.8
86.3
$ 118.5
32.6
110.3
$ 655.9
329.0
212.3
1,197.2
735.9
169.1
905.0
595.0
76.3
19.3
41.1
731.7
170.6
123.0
87.8
381.4
119.1
65.7
31.7
216.5
97.1
51.0
29.0
283.3
349.3
124.4
473.7
66.5
4.8
—
40.2
111.5
128.9
123.0
48.8
300.7
30.2
—
21.0
51.2
14.9
3.2
28.9
47.0
1.3
17.1
808.7
357.5
70.6
428.1
476.8
99.4
10.2
6.7
593.1
41.4
—
37.5
78.9
61.4
72.1
11.4
144.9
72.6
39.1
0.6
177.1
112.3
93.4
50.5
77.4
47.2
$ 605.1
268.4
196.6
1,070.1
725.3
190.7
916.0
538.4
106.0
10.2
36.5
691.1
152.9
117.2
89.6
359.7
86.7
72.1
31.7
190.5
84.9
39.1
36.5
160.5
77.4
68.5
261.4
367.8
120.1
487.9
61.6
6.6
—
29.8
98.0
111.5
117.2
52.1
280.8
25.3
—
20.3
45.6
12.3
—
35.9
48.2
—
21.3
Total product sales . . . . . . . . . . . . . .
$2,467.0
$1,285.8
$3,752.8
$2,290.6
$1,243.2
$3,533.8
(1) Other Neuroscience includes INTUNIV, EQUASYM, and BUCCOLAM.
(2) Other Established Brands includes FOSRENOL and CARBATROL.
(3) Other Internal Medicine includes AGRYLIN, PLENADREN, and RESOLOR.
(4) Results include the Oncology franchise until the date of its sale on August 31, 2018.
H-37
In the periods set out below, Royalties and other revenues were as follows:
(In millions)
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalties and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three months ended
September 30,
2018
September 30,
2017
$ 45.1
73.8
$118.9
$111.4
52.4
$163.8
(In millions)
Product sales by franchise
IMMUNOGLOBULIN THERAPIES . .
HEREDITARY ANGIOEDEMA . . . . . .
BIO THERAPEUTICS . . . . . . . . . . . . . .
Nine months ended
September 30, 2018
September 30, 2017
U.S.
Sales
International
Sales
Total
Sales
U.S.
Sales
International
Sales
Total
Sales
$1,409.6
949.9
254.8
$ 416.3
113.1
328.9
$ 1,825.9
1,063.0
583.7
$1,299.9
878.9
231.9
$ 314.0
89.5
314.8
$ 1,613.9
968.4
546.7
Immunology . . . . . . . . . . . . . . . . . . . . . .
2,614.3
858.3
3,472.6
2,410.7
HEMOPHILIA . . . . . . . . . . . . . . . . . . . .
INHIBITOR THERAPIES . . . . . . . . . . .
1,152.6
160.5
Hematology . . . . . . . . . . . . . . . . . . . . . .
1,313.1
1,072.8
422.7
1,495.5
VYVANSE . . . . . . . . . . . . . . . . . . . . . . .
ADDERALL XR . . . . . . . . . . . . . . . . . .
MYDAYIS . . . . . . . . . . . . . . . . . . . . . . .
Other Neuroscience(1) . . . . . . . . . . . . . . .
1,572.3
219.4
40.4
6.0
Neuroscience . . . . . . . . . . . . . . . . . . . . .
1,838.1
ELAPRASE . . . . . . . . . . . . . . . . . . . . . .
REPLAGAL . . . . . . . . . . . . . . . . . . . . . .
VPRIV . . . . . . . . . . . . . . . . . . . . . . . . . .
Genetic Diseases . . . . . . . . . . . . . . . . . .
LIALDA/MEZAVANT . . . . . . . . . . . . .
PENTASA . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .
Other Established Brands(2)
Established Brands . . . . . . . . . . . . . . . .
GATTEX/REVESTIVE . . . . . . . . . . . . .
NATPARA/NATPAR . . . . . . . . . . . . . .
Other Internal Medicine(3) . . . . . . . . . . . .
Internal Medicine . . . . . . . . . . . . . . . . .
Ophthalmics . . . . . . . . . . . . . . . . . . . . .
Oncology(4) . . . . . . . . . . . . . . . . . . . . . . .
126.6
—
113.9
240.5
194.8
215.6
43.8
454.2
280.2
153.5
0.8
434.5
252.9
124.8
207.5
12.7
—
111.8
332.0
338.9
372.8
153.4
865.1
92.2
—
62.1
154.3
46.6
7.3
100.5
154.4
2.9
63.6
2,225.4
583.2
1,082.1
217.4
2,808.6
1,299.5
1,779.8
232.1
40.4
117.8
1,445.4
225.9
25.9
13.5
2,170.1
1,710.7
465.5
372.8
267.3
1,105.6
287.0
215.6
105.9
608.5
326.8
160.8
101.3
588.9
255.8
188.4
119.4
—
110.3
229.7
402.0
224.5
67.0
693.5
193.3
103.2
1.3
297.8
173.4
135.3
718.3
1,037.5
414.5
1,452.0
174.9
16.4
—
77.8
269.1
335.1
349.0
147.0
831.1
67.6
—
55.3
122.9
35.9
0.1
103.9
139.9
—
54.0
3,129.0
2,119.6
631.9
2,751.5
1,620.3
242.3
25.9
91.3
1,979.8
454.5
349.0
257.3
1,060.8
469.6
224.5
122.3
816.4
229.2
103.3
105.2
437.7
173.4
189.3
Total product sales . . . . . . . . . . . .
$7,272.4
$3,926.1
$11,198.5
$6,950.6
$3,587.3
$10,537.9
(1) Other Neuroscience includes INTUNIV, EQUASYM, and BUCCOLAM.
(2) Other Established Brands includes FOSRENOL and CARBATROL.
(3) Other Internal Medicine includes AGRYLIN, PLENADREN, and RESOLOR.
(4) Results include the Oncology franchise until the date of its sale on August 31, 2018.
H-38
In the periods set out below, Royalties and other revenues were as follows:
(In millions)
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalties and other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nine months ended
September 30,
2018
September 30,
2017
$175.4
183.0
$358.4
$329.7
148.1
$477.8
26. Agreements and Transactions with Baxter
In connection with Baxalta’s separation from Baxter on July 1, 2015, Baxalta and Baxter entered into
several separation-related agreements that provided a framework for Baxalta’s relationship with Baxter after the
separation. These agreements, among others, included a manufacturing and supply agreement, a transition
services agreement and a tax matters agreement. For further details on existing agreements with Baxter, refer to
Note 28, Agreements and Transactions with Baxter, of Shire’s Annual Report on Form 10-K for the year ended
December 31, 2017.
During the three and nine months ended September 30, 2018, the Company reported revenues associated
with the manufacturing and supply agreement with Baxter of approximately $57.6 million and $142.6 million,
respectively (2017: $35.8 million and $106.5 million, respectively) and Selling, general and administrative
expense associated with the transition services agreement with Baxter of approximately $0.3 million and
$10.2 million,
tax-related
indemnification liabilities as of September 30, 2018, associated with the tax matters agreement with Baxter are
discussed in Note 23, Commitments and Contingencies, of these Unaudited Consolidated Financial Statements.
respectively and (2017: $9.8 million and $43.5 million,
respectively). Net
27. Guarantor Financial Information
On June 3, 2016, Shire plc provided full and unconditional, joint and several guarantees of the floating
rate senior notes due 2018, 2.000% senior notes due 2018 (repaid upon maturity in June 2018), 2.875% senior
notes due 2020, 3.600% senior notes due 2022, 4.000% senior notes due 2025, and 5.250% senior notes due 2045
(collectively, “Baxalta Notes”), of Baxalta Inc., a 100% owned subsidiary of the Company. Amounts related to
Baxalta Inc. and its subsidiaries are included in the condensed consolidating financial information for periods
subsequent to June 3, 2016, the date of Baxalta Inc.’s acquisition.
On September 23, 2016, Shire plc provided full and unconditional, joint and several guarantees of the
1.900% senior notes due 2019, 2.400% senior notes due 2021, 2.875% senior notes due 2023, and 3.200% senior
notes due 2026, of SAIIDAC (collectively, “SAIIDAC Notes”), a 100% owned subsidiary of the Company.
On December 1, 2016, Baxalta Inc. became a guarantor to the SAIIDAC Notes. Accordingly, both
Baxalta Inc. and Shire plc are now co-guarantors of the SAIIDAC Notes.
On September 11, 2018, Shire purchased an aggregate of $2.3 billion in principal amount of Baxalta
Notes. For further information, refer to Note 17, Borrowings and Capital Leases, to these unaudited Consolidated
Financial Statements.
In accordance with the requirements of SEC Regulation S-X Rule 3-10 “Financial Statements of
Guarantors and Issuers of Guaranteed Securities Registered or Being Registered”, the following tables present
Unaudited Condensed Consolidating Financial Statements of the two separate guarantee structures of the Baxalta
Notes and SAIIDAC Notes, for:
•
Shire plc - Parent Guarantor;
H-39
•
•
•
•
•
SAIIDAC Subsidiary Issuer - issuer subsidiary of the SAIIDAC Notes; (a)
Baxalta Inc. - issuer subsidiary of the Baxalta Notes and guarantor subsidiary of the SAIIDAC
Notes; (b)
Non-Guarantor Non-Issuer Subsidiaries - presents all other subsidiaries of the Parent Guarantor on
a combined basis, none of which guarantee the Baxalta Notes or SAIIDAC Notes; (c)
Non-Guarantor Subsidiaries of Baxalta Notes - presents combined Non-Guarantor Non-Issuer
Subsidiaries, including SAIIDAC, under the guarantee structure where Baxalta Inc. is the subsidiary
issuer (a+c); and
Eliminations - primarily relate to eliminations of investments in subsidiaries and intercompany
balances and transactions.
The Unaudited Condensed Consolidating Financial Statements present investments in subsidiaries using
the equity method of accounting.
H-40
Condensed Consolidating Balance Sheets
(Unaudited, In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
As of September 30, 2018
ASSETS
Current assets:
Cash and cash
equivalents . . . . . . . . . . . . $
Restricted cash . . . . . . . . . . .
Accounts receivable, net . . .
Inventories . . . . . . . . . . . . . .
Other current assets . . . . . . .
Intercompany receivables . .
Short term intercompany
loan receivable . . . . . . . . .
Total current assets . . . . . . .
Non-current assets:
Investments . . . . . . . . . . . . .
Property, plant and
equipment (PP&E), net . .
Goodwill
. . . . . . . . . . . . . . .
Intangible assets, net . . . . . .
. . . . . . . .
Deferred tax asset
Long term intercompany
loan receivable . . . . . . . . .
Other non-current assets . . .
— $
—
—
—
—
—
— $
—
—
—
1.5
41.0
—
—
4,210.3
4,252.8
—
—
—
—
81.2
—
—
81.2
$
193.2
39.9
3,207.4
3,458.7
817.4
7,811.8
$
193.2
39.9
3,207.4
3,458.7
818.9
7,852.8
$
— $
—
—
—
—
(7,852.8)
193.2
39.9
3,207.4
3,458.7
900.1
—
—
4,210.3
(4,210.3)
—
15,528.4
19,781.2
(12,063.1)
7,799.3
44,695.6
— 38,547.8
13,312.3
13,312.3
(96,085.0)
470.7
—
—
—
—
—
—
—
—
—
—
4.6
—
—
304.1
8,763.6
1.9
3,507.0
—
6,448.4
19,095.0
29,625.4
151.2
—
169.4
6,448.4
19,095.0
29,625.4
151.2
—
—
—
(304.1)
6,453.0
19,095.0
29,625.4
151.2
8,763.6
171.3
(12,270.6)
—
—
171.3
Total assets . . . . . . . . . . . . . $44,695.6 $13,018.3 $42,444.7
$84,330.1
$97,348.4
$(120,722.8) $63,765.9
LIABILITIES AND
EQUITY
Current liabilities:
Accounts payable and
accrued expenses . . . . . . . $
6.4 $
8.0 $
33.6
$ 3,977.1
$ 3,985.1
$
— $ 4,025.1
Short term borrowings and
capital leases . . . . . . . . . .
Intercompany payables . . . .
Short term intercompany
loan payable . . . . . . . . . . .
Other current liabilities . . . .
Total current liabilities . . . . .
Long term borrowings and
capital leases . . . . . . . . . .
Deferred tax liability . . . . . .
Long term intercompany
—
3,612.5
4,210.3
—
—
4,240.3
—
—
—
—
—
3.8
3,618.9
4,218.3
4,277.7
—
—
8,763.6
—
1,939.9
—
38.4
—
4,210.3
234.0
8,459.8
394.5
4,875.3
4,248.7
—
4,210.3
234.0
—
(7,852.8)
4,248.7
—
(4,210.3)
—
—
237.8
12,678.1
(12,063.1)
8,511.6
9,158.1
4,875.3
—
(304.1)
11,098.0
4,571.2
loan payable . . . . . . . . . . .
3,786.5
Other non-current
liabilities . . . . . . . . . . . . .
—
—
—
—
60.3
Total liabilities . . . . . . . . . . .
7,405.4
12,981.9
6,277.9
Total equity . . . . . . . . . . . . .
37,290.2
36.4
36,166.8
8,484.1
8,484.1
(12,270.6)
—
2,234.6
24,448.3
59,881.8
2,234.6
37,430.2
59,918.2
—
2,294.9
(24,637.8)
26,475.7
(96,085.0)
37,290.2
Total liabilities and
equity . . . . . . . . . . . . . . . . $44,695.6 $13,018.3 $42,444.7
$84,330.1
$97,348.4
$(120,722.8) $63,765.9
H-41
Condensed Consolidating Balance Sheets
(Unaudited, In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
As of December 31, 2017
ASSETS
Current assets:
Cash and cash
equivalents . . . . . . . . . . . . $
Restricted cash . . . . . . . . . . .
Accounts receivable, net . . .
Inventories . . . . . . . . . . . . . .
Other current assets . . . . . . .
Intercompany receivables . .
Short term intercompany
loan receivable . . . . . . . . .
Total current assets . . . . . . .
Non-current assets:
Investments . . . . . . . . . . . . .
Property, plant and
equipment (PP&E), net . .
Goodwill
. . . . . . . . . . . . . . .
Intangible assets, net . . . . . .
. . . . . . . .
Deferred tax asset
Long term intercompany
loan receivable . . . . . . . . .
Other non-current assets . . .
— $ — $
—
—
—
—
—
—
—
—
1.6
120.2
—
—
2,006.3
2,128.1
0.5
—
—
—
95.2
—
—
95.7
$
471.9
39.4
3,009.8
3,291.5
698.5
4,682.3
—
12,193.4
$
471.9
39.4
3,009.8
3,291.5
700.1
4,802.5
2,006.3
14,321.5
$
— $
—
—
—
—
(4,802.5)
472.4
39.4
3,009.8
3,291.5
795.3
—
(2,006.3)
—
(6,808.8)
7,608.4
43,204.3
— 38,924.6
13,059.4
13,059.4
(94,947.2)
241.1
—
—
—
—
—
—
—
—
7.6
—
—
304.1
— 12,050.2
2.8
—
1,609.3
—
6,627.8
19,831.7
33,046.1
188.8
—
202.6
6,627.8
19,831.7
33,046.1
188.8
12,050.2
205.4
—
—
—
(304.1)
6,635.4
19,831.7
33,046.1
188.8
(13,659.5)
—
—
205.4
Total assets . . . . . . . . . . . . . $43,204.3 $14,181.1 $40,941.3
$85,149.8
$99,330.9
$(115,719.6) $67,756.9
LIABILITIES AND
EQUITY
Current liabilities:
Accounts payable and
accrued expenses . . . . . . . $
0.2 $
85.9 $
18.1
$ 4,080.3
$ 4,166.2
$
— $ 4,184.5
Short term borrowings and
capital leases . . . . . . . . . .
Intercompany payables . . . .
Short term intercompany
loan payable . . . . . . . . . . .
Other current liabilities . . . .
Total current liabilities . . . . .
Long term borrowings and
capital leases . . . . . . . . . .
Deferred tax liability . . . . . .
Long term intercompany
—
3,585.3
2,006.3
—
748.8
1,217.2
—
573.5
—
—
—
10.7
4,159.0
2,092.2
1,994.8
— 12,050.2
—
—
4,308.9
—
33.6
—
2,006.3
324.6
6,444.8
393.3
5,052.3
2,039.9
—
2,006.3
324.6
8,537.0
12,443.5
5,052.3
—
(4,802.5)
2,788.7
—
(2,006.3)
—
—
908.8
(6,808.8)
7,882.0
—
(304.1)
16,752.4
4,748.2
—
10,790.6
10,790.6
(13,659.5)
—
loan payable . . . . . . . . . . .
2,868.9
Other non-current
liabilities . . . . . . . . . . . . .
—
—
—
Total liabilities . . . . . . . . . . .
7,027.9
14,142.4
6,373.7
Total equity . . . . . . . . . . . . .
36,176.4
38.7
34,567.6
Total liabilities and
70.0
2,127.9
24,808.9
60,340.9
2,127.9
38,951.3
60,379.6
—
2,197.9
(20,772.4)
31,580.5
(94,947.2)
36,176.4
equity . . . . . . . . . . . . . . . . $43,204.3 $14,181.1 $40,941.3
$85,149.8
$99,330.9
$(115,719.6) $67,756.9
H-42
Condensed Consolidating Statements of Operations
(Unaudited, In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
$ —
$—
$ —
$3,752.8
$3,752.8
$ —
$3,752.8
—
—
—
—
(14.5)
—
45.0
—
—
(30.5)
(43.7)
0.2
(43.5)
—
—
—
—
—
—
—
—
—
—
—
5.6
—
5.6
—
—
—
—
—
—
5.3
—
—
118.9
3,871.7
118.9
3,871.7
1,157.6
1,157.6
407.2
851.3
433.7
42.7
254.8
407.2
851.3
433.7
42.7
254.8
(267.2)
(267.2)
5.3
2,880.1
2,880.1
(5.3)
(37.1)
(24.8)
991.6
(48.7)
(71.5)
991.6
(43.1)
(71.5)
(61.9)
(120.2)
(114.6)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
118.9
3,871.7
1,157.6
407.2
836.8
433.7
93.0
254.8
(267.2)
2,915.9
955.8
(123.9)
(96.1)
(220.0)
735.8
(203.3)
expenses . . . . . . . . . . . .
30.5
Three months ended
September 30, 2018
Revenues:
Product sales . . . . . . . . . . .
Royalties and other
revenues . . . . . . . . . . . .
Total revenues . . . . . . . . . .
Costs and expenses:
Cost of sales . . . . . . . . . . .
Research and
development
Selling, general and
. . . . . . . . .
administrative . . . . . . . .
Amortization of acquired
intangible assets . . . . . .
Integration and acquisition
costs . . . . . . . . . . . . . . . .
Reorganization costs . . . . .
Gain on sale of Oncology
franchise and product
rights . . . . . . . . . . . . . . .
Total operating
Operating income/(loss)
from continuing
operations . . . . . . . . . . .
Interest income/(expense),
net . . . . . . . . . . . . . . . . .
Other income/(expense),
net . . . . . . . . . . . . . . . . .
Total other income/
(expense), net
. . . . . . . .
Income/(loss) from
continuing operations
before income taxes and
equity in earnings/
(losses) of equity
method investees . . . . . .
Income taxes . . . . . . . . . . .
Equity in earnings/(losses)
of equity method
investees, net of
taxes . . . . . . . . . . . . . . .
Income/(loss) from
continuing operations,
net of taxes . . . . . . . . . .
Net income/(loss) . . . . . . .
Comprehensive income/
(74.0)
0.2
5.6
(2.4)
(67.2)
15.2
871.4
(216.3)
877.0
(218.7)
611.0
—
(74.2)
4.7
4.7
(536.8)
4.7
537.2
537.2
3.2
3.2
(126.2)
(126.2)
659.8
659.8
663.0
663.0
(536.8)
(536.8)
537.2
537.2
(loss) . . . . . . . . . . . . . . .
$436.0
$ 3.2
$(220.3)
$ 558.6
$ 561.8
$(341.5)
$ 436.0
H-43
Condensed Consolidating Statements of Operations
(Unaudited, In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Nine months ended
September 30, 2018
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
$ —
$ —
$ 11,198.5
$ 11,198.5
$
— $ 11,198.5
Revenues:
Product sales . . . . . . . . . . . . $ —
Royalties and other
revenues . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . .
Costs and expenses:
Cost of sales . . . . . . . . . . . . .
Research and
development . . . . . . . . . . .
Selling, general and
—
—
—
—
administrative . . . . . . . . .
76.4
Amortization of acquired
intangible assets . . . . . . . .
Integration and acquisition
costs . . . . . . . . . . . . . . . . .
Reorganization costs . . . . . .
Gain on sale of Oncology
franchise and product
rights . . . . . . . . . . . . . . . .
—
142.7
—
—
Total operating expenses . . .
219.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7.2
—
7.4
—
—
14.6
358.4
358.4
11,556.9
11,556.9
3,398.3
3,398.3
1,240.0
1,240.0
2,465.7
2,465.7
1,375.3
1,375.3
361.9
268.9
361.9
268.9
(267.2)
8,842.9
(267.2)
8,842.9
Operating income/(loss)
from continuing
operations . . . . . . . . . . . . .
Interest income/(expense),
(219.1)
—
(14.6)
2,714.0
2,714.0
net
. . . . . . . . . . . . . . . . . .
(110.4)
(2.2)
Other income/(expense),
net
. . . . . . . . . . . . . . . . . .
—
—
(91.6)
(23.9)
(169.1)
(171.3)
(20.0)
(20.0)
Total other income/
(expense), net . . . . . . . . . .
(110.4)
(2.2)
(115.5)
(189.1)
(191.3)
Income/(loss) from
continuing operations
before income taxes and
equity in earnings/(losses)
of equity method
investees . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . .
Equity in earnings/(losses)
of equity method
investees, net of taxes . . .
Income/(loss) from
(329.5)
17.4
(2.2)
0.6
(130.1)
28.4
2,524.9
(417.4)
2,522.7
(416.8)
2,015.4
—
243.2
11.2
11.2
(2,258.6)
11.2
continuing operations, net
of taxes . . . . . . . . . . . . . . .
1,703.3
Net income/(loss) . . . . . . . . .
1,703.3
Comprehensive income/
(1.6)
(1.6)
141.5
141.5
2,118.7
2,118.7
2,117.1
2,117.1
(2,258.6)
(2,258.6)
1,703.3
1,703.3
(loss)
. . . . . . . . . . . . . . . . $
954.7
$ (1.6)
$ (538.7)
$ 1,370.1
$ 1,368.5
$
(829.8) $
954.7
H-44
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
358.4
11,556.9
3,398.3
1,240.0
2,549.3
1,375.3
512.0
268.9
(267.2)
9,076.6
2,480.3
(373.3)
(43.9)
(417.2)
2,063.1
(371.0)
Condensed Consolidating Statements of Operations
(Unaudited, In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
$ —
$—
$ —
$3,533.8
$3,533.8
$ —
$3,533.8
—
—
—
—
6.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4.0
—
9.2
—
—
13.2
163.8
3,697.6
163.8
3,697.6
1,001.4
1,001.4
402.8
849.6
482.4
227.8
5.4
402.8
849.6
482.4
227.8
5.4
0.3
2,969.7
0.3
2,969.7
Total operating expenses . . .
6.1
Operating income/(loss)
from continuing
operations . . . . . . . . . . . . .
Interest income/(expense),
(6.1)
—
net
. . . . . . . . . . . . . . . . . .
(48.0)
3.0
Other income/(expense),
net
. . . . . . . . . . . . . . . . . .
—
—
Total other income/
(13.2)
(23.6)
4.4
727.9
(71.7)
(4.6)
(expense), net . . . . . . . . . .
(48.0)
3.0
(19.2)
(76.3)
727.9
(68.7)
(4.6)
(73.3)
Three months ended
September 30, 2017
Revenues:
Product sales . . . . . . . . . . . .
Royalties and other
revenues . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . .
Costs and expenses:
Cost of sales . . . . . . . . . . . . .
Research and
development . . . . . . . . . . .
Selling, general and
administrative . . . . . . . . .
Amortization of acquired
intangible assets . . . . . . . .
Integration and acquisition
costs . . . . . . . . . . . . . . . . .
Reorganization costs . . . . . .
Loss on sale of product
rights . . . . . . . . . . . . . . . .
Income/(loss) from
continuing operations
before income taxes and
equity in earnings/(losses)
of equity method
investees . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . .
Equity in earnings/(losses)
of equity method
investees, net of taxes . . .
Income/(loss) from
(54.1)
0.9
3.0
0.6
(32.4)
(8.9)
651.6
(6.1)
654.6
(5.5)
604.0
—
(79.8)
(3.3)
(3.3)
(524.3)
(3.4)
continuing operations, net
of taxes . . . . . . . . . . . . . . .
550.8
Loss from discontinued
operations, net of taxes . .
—
Net income/(loss) . . . . . . . . .
550.8
3.6
—
3.6
Comprehensive income/
(121.1)
642.2
645.8
(524.3)
551.2
—
(121.1)
(0.4)
641.8
(0.4)
645.4
—
(524.3)
(0.4)
550.8
(loss)
. . . . . . . . . . . . . . . .
$1,319.8
$ 3.6
$ 581.0
$1,411.2
$1,414.8
$(1,995.8)
$1,319.8
H-45
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
163.8
3,697.6
1,001.4
402.8
859.7
482.4
237.0
5.4
0.3
2,989.0
708.6
(140.3)
(0.2)
(140.5)
568.1
(13.5)
Condensed Consolidating Statements of Operations
(Unaudited, In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
$ —
$ —
$ —
$10,537.9
$10,537.9
$ —
$10,537.9
Nine months ended
September 30, 2017
Revenues:
Product sales . . . . . . . . . . . .
Royalties and other
revenues . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . .
Costs and expenses:
Cost of sales . . . . . . . . . . . . .
Research and
development . . . . . . . . . . .
Selling, general and
—
—
—
—
administrative . . . . . . . . .
24.2
Amortization of acquired
intangible assets . . . . . . . .
Integration and acquisition
costs . . . . . . . . . . . . . . . . .
Reorganization costs . . . . . .
Loss on sale of product
rights . . . . . . . . . . . . . . . .
—
164.7
—
—
Total operating expenses . . .
188.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
15.3
—
52.3
—
—
67.6
477.8
477.8
11,015.7
11,015.7
3,437.3
3,437.3
1,324.5
1,324.5
2,608.2
2,608.2
1,280.5
1,280.5
479.7
24.5
(0.4)
479.7
24.5
(0.4)
9,154.3
9,154.3
Operating income/(loss)
from continuing
operations . . . . . . . . . . . . .
Interest income/(expense),
(188.9)
—
(67.6)
1,861.4
1,861.4
net
. . . . . . . . . . . . . . . . . .
(109.1)
14.5
(66.5)
(258.6)
(244.1)
Other income/(expense),
net
. . . . . . . . . . . . . . . . . .
1.8
—
4.3
0.7
0.7
Total other income/
(expense), net . . . . . . . . . .
(107.3)
14.5
(62.2)
(257.9)
(243.4)
Income/(loss) from
continuing operations
before income taxes and
equity in earnings/(losses)
of equity method
investees . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . .
Equity in earnings/(losses)
of equity method
investees, net of taxes . . .
Income/(loss) from
continuing operations, net
of taxes . . . . . . . . . . . . . . .
Gain from discontinued
(296.2)
1.7
14.5
(3.6)
(129.8)
(45.0)
1,603.5
2.3
1,618.0
(1.3)
1,460.6
—
(119.7)
0.1
0.1
(1,340.9)
0.1
1,166.1
10.9
(294.5)
1,605.9
1,616.8
(1,340.9)
1,147.5
operations, net of taxes . .
—
Net income/(loss) . . . . . . . . .
1,166.1
—
10.9
—
18.6
18.6
—
18.6
(294.5)
1,624.5
1,635.4
(1,340.9)
1,166.1
Comprehensive income/
(loss)
. . . . . . . . . . . . . . . .
$3,632.8
$10.9
$2,031.5
$ 4,088.2
$ 4,099.1
$(6,130.6)
$ 3,632.8
H-46
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
477.8
11,015.7
3,437.3
1,324.5
2,647.7
1,280.5
696.7
24.5
(0.4)
9,410.8
1,604.9
(419.7)
6.8
(412.9)
1,192.0
(44.6)
Condensed Consolidating Statements of Cash Flows
(Unaudited, In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
$(251.2) $
(17.4) $
264.2
$ 2,811.9
$ 2,794.5
$
— $ 2,807.5
Nine months ended
September 30, 2018
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net cash provided by/(used in)
operating activities . . . . . . . .
CASH FLOWS FROM
INVESTING ACTIVITIES:
Transactions with
subsidiaries . . . . . . . . . . . . .
(228.0)
(16,010.0)
(11,268.3)
(32,187.9)
(48,197.9)
59,694.2
—
Proceeds from sale of
Oncology franchise . . . . . . .
Purchases of PP&E . . . . . . . . .
Acquisition of business, net of
cash acquired . . . . . . . . . . . .
Proceeds from sale of
investments . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . .
Net cash provided by/(used in)
investing activities . . . . . . . .
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from revolving line
of credit, long term and
short term borrowings . . . . .
Repayment of revolving line of
credit, long term and short
term borrowings . . . . . . . . . .
Proceeds from/(to)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,412.2
(564.6)
2,412.2
(564.6)
(104.7)
(104.7)
31.8
(97.9)
31.8
(97.9)
—
—
—
—
—
2,412.2
(564.6)
(104.7)
31.8
(97.9)
(228.0)
(16,010.0)
(11,268.3)
(30,511.1)
(46,521.1)
59,694.2
1,676.8
—
—
2,685.0
—
1,050.3
3,735.3
(3,780.0)
(3,129.5)
(1,059.5)
(4,839.5)
—
—
3,735.3
(7,969.0)
intercompany borrowings . .
923.5
17,122.4
14,142.0
27,506.3
44,628.7
(59,694.2)
—
Contingent consideration
payment . . . . . . . . . . . . . . . .
Payment of dividend . . . . . . . .
Proceeds from issuance of
stock for share-based
compensation
arrangements . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . .
Net cash provided by/(used in)
financing activities . . . . . . . .
Effect of foreign exchange rate
changes on cash and cash
equivalents . . . . . . . . . . . . . .
Net decrease in cash, cash
equivalents and restricted
cash . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and
restricted cash at beginning
of period . . . . . . . . . . . . . . . .
Cash, cash equivalents and
restricted cash at end of
period . . . . . . . . . . . . . . . . . .
(396.0)
(48.6)
0.3
—
—
—
—
—
—
—
—
(228.0)
—
(228.0)
9.1
(18.0)
171.4
(7.6)
171.4
(7.6)
—
—
—
—
(396.0)
(276.6)
180.8
(25.6)
479.2
16,027.4
11,003.6
27,432.9
43,460.3
(59,694.2)
(4,751.1)
—
—
—
—
—
—
—
(11.9)
(11.9)
(0.5)
(278.2)
(278.2)
0.5
511.3
511.3
—
—
—
(11.9)
(278.7)
511.8
$ — $
— $
— $
233.1
$
233.1
$
— $
233.1
H-47
Condensed Consolidating Statements of Cash Flows
(Unaudited, In millions)
Baxalta Inc.
(Baxalta
Notes
Subsidiary
Issuer and
SAIIDAC
Notes
Subsidiary
Guarantor)
SAIIDAC
(SAIIDAC
Notes
Subsidiary
Issuer)
Shire plc
(Parent
Guarantor)
Non-Guarantor
Non-Issuer
Subsidiaries
Non-Guarantor
Subsidiaries of
Baxalta Notes Eliminations Consolidated
Nine months ended
September 30, 2017
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net cash provided by/(used
in) operating activities . . . $ (102.9) $
(62.9)
$
0.6
$ 2,902.3
$ 2,839.4
$ —
$ 2,737.1
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Transactions with
subsidiaries . . . . . . . . . . .
Purchases of PP&E . . . . . . .
Proceeds/(payments) from
sale of investments . . . . . .
Other, net . . . . . . . . . . . . . . .
Net cash provided by/(used
(1,339.3)
—
—
—
(262.9)
—
(659.3)
—
(4,209.1)
(565.5)
(4,472.0)
(565.5)
6,470.6
—
—
—
(9.8)
—
57.9
34.8
57.9
34.8
—
—
—
(565.5)
48.1
34.8
in) investing activities . . .
(1,339.3)
(262.9)
(669.1)
(4,681.9)
(4,944.8)
6,470.6
(482.6)
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Proceeds from revolving line
of credit, long term and
short term borrowings . . .
Repayment of revolving line
of credit, long term and
short term borrowings . . .
Proceeds from/(to)
intercompany
borrowings . . . . . . . . . . . .
Payment of dividend . . . . . .
Proceeds from issuance of
stock for share-based
compensation
arrangements . . . . . . . . . .
Other, net . . . . . . . . . . . . . . .
Net cash provided by/(used
2,110.0
1,150.0
(2,560.0)
(3,100.0)
—
—
1.6
1,151.6
(4.5)
(3,104.5)
—
—
3,261.6
(5,664.5)
1,919.6
(27.6)
2,275.8
—
623.9
—
1,651.3
(207.1)
3,927.1
(207.1)
(6,470.6)
—
—
(234.7)
0.2
—
—
—
4.6
(0.8)
87.4
(25.4)
87.4
(25.4)
—
—
92.2
(26.2)
in) financing activities . . .
1,442.2
325.8
627.7
1,503.3
1,829.1
(6,470.6)
(2,571.6)
Effect of foreign exchange
rate changes on cash and
cash equivalents . . . . . . . .
Net decrease in cash and
cash equivalents and
restricted cash . . . . . . . . .
Cash, cash equivalents, and
restricted cash at
beginning of period . . . . .
—
—
—
—
—
—
—
6.2
6.2
(40.8)
(270.1)
(270.1)
41.7
512.8
512.8
—
—
—
6.2
(310.9)
554.5
Cash, cash equivalents, and
restricted cash at end of
period . . . . . . . . . . . . . . . . $ — $ —
$
0.9
$
242.7
$
242.7
$ —
$
243.6
H-48
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
On May 8, 2018, Takeda and Shire signed a Co-operation Agreement and announced an offer to acquire
all of the issued and to-be-issued share capital of Shire. The unaudited pro forma condensed combined financial
data set forth below gives effect to the following:
•
•
•
the Shire Acquisition, which is expected to close in the first half of 2019, the actual date of close to
be determined (the “Closing”);
the financing obtained by Takeda to fund the cash portion of the acquisition consideration; and
the issuance of shares of Takeda to shareholders of Shire (collectively, the “Transactions”).
The final purchase price will vary based on the exchange rate at the date of the Closing and the Takeda
share price on that date. The terms and conditions of the financing that will be used to fund the acquisition,
including the amount of debt we actually incur, have not been finally determined and are subject to change.
The unaudited pro forma condensed combined statement of financial position gives effect to these
transactions as if they occurred on March 31, 2018 and the unaudited pro forma condensed combined statements
of income give effect to these transactions as if they occurred as of April 1, 2017. The unaudited pro forma
condensed combined financial information has been prepared by management in accordance with the regulations
of the SEC and is not necessarily indicative of what the combined company’s financial position or results of
operations actually would have been had the Shire Acquisition been completed as of the dates indicated. In
addition, the unaudited pro forma condensed combined financial statements do not purport to project the future
financial position or results of operations of the combined entity. There were no material transactions between
Shire and Takeda during the period presented in the unaudited pro forma condensed combined financial
statements that would need to be eliminated.
The unaudited pro forma condensed combined financial statements have been prepared using the
acquisition method of accounting under IFRS, with Takeda being the accounting acquirer. The pro forma
adjustments are preliminary and based on currently available information. The pro forma adjustments have been
made solely for the purpose of preparing these unaudited pro forma condensed combined financial statements.
Differences between these preliminary estimates and the final acquisition accounting will likely occur, and these
differences could be material. The differences, if any, could have a material impact on the accompanying
unaudited pro forma condensed combined financial statements and Takeda’s future results of operations and
financial position.
In addition, the unaudited pro forma condensed combined financial statements do not reflect any cost
savings, operating synergies, or revenue enhancements that the combined company may achieve as a result of the
Shire Acquisition; the costs to integrate the operations of Shire or the costs necessary to achieve these cost
savings, operating synergies, and revenue enhancements.
The unaudited pro forma condensed combined financial information gives pro forma effect to events
that are directly attributable to the Shire Acquisition, are factually supportable, and with respect to the unaudited
pro forma condensed combined statements of operations, are expected to have a continuing impact on the
combined results. The unaudited pro forma condensed combined statement of income excludes ¥25,070 million
of non-recurring costs expected to be incurred in connection with the acquisition and the impact of any
incremental cost of sales related to the recognition of Shire’s inventory at fair value of ¥411,891 million, which is
expected to be recorded within the first year after Closing.
All financial data included in the unaudited condensed combined financial information is presented in
millions of Japanese yen and has been prepared on the basis of IFRS and Takeda’s accounting policies. For the
purpose of the pro forma condensed combined financial information, Shire’s historical financial information as
P-1
of and for the year ended December 31, 2017, has been conformed from U.S. GAAP to IFRS and Takeda’s
accounting policies for material accounting policy differences based on information available to Takeda.
The unaudited pro forma condensed combined financial information set forth below should be read in
conjunction with the audited consolidated financial statements and the related notes of Takeda and Shire included
in this registration statement. Amounts shown in the tables below have been rounded to the nearest indicated
digit unless otherwise specified. As a result, the sum of the components may not equal the total amount reported
due to rounding.
P-2
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION
AS OF MARCH 31, 2018
(millions of JPY)
Takeda
Shire (A)
Pro forma
Adjustments
Note
Pro forma
ASSETS
Noncurrent assets:
Property, plant, and equipment . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset
. . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
536,801
1,029,248
1,014,264
64,980
382,362
749,012
2,238,458
3,744,677
35,611
50,340
37,949
588,639
1,868,102
893
—
(B)
(B)(ii)(c)
(B)(ii)(a)
(E)
Total non-current assets . . . . . . . . . . . . . . . .
3,027,655
6,818,098
2,495,583
Current assets:
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade and other receivables . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . .
212,944
420,247
294,522
151,095
371,571
394,864
57,677
51,479
Total current assets . . . . . . . . . . . . . . . . . . . .
1,078,808
875,591
(B)
(C)
457,657
—
110,763
—
568,420
1,323,762
3,856,345
6,627,043
101,484
432,702
12,341,336
1,042,172
815,111
462,962
202,574
2,522,819
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,106,463
7,693,689
3,064,003
14,864,155
LIABILITIES
Noncurrent liabilities:
Bonds and loans . . . . . . . . . . . . . . . . . . . . . .
Net defined benefit liabilities . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
985,644
87,611
90,725
187,565
1,858,972
66,056
535,912
215,366
Total non-current liabilities . . . . . . . . . . . . . .
1,351,545
2,676,306
—
—
588,433
—
588,433
(B)(ii)(b)
Current liabilities:
Bonds and loan . . . . . . . . . . . . . . . . . . . . . . .
Trade and other payables . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
240,259
132,781
364,451
313,948
71,752
234,402
296,958
3,329,582
—
—
107,369
(D)
(B)
Total current liabilities . . . . . . . . . . . . . . . . .
737,509
917,060
3,436,951
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,089,054
3,593,366
4,025,384
EQUITY
Share capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . .
Other components of equity . . . . . . . . . . . . . . . . .
Equity attributable to owners of the
77,914
90,740
(74,373)
1,557,307
345,836
9,255
2,827,075
(31,942)
1,140,737
155,198
1,587,748
(1,260,066)
31,942
(1,165,807)
(155,198)
(E)
(E)
(E)
(E)
(E)
Company . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . .
1,997,424
19,985
4,100,323
(961,381)
—
—
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,017,409
4,100,323
(961,381)
TOTAL LIABILITIES AND EQUITY . . . . . . . .
4,106,463
7,693,689
3,064,003
2,844,616
153,667
1,215,070
402,931
4,616,284
3,643,548
312,011
367,183
768,778
5,091,520
9,707,804
1,674,917
1,657,749
(74,373)
1,532,237
345,836
5,136,366
19,985
5,156,351
14,864,155
P-3
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED MARCH 31, 2018
(millions of JPY except share and per share data)
Takeda
Shire (a)
Adjustments Note
Pro forma
Pro forma
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general, and administrative expense . . . . . . . . .
Research and development expense . . . . . . . . . . . . . . . .
Amortization and impairment losses on intangible
1,770,531
(495,921)
(628,106)
(325,441)
1,703,475
(529,114)
(393,241)
(184,046)
—
(1,368)
(855)
(234)
assets associated with products . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Other operating income (expense), net
(122,131)
42,857
(198,651)
(99,072)
(338,181)
1,510
Operating profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance income (expense), net . . . . . . . . . . . . . . . . . . . .
Share of profit (loss) of investments accounted for
241,789
7,615
299,351
(65,799)
(339,128)
(91,270)
using the equity method . . . . . . . . . . . . . . . . . . . . . . .
(32,199)
337
—
(F)
(F)
(F)
(G)
(I)
(H)
Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax (expense) / benefit . . . . . . . . . . . . . . . . . . . .
217,205
(30,497)
233,889
278,821
(430,398)
107,600
(J)
Net profit for the year, before discontinued
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain / (loss) from discontinued operations . . . . . . . . . .
186,708
—
512,710
2,023
(322,798)
—
Net profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . .
186,708
514,733
(322,798)
Attributable to:
Owners of the Company . . . . . . . . . . . . . . . . . . . . .
Non-controlling interest . . . . . . . . . . . . . . . . . . . . .
186,886
(178)
Profit from continuing operations . . . . . . . . . . . . .
186,708
Earnings per share (JPY):
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
239.35
237.56
Weighted average shares outstanding (in millions):
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
780.8
786.7
3,474,006
(1,026,403)
(1,022,202)
(509,721)
(658,963)
(54,705)
202,012
(149,454)
(31,862)
20,696
355,924
376,620
2,023
378,643
376,798
(178)
376,620
243.90
242.97
1,544.9
1,550.8
P-4
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
Basis of Preparation
The unaudited pro forma condensed combined statement of financial position as of March 31, 2018 and
the unaudited pro forma condensed combined statements of income for the year ended March 31, 2018, reflect
adjustments that are: (i) directly attributable to the Transactions; (ii) factually supportable; and (iii) with respect
to the pro forma condensed combined statement of income, expected to have a continuing impact on the
combined results following the consummation of the Transactions.
The unaudited pro forma condensed combined statement of financial position has been prepared by
combining Takeda’s statement of financial position as of March 31, 2018, and Shire’s balance sheet as of
December 31, 2017 and applying the pro forma adjustments described below. The unaudited pro forma
condensed combined statement of income has been prepared by combining Takeda’s statement of income for the
year ended March 31, 2018 and Shire’s for the year ended December 31, 2017 and applying the pro forma
adjustments described below. Management has elected to combine the historical financial information based on
the respective fiscal year end of each company. The historical Shire balance sheet and income statement have not
been updated for any significant events that may have occurred between December 31, 2017 and March 31,
2018. In addition, the historical financial information of Shire has been prepared based on U.S. GAAP, which has
been converted to IFRS and Takeda’s accounting policies. The pro forma condensed combined statement of
financial position has been prepared assuming the Closing occurred on March 31, 2018, and the pro forma
condensed combined statement of income has been prepared assuming the Closing occurred on April 1, 2017.
The pro forma adjustments for the Transactions are made on the basis that it is a business combination
that
is accounted for under the acquisition method of accounting in accordance with IFRS 3, Business
Combinations. Accordingly, Takeda has estimated the fair value of Shire’s assets acquired and liabilities
assumed and conformed Shire’s accounting policies to its own for material policy differences and based on
available information.
The unaudited pro forma condensed combined financial statements have been prepared based upon
currently available information and assumptions deemed appropriate by Takeda management and for
informational purposes only and should be read in conjunction with Takeda’s and Shire’s financial statements.
The preparation of these unaudited pro forma condensed combined financial statements requires management to
make estimates and assumptions deemed appropriate. The unaudited pro forma condensed combined financial
statements are not intended to represent, or be indicative of, the actual financial position and results of operations
that would have occurred if the Transactions described below had been affected on the dates indicated, nor are
they indicative of Takeda’s future results.
Pro forma adjustments
information has been conformed from Shire’s historical financial
(A) The historical financial statements of Shire were prepared in accordance with U.S. GAAP and prepared in
US dollars. The historical financial information of Shire presented in the pro forma condensed combined
financial
information to IFRS and
Takeda’s accounting policies for material accounting policy differences based on information available at
the time of preparation and converted to Japanese Yen. A reconciliation of the historical financial
information of Shire to Shire’s financial information based on IFRS and the foreign currency rates used to
convert the historical financial statements to Japanese Yen are presented in Note K.
Based upon the available information, Takeda is not aware of any additional accounting policy differences
that would have a material impact on the unaudited pro forma condensed combined financial information
and that have not been reflected in the conversion shown in Note K. Takeda will review Shire’s accounting
policies subsequent to the Closing in more detail. As a result of that review, Takeda may identify
differences between the accounting policies of the two companies that, when conformed, could have a
material impact on the unaudited pro forma condensed combined financial information.
P-5
(B) Reflects the preliminary purchase price allocation among assets acquired and liabilities assumed as set forth
below (in millions of JPY):
Estimated purchase price:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Takeda shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
3,138,433
3,194,007
Total (i)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,332,440
Preliminary estimate of assets acquired and liabilities assumed (ii)
Net assets of Shire at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Cash for estimated transaction expenses (note C) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Historical goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Historical intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted net book value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase inventory to fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IPR&D at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other identifiable intangible assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase property, plant, and equipment to fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax impact of fair value adjustments (ii)(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash settled share-based award liability (iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,100,323
(24,428)
(2,238,458)
(3,744,677)
(1,907,240)
457,657
284,048
5,328,731
37,949
(588,433)
(107,369)
Preliminary allocation to goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,827,097
(i) The aggregate preliminary purchase price is calculated as follows (in millions of JPY except per share
data):
Calculation of estimated cash consideration (a):
Number of Shire shares to be purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash consideration per share ($30.33 per share) in ¥ (a) . . . . . . . . . . . . . . . . .
Amount
910,746,641
3,446
Estimated cash paid for shares and vested share-settled awards (b) . . . . . . . . .
3,138,433
Calculation of estimated fair value of shares issued as consideration:
Shire shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conversion ratio (as per agreement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated Takeda shares to be issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value per share based on Takeda share price . . . . . . . . . . . . . . . . . . . . . . .
910,746,641
0.839
764,116,432
4,180
Estimated fair value of shares issued as consideration (c) . . . . . . . . . . . . . . . .
3,194,007
(a) Cash consideration per share was converted to JPY at US$1.00 to ¥113.619 as of
November 27, 2018.
(b) The number of shares to be purchased represents the outstanding shares of Shire at March 31,
2018, and the estimated number of vested share-settled awards to be treated as shares in the
acquisition.
Cash consideration for shares was estimated based on 910,670,167 Shire shares outstanding,
expected to be purchased as of March 31, 2018.
P-6
Cash consideration for vested Shire share settled awards was estimated based on 76,474
Shire share award units. This represents the share awards expected to be vested at the Closing
and are expected to be settled the same as Shire’s ordinary outstanding shares.
The total cash consideration will vary based on the USD to JPY exchange rate on the date of
the Shire Acquisition. From May 8, 2018, the date on which Takeda’s initial offer was made
public, to November 27, 2018, the foreign currency exchange rate from USD to JPY ranged
from ¥108.729 to ¥114.101 per US$1.00, or a range of approximately 5%. A 5% weakening
of the Japanese Yen to US dollar would increase the cash amount by ¥156,648 million, and a
5% strengthening of the Japanese yen to the US dollar would decrease the cash amount by
¥156,648 million.
(c) The estimated fair value of shares issued was calculated based on the outstanding shares and
share awards at March 31, 2018, multiplied by the exchange ratio of 0.839, and Takeda’s
closing share price as of November 27, 2018, of ¥4,180 per share.
The fair value of the consideration settled in shares is subject to change based on movements
in Takeda’s share price. From the date on which Takeda’s initial offer was made public on
May 8, 2018 to November 27, 2018, Takeda’s closing share price has ranged from ¥4,180 to
¥4,899, or a range of approximately 17%. A 20% decrease in Takeda’s share price would
reduce the value of the shares issued by ¥638,801 million, and a 20% increase in Takeda’s
share price would increase the value of the shares to be issued by ¥638,801 million.
As noted above, the final consideration transferred is contingent upon the share price of Takeda shares
on the Closing date and the foreign currency exchange rate on the date of acquisition. A difference in
any of these factors from the amount assumed herein will result in a change in the purchase price and,
as a consequence, a change in goodwill is recognized.
(ii) The preliminary estimates are based on the data available to Takeda and may change upon completion
of the final purchase price allocation. Any change in the estimated fair value of the assets and liabilities
acquired will have a corresponding impact on the amount of the goodwill. In addition, a change in the
amount of property, plant, and equipment and other identifiable intangible assets will have a direct
impact on the amount of amortization and depreciation recorded against income in future periods. The
impact of any changes in the purchase price allocation may have a material impact on the amounts
presented in this pro forma condensed combined financial information and in future periods.
(a) The pro forma adjustment for intangible assets is calculated as follows (in millions of JPY):
Fair value of IPR&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Historical intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
284,048
5,328,731
(3,744,677)
Pro forma adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,868,102
(b) The estimated tax impact is based on assumed tax rate of 25%, which represents Takeda’s
2017 estimated global blended statutory tax rate applicable to the fair value step-ups.
(c) The acquired assets and liabilities assumed are reflected at their preliminarily estimated fair
values with the excess consideration recorded as goodwill. The pro forma adjustment for
goodwill is calculated as follows (in millions of JPY):
Preliminary allocation to goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Historical goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,827,097
(2,238,458)
Pro forma adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
588,639
Amount
P-7
(iii) Reflects the fair value of Shire share-based awards that Shire intends to cash settle upon the change in
control. The total cash consideration related to these awards is based on an assumed number of units of
15,442,104 at ¥6,953 (Takeda Offer Price) per share. The amount that will be ultimately payable will
be based on the higher of (i) the Shire stock price during the 30 days prior to Closing and (ii) the
Takeda Offer Price per share at Closing. The payment is expected to be made after the Closing. The
final amount payable is contingent upon, Shire’s stock price, the share price of Takeda shares on the
Closing date and the foreign currency exchange rate on the date of acquisition. A difference in any of
these factors from the amount assumed herein will change the cash-settle award liability and goodwill
by the same amount.
(C) Reflects the impact on cash and cash equivalents of the Transactions calculated as follows (in millions of
JPY):
Net proceeds from borrowings (Note D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated Takeda transaction costs (Note E)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated Shire transaction costs (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs (Note D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash consideration for the Shire Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
3,358,300
(55,958)
(24,428)
(28,718)
(3,138,433)
Pro forma adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
110,763
(i) This represents estimated transaction costs expected to be paid by Shire at close, which will reduce
cash acquired by Takeda.
(D) Reflects the borrowings to be entered into in connection with the Shire Acquisition (in millions of JPY):
Term loan (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SSTL (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JBIC Loan (iii)
Euro Notes (iv) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
USD Notes (v) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total (vi) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Estimated debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Discount on Euro and USD Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
852,143
500,000
420,390
964,125
624,905
3,361,563
28,718
3,263
Pro forma adjustment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,329,582
(i) Term loan. This represents the term loan agreement entered into by Takeda on June 8, 2018.
(ii) SSTL. This represents the short term facility agreement entered into on October 26, 2018, that has an
aggregate commitment of ¥500.0 billion.
(iii) JBIC Loan. On December 3, 2018, Takeda entered into a loan agreement with the Japan Bank for
International Cooperation (the “JBIC Loan”) for an aggregate principal amount of up to $3.7 billion,
and subsequently reduced the commitments under the Bridge Credit Agreement by the same amount.
(iv) Euro Notes. On November 21, 2018 Takeda completed an offering of euro denominated senior notes in
a number of series in aggregate principal amount of €7.5 billion.
(v) USD Notes. On November 26, 2018, Takeda completed an offering of U.S. dollar denominated senior
notes in a number of series for an aggregate amount of $5.5 billion.
(vi) The total proceeds have been based on the assumed foreign currency composition of USD, JPY and
Euro and a foreign currency exchange rate of USD to JPY of ¥113.619 per US$1.00 and EUR to JPY
of ¥128.550.
P-8
In addition to the above, on May 8, 2018 (as amended on June 8, 2018 and October 26, 2018), Takeda entered
into the Bridge Credit Agreement, with aggregate commitments of $30.85 billion. The commitments under the
Bridge financing were reduced by the amount of commitments under the Term loan, SSTL, Euro Notes, USD
Notes and JBIC loan described below. Takeda does not expect to further refinance the commitments under the
Bridge Credit Agreement prior to the completion of the Shire Acquisition, and does not currently intend to draw
upon the Bridge Credit Agreement, although Takeda retains the ability to do so.
Takeda also entered into a Subordinated Loan Agreement (the “Subordinated Loan”), on October 26, 2018, with
aggregate commitments of ¥500.0 billion. Takeda is not required to draw upon the Subordinated Loan. However,
if Takeda choses to draw on all or a part of the Subordinated Loan, the proceeds will be used to refinance all or a
part of any indebtedness incurred pursuant to the SSTL described above.
(E) Represents the elimination of Shire’s historical equity and the impact of the Transactions on equity
calculated as follows (in millions of JPY):
Share
Capital
Share
Premium
Treasury
Shares
Retained
Earnings
Other
Components
of Equity
Eliminate Shire equity . . . . . . . . .
Issuance of shares (i) . . . . . . . . . .
Transaction costs (ii) . . . . . . . . . .
(9,255)
1,597,003
—
(2,827,075) 31,942
1,597,004
—
(29,995) —
(1,140,737)
(155,198)
—
(25,070)
—
—
Total
(4,100,323)
3,194,007
(55,065)
Total pro forma adjustment . . . . .
1,587,748
(1,260,066) 31,942
(1,165,807)
(155,198)
(961,381)
(i) Represents impact of the shares issued to finance a portion of the purchase price. This is based on an
assumed share price at the date of acquisition of ¥4,180 and the issuance of 764,116,432 shares. As
noted above, the number of shares and the value of the shares will be based on the share price at
Closing and may differ from these amounts.
(ii) Represents the impact on retained earnings of the transaction costs to be paid by Takeda that will be
recorded at the time of the acquisition, net of the associated tax benefit related to the tax deduction of
these costs. These costs include ¥25,070 million that will be expensed in future periods and
¥29,995 million related to registration of equity that will be recorded directly to equity. The tax benefit
is based on the estimated tax-deductible portion of transaction expenses and an assumed tax rate of
25%, which represents Takeda’s 2017 estimated blended global statutory tax rate, and is shown as a
pro forma adjustment to deferred tax asset. These transaction costs are excluded from the pro forma
condensed combined statement of income, as they are non-recurring in nature.
(F) Represents the incremental depreciation expense based on the preliminary fair value of property, plant, and
equipment and an estimated remaining useful life of 15 years calculated as follows (in millions of JPY):
Asset category
Fair value adjustment
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and vehicles . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,091
8,710
28,147
37,948
Estimated
useful life
Indefinite
15 years
15 years
Pro forma adjustment
n/a
581
1,876
2,457
If the weighted-average estimated useful life of depreciable assets were to increase by one year, pro forma
depreciation expense would decrease by ¥3,137 million or
the
weighted-average estimated useful lives were to decrease by one year. If the estimated fair value of
estimated depreciable assets were to change by 10%, pro forma annual depreciation expense would increase
or decrease by ¥5,020 million.
increase by ¥3,586 million if
(G) Reflects the incremental amortization expense resulting from the recognition of other identifiable intangible
is based on recognition of amortizable intangible assets of
assets. The pro forma adjustment
P-9
¥5,612,779 million (Note B) and estimated weighted-average life of 5-18 years. If the fair value was to
change by 10%, it would result in a ¥53,688 million impact on amortization expense. If the estimated useful
life of amortizable intangible assets were to increase by one year, pro forma annual amortization expense
would decrease by ¥59,228 million and would increase by ¥80,947 million if the estimated useful lives were
to decrease by one year.
(H) Reflects the incremental interest expense related to the financing of the acquisition described in Note
(D) calculated as follows (in millions JPY):
Amount
Term
Weighted
average
Interest Rate
Pro forma
interest expense
Term loan (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SSTL (ii)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JBIC loan (iii)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Euro Notes (iv)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
USD Notes (iv)
. . . . . . . . . . . . . . . . .
Estimated debt issuance costs (v)
. . . . . . . . . . . . .
Discount on Euro and USD Notes (vi)
852,143
500,000
420,390
964,125
624,905
(28,718)
(3,263)
Pro forma adjustment (vii) . . . . . . . . . . . . . . . . . . . . . . .
3,329,582
5 years
0.5 year
7 years
2-12 years
2-10 years
2.38%
0.23%
3.47%
1.45%
4.39%
20,266
566
7,294
13,953
27,440
21,207
544
91,270
(i) The interest is based on the Term loan financing of which 53.3% is denominated in USD and 46.7% is
denominated in Euro. The interest under the agreement is based on LIBOR or EURIBOR plus a
margin.
(ii) The SSTL is denominated in JPY and the interest under the agreement is based on TIBOR plus a
margin.
(iii) The JBIC loan is denominated in USD and the interest under the agreement is based on LIBOR plus a
margin.
(iv) The interest is estimated based on the rates associated with the Euro Notes and USD Notes issued by
the Company as described above. The Euro Notes are comprised of fixed and variable rate borrowings.
The Euro Notes are comprised of 23% variable rate borrowings and 77% fixed rate borrowings, which
resulted in a weighted average interest rate of 1.45%. The USD Notes are comprised of fixed rate
borrowings, which resulted in a weighted average interest rate of 4.39%.
(v) The debt issuance costs are amortized over the life of the associated borrowings and the amortization
expense is included in interest expense. We have assumed a weighted average term of 2.69 years.
(vi) The discounts on Euro and USD Notes are amortized over the life of the associated borrowings and the
amortization expense is included in interest expense.
(vii) The actual terms and conditions of the Financing, including the amount of debt we actually incur, the
currency of the borrowings, the interest rate, and the form of the borrowings (as noted in Note D), have
not been finally determined and are subject to change.
(I) Reflects the elimination of non-recurring transaction costs incurred during the year ended March 31, 2018
that are directly related to the Shire Acquisition and are reflected in Takeda’s historical statement of income.
(J) Reflects the tax impact of the pro forma adjustments based on assumed rate of 25%, which represents
Takeda’s 2017 estimated global blended statutory tax rate.
(K) The following is a reconciliation of Shire’s historical financial information from U.S. GAAP to IFRS and
Takeda’s accounting policies (amounts in millions of JPY unless otherwise noted):
P-10
Historical
Shire IFRS
conversion
(JPY)
749,012
2,238,458
3,744,677
35,611
50,340
6,818,098
371,571
394,864
57,677
51,479
875,591
7,693,689
UNAUDITED SHIRE CONDENSED BALANCE SHEET IFRS CONVERSION
AS OF DECEMBER 31, 2017
Historical
Shire
(USD)(i)
Historical
Shire
(JPY)(ii)
IFRS
conversion
adjustments(iii) Note
Classification
adjustments(iii) Note
ASSETS
Noncurrent assets:
a.
b.
c.
b.
—
—
—
—
—
—
f.
k.
k.
—
27,411
27,711
—
(27,711)
27,411
27,411
749,012
Property, plant, and equipment . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . 19,832 2,238,458
Intangible assets . . . . . . . . . . . . . . 33,046 3,729,935
21,333
Deferred tax assets . . . . . . . . . . . .
6,636
189
Other . . . . . . . . . . . . . . . . . . . . . . .
446
50,340
—
—
14,742
22,055
(7,777)
—
Total noncurrent assets . . . . . . . 60,149 6,789,078
29,020
Current assets:
Inventories . . . . . . . . . . . . . . . . . . .
Trade and other receivables . . . . . .
3,292
3,010
371,571
339,742
Cash and cash equivalents . . . . . . .
Other current assets . . . . . . . . . . . .
511
795
57,677
89,732
—
—
—
—
(10,542)
Total current assets . . . . . . . . . .
7,608
858,722
(10,542)
Total assets . . . . . . . . . . . . . . . . . . . . . . 67,757 7,647,800
18,478
P-11
UNAUDITED SHIRE CONDENSED BALANCE SHEET IFRS CONVERSION
AS OF DECEMBER 31, 2017 (continued)
Historical
Shire
(USD)(i)
Historical
Shire
(JPY)(ii)
IFRS
conversion
adjustments(iii) Note
Classification
adjustments(iii) Note
LIABILITIES
Noncurrent liabilities:
Bonds and loans . . . . . . . . . . . . . . . 16,752 1,890,815
—
Net defined benefit liabilities . . . .
Deferred tax liabilities . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
—
4,748
2,198
—
535,912
248,090
—
—
1,489
d.
Total noncurrent liabilities . . . . 23,698 2,674,817
1,489
Current liabilities:
Bonds and loan . . . . . . . . . . . . . . .
Trade and other payables . . . . . . . .
2,789
4,184
314,797
472,252
Provisions . . . . . . . . . . . . . . . . . . .
—
—
Other . . . . . . . . . . . . . . . . . . . . . . .
909
102,600
Total current liabilities . . . . . . .
7,882
889,649
—
—
—
—
—
Total liabilities . . . . . . . . . . . . . . . . 31,580 3,564,466
1,489
EQUITY
k.
k.
k.
k.
k.
k.
k.
g.
f.
g.
k.
k.
(38,565)
6,722
66,056
—
38,565
(6,722)
(66,056)
—
(849)
(193,509)
(206,991)
27,411
206,991
193,509
849
27,411
27,411
9,255
Share capital
Share premium . . . . . . . . . . . . . . . 25,082 2,831,030
. . . . . . . . . . . . . . . . .
82
Treasury shares . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . .
(283)
(31,942)
9,921 1,119,793
Other components of equity . . . . .
Equity attributable to owners
1,375
155,198
of the Company . . . . . . . . . 36,177 4,083,334
—
Noncontrolling interests . . . . . . . .
—
Total equity . . . . . . . . . . . . . . . . . . . . . . 36,177 4,083,334
TOTAL LIABILITIES AND
e.
c.
e.
a.
d.
b.
—
3,822
(7,777)
—
(3,822)
14,742
(1,489)
11,513
—
16,989
—
16,989
—
—
—
—
—
—
—
—
—
—
Historical
Shire IFRS
conversion
(JPY)
1,858,972
66,056
535,912
215,366
2,676,306
313,948
71,752
234,402
296,958
917,060
3,593,366
9,255
2,827,075
(31,942)
1,140,737
155,198
4,100,323
—
4,100,323
EQUITY . . . . . . . . . . . . . . . . . . . . . . 67,757 7,647,800
18,478
27,411
7,693,689
P-12
UNAUDITED SHIRE CONDENSED STATEMENT OF INCOME IFRS CONVERSION
FOR THE YEAR ENDED DECEMBER 31, 2017
Historical
Shire
(USD)(i)
Historical
Shire
(JPY)(ii)
IFRS
conversion
adjustments(iii) Note
Classification
adjustments(iii) Note
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . 15,161 1,703,475
(528,200)
Cost of sales . . . . . . . . . . . . . . . . . . . . .
(4,701)
—
(778)
Selling, general, and
administrative expense . . . . . . .
(3,531)
(396,740)
Research and development
expense . . . . . . . . . . . . . . . . . . .
(1,763)
(198,089)
(2,124)
(197)
(597)
14,742
Amortization and impairment
losses on intangible assets
associated with products . . . . . .
Other operating income (expense),
net (iv) . . . . . . . . . . . . . . . . . . . .
Operating profit . . . . . . . . . . . . . . .
. . . .
Finance income (expense), net (v)
Share of profit (loss) of
investments accounted for using
the equity method . . . . . . . . . . .
Profit before tax . . . . . . . . . . . . . . .
. . .
Income tax (expense) / benefit
(1,768)
(198,651)
—
(943)
(105,954)
2,455
(562)
275,841
(63,146)
3
1,896
2,358
337
213,032
264,943
(323)
11,528
22,251
(1,292)
—
20,959
14,124
(348)
Net profit for the year, before
discontinued operations . . . . . . .
4,254
477,975
34,735
Gain / (loss) from discontinued
operations . . . . . . . . . . . . . . . . .
Net profit for the year . . . . . . . . . .
18
4,272
2,023
479,998
—
34,735
e.
e.
d.
e.
a.
e.
l.
d.
b.
c.
h.
h.
i.
j.
i.
k.
k.
j.
—
(136)
136
5,684
(102)
—
—
(5,684)
1,361
1,259
(1,361)
—
(102)
102
—
—
—
Historical
Shire IFRS
conversion
(JPY)
1,703,475
(529,114)
(393,241)
(184,046)
(198,651)
(99,072)
—
299,351
(65,799)
337
233,889
278,821
512,710
2,023
514,733
(i) Represents the historical balance of Shire at December 31, 2017, and the income statement for the year
ended December 31, 2017.
(ii) The historical USD balance sheet and income statement of Shire are converted to JPY based on a USD
to JPY exchange rate of ¥112.871 per $1.00 for the balance sheet and ¥112.359 per US$1.00 for the
income statement. For the balance sheet, the spot rate at December 31, 2017 of ¥112.871 per US$1.00
was used. For the income statement, the average rate for the prior twelve months of ¥112.354 per
US$1.00 was used.
(iii) A summary of the differences between U.S. GAAP and Takeda’s accounting policies is as follows:
a. Reflect adjustment to eliminate expense recorded by Shire for collaboration payments related to
products that are not yet commercialized and to recognize IPR&D based on Takeda’s accounting
policy.
b. Reflect adjustments to record a deferred tax asset and reclassify prepaid taxes to tax expense on
intercompany inventory transfers under IFRS reporting requirements and to record the cumulative
effect on retained earnings.
c. Reflect adjustments to record the deferred tax asset and tax expense for stock-based compensation
under IFRS reporting requirements.
d. Reflects adjustments to net periodic benefit costs and net defined benefit obligation due to the
measurement differences between U.S. GAAP and Takeda accounting policies. These
measurement differences relate to the removal of expected return on plan assets and inclusion of
interest income on plan assets.
P-13
e. Reflect stock compensation expense based on graded vesting under IFRS. Under U.S GAAP Shire
f.
elected to record the expense on a straight-line basis.
Reclassify Shire’s chargeback and sales discounts reserve from trade and other receivables to
provisions.
g. Reclassify accrued rebates, accrued managed care, accrued Medicare and Medicaid reserves,
accrued sales returns, litigation reserves, and other accruals from trade and other payables to
current provisions.
h. Reclassify freight insurance expenses from selling, general, and administrative expenses to cost of
i.
j.
sales.
Reclassify charitable donations from selling, general, and administrative expense to other
operating expenses.
Reclassify research and development investment tax credits from research and development to
income tax expenses.
k. Reclassify assets and liabilities to align the Shire classification to the Takeda classification.
l.
Reflect adjustment to decrease restructuring expenses in 2017 as this expense would have been
recorded in an earlier period under IFRS. There is no corresponding adjustment to the balance
sheet as the cumulative retained earnings impact does not change.
(iv) Other operating expenses includes integration and acquisition costs, reorganization costs, and gain on
sale of product rights.
(v) Finance income / (expense), net
includes interest
income,
interest expense, and other income/
(expense), net.
P-14
[The following is the translation of the Articles of Incorporation of Takeda Pharmaceutical Company Limited,
the latest amendment to which was made on 29 June 2016.]
Exhibit 1.1
ARTICLES OF INCORPORATION OF
TAKEDA PHARMACEUTICAL COMPANY LIMITED
Chapter I General Provisions
Article 1. (Corporate Name)
The Company shall be named Takeda Yakuhin Kogyo Kabushiki Kaisha, displayed in English as Takeda
Pharmaceutical Company Limited.
Article 2. (Location of Head Office)
The head office of the Company shall be located in the city of Osaka.
Article 3. (Purpose of the Company)
The purpose of the Company shall be to engage in the following businesses:
1. Manufacture, purchase and sale of medicines, chemicals for non-medicinal uses, quasi-medicines,
medical instruments, appliances and supplies, measuring equipments, cosmetics, food products,
beverages, food additives, livestock feed additives and other chemical products, and instruments,
appliances and equipment relating to any of the foregoing products;
2.
Trucking and freight forwarding;
3. Warehousing;
4.
Publishing;
5. Management, purchase, sale and lease of real estate; and
6. Business ancillary or related to any of those specified in each foregoing clause.
Article 4. (Organizations)
In addition to the general meetings of shareholders and Directors, the Company shall have the following
organizations:
1. Board of Directors
2. Audit and Supervisory Committee
3. Accounting Auditors
Article 5. (Method of Public Notices)
The method of Public notices of the Company shall be electronic public notices; provided, however, that
in case where an electronic public notice is impracticable due to accidents or other unavoidable reasons,
the Company shall give its public notices in the Nihon Keizai Shimbun.
Article 6. (Total Number of Shares Authorized to be Issued)
Chapter II Shares
The total number of shares authorized to be issued by the Company shall be three billion and five hundred
million (3,500,000,000) shares.
Article 7. (Number of Shares in One Unit)
The number of shares in one unit of the Company shall be one hundred (100) shares.
Article 8. (Additional Purchases of Shares Less Than One Unit)
A shareholder holding the Company’s shares less than one unit may, in accordance with the provisions of
the Company Shares, etc. Handling Rule, request the Company to sell to the shareholder such number of
shares that will, when added to the shares less than one unit held by such shareholder, constitute one unit
of shares.
Article 9. (Transfer Agent)
The Company shall have a transfer agent. The transfer agent and its place of handling business shall be
decided by a resolution of the Board of Directors and the Company shall give a public notice on them.
(2) The register of shareholders and the register of stock acquisition rights of the Company shall be kept at
the transfer agent’s place of handling business; entry in writing or digitally in the register of shareholders
and the register of stock acquisition rights, purchase and sale of shares less than one unit, and other
businesses with regard to shares and stock acquisition rights shall be handled by the transfer agent, and
will not be handled by the Company.
Article 10. (Company Shares, etc. Handling Rule)
Entry in writing or digitally in the register of shareholders and the register of stock acquisition rights,
purchase and sale of shares less than one unit, and other matters related to the handling of shares and
stock acquisition rights, and fees to be charged for handling these matters and the procedures for the
exercise of rights of shareholders, shall be governed by Company Shares, etc. Handling Rule established
by the Board of Directors.
Chapter III General Meeting of Shareholders
Article 11. (Time for Holding the Meeting)
The ordinary general meeting of shareholders of the Company shall be convened in June of each year.
(2)
In addition to the preceding paragraph, an extraordinary general meeting of shareholders may be
convened when necessary.
Article 12. (Record Date for Ordinary General Meetings of Shareholders)
The record date for voting rights for the ordinary general meetings of shareholders of the Company shall
be March 31 of each year.
Article 13. (Convener and Chairman)
A general meeting of shareholders shall be convened by the Representative Director in accordance with a
resolution of the Board of Directors.
(2) The Chairman of a general meeting of shareholders shall be the Chairman of the Board.
(3)
If the office of the Chairman of the Board is vacant, or, should an accident prevent the Chairman of the
Board from being the Chairman of a general meeting of shareholders, another Director nominated by the
Board of Directors shall serve as the Chairman of the general meeting of shareholders.
Article 14. (Disclosure through Internet and Deemed Delivery of Reference Documents, Etc. for General Meeting
of Shareholders)
In convening a general meeting of shareholders, the Company may be deemed to have provided the
shareholders with necessary information that should be described or indicated in the reference documents
for the general meeting of shareholders, business reports, unconsolidated financial statements and
consolidated financial statements, on the condition that such information is disclosed through the Internet
in accordance with Ordinances of the Ministry of Justice.
Article 15. (Requisites for a Resolution)
Unless otherwise provided by law or by these Articles of Incorporation, a resolution at a general meeting
of shareholders shall be made by a majority of the votes of the shareholders present at the meeting and
entitled to exercise their voting rights.
(2) The resolution provided for in Paragraph 2, Article 309 of the Companies Act shall be adopted by
two-thirds or more of the votes of the shareholders present at the meeting and entitled to exercise their
voting rights at which a quorum shall be one-thirds or more of the voting rights of the shareholders
entitled to exercise their voting rights.
Article 16. (Voting by Proxy)
A shareholder may exercise his or her vote by appointing another shareholder entitled to vote as his or her
proxy, provided, however, that such shareholder or proxy shall submit a document evidencing an
authority of representation to the Company for each meeting.
Chapter IV Directors and Board of Directors, and Audit and Supervisory Committee
Article 17. (Number of Directors)
The Company shall have twelve (12) or fewer Directors (excluding Directors who are Audit and
Supervisory Committee Members).
(2) The Company shall have four (4) or fewer Directors who are Audit and Supervisory Committee
Members.
Article 18. (Appointment of Directors)
The Directors shall be appointed at a general meeting of shareholders that distinguishes between
Directors who are Audit and Supervisory Committee Members and other Directors.
(2) Voting on resolutions for appointments under the terms of the preceding paragraph shall take place with
the presence of shareholders who have one-third or more of the voting rights of shareholders entitled to
exercise their voting rights, and a majority of the votes of the shareholders present shall be requisite for
adoption of the resolution.
(3) The appointment of Directors shall not be made by cumulative voting.
Article 19. (Term of Office of Directors)
The term of office of Directors (excluding Directors who are Audit and Supervisory Committee
Members) shall be up to the time of closing of the ordinary general meeting of shareholders concerning
the last business year ending within one (1) year after their election.
(2) The term of office of Directors who are Audit and Supervisory Committee Members shall be up to the
time of closing of the ordinary general meeting of shareholders concerning the last business year ending
within two (2) years after their election.
(3) The term of office of a Director who is an Audit and Supervisory Committee Member and was appointed
to fill a vacancy due to the retirement of a Director who is an Audit and Supervisory Committee Member
from office before expiration of his or her term of office shall be up to the time of expiration of the term
of office of such retiring Director.
(4) The effect of pre-election of a substitute Director who is an Audit and Supervisory Committee Member
shall continue until the opening of the ordinary general meeting of shareholders concerning the last
business year ending within two (2) years after the resolution of such pre-election.
Article 20. (Compensation, Etc. for Directors)
The compensation, bonuses, and other financial benefits given by the Company in consideration of the
performance of duties for Directors shall be determined by a resolution at the general meeting of
shareholders that distinguishes between Directors who are Audit and Supervisory Members and other
Directors.
Article 21. (Notice of Meetings of the Board of Directors)
Notice of a meeting of the Board of Directors shall be given at least three (3) days prior to the date set for
the meeting; provided, however, that such period may be shortened in the case of an emergency.
(2) A meeting of the Board of Directors may be held without taking the convocation procedures with the
unanimous consent of all Directors.
Article 22. (Notice of Meetings of the Audit and Supervisory Committee)
Notice of a meeting of the Audit and Supervisory Committee shall be given at least three (3) days prior to
the date set for the meeting; provided, however, that such period may be shortened in the case of an
emergency.
(2) A meeting of the Audit and Supervisory Committee may be held without taking the convocation
procedures with the unanimous consent of all Audit and Supervisory Committee Members.
Article 23. (Deemed Resolution of the Board of Directors)
The Company shall deem that a resolution of the Board of Directors is adopted when the requirements set
forth in Article 370 of the Companies Act are satisfied.
Article 24. (Delegation of a Decision on the Execution of Important Operations)
Under Paragraph 6, Article 399-13 of the Companies Act, the Company may delegate all or some of the
decisions concerning the execution of important operations (excluding matters listed in the items under
Paragraph 5 of that article) to Directors by a resolution of the Board of Directors.
Article 25. (Chairman of the Board and President & CEO)
The Board of Directors may, by its resolution, appoint from among Directors (excluding Directors who
are Audit and Supervisory Committee Members) one (1) Chairman of the Board and one (1) President &
CEO.
(2) The Chairman of the Board shall preside over a meeting of the Board of Directors; however, another
Director shall preside over a meeting of the Board of Directors if the office of the Chairman of the Board
is vacant or if an accident prevents the Chairman of the Board from doing so.
(3) The President & CEO shall exercise control over the affairs of the Company.
Article 26. (Representative Directors)
The Board of Directors shall, by its resolution, elect Representative Director(s) from among Directors
(excluding Directors who are Audit and Supervisory Committee Members).
Article 27. (Exemption from Liability of Directors)
The Company may, by a resolution of the Board of Directors, exempt Directors from their liabilities for
damages set forth in Paragraph 1, Article 423 of the Companies Act to the extent permitted by law.
(2) The Company may enter into agreements with Directors (excluding Executive Directors or the like
provided for in (a), Item 15, Article 2 of the Companies Act) that limit the maximum amount of liability
for damages set forth in Paragraph 1, Article 423 of the Companies Act to the amount provided by law.
Chapter V Accounts
Article 28. (Business Year)
The business year of the Company shall be from April 1 of each year to March 31 of the following year.
Article 29. (Organ to decide on Matters including Dividends from Surplus)
The Company may decide the matters listed in each item of Paragraph 1, Article 459 of the Companies
Act including dividends from surplus by resolution of the Board of Directors, unless otherwise provided
for in laws and regulations.
Article 30. (Record Date for Dividends from Surplus)
The record date for year-end dividends of the Company shall be March 31 of each year.
(2) The record date for interim dividends of the Company shall be September 30 of each year.
Article 31. (Lapse of the Rights on Dividends)
If any year-end dividends or interim dividends are not received after a lapse of three (3) full years from
the date of commencement of the payment thereof, the Company shall thereafter be exempted from its
obligation to pay thereof.
Supplementary Provisions
Article 1. (Transitional Measure concerning Exemption from and Limitation of Liability of Corporate Auditors
before becoming a Company with Audit and Supervisory Committee)
Exemption from liabilities for damages of Corporate Auditors (including a person who was formerly a
Corporate Auditor) by the Board of Directors concerning acts under Paragraph 1, Article 423 of the
Companies Act before the closing of the 140th ordinary general meeting of shareholders held in June
2016, and contracts for limitation of liability concluded with Outside Corporate Auditors (including a
person who was formerly an Outside Corporate Auditor) shall be governed by Paragraphs 1 and 2, Article
34 of the Articles of Incorporation before the amendment associated with the closing of the same ordinary
general meeting of shareholders.
Article 2. (Deletion Date of Supplementary Provisions)
Articles 1 and 2 of the Supplementary Provisions hereof are to be deleted as of June 29, 2026.
Exhibit 1.2
Bylaws of Board of Directors
Rule No. 1
Article 1: (Purpose)
The Board of Directors of Takeda Pharmaceutical Company Limited (the “Company”) shall comply
with the bylaws unless otherwise prescribed by the applicable laws and ordinances, or the Articles of
Incorporation.
Article 2: (Meetings)
Meetings of the Board of Directors shall be convened by the Chairman of the Board of Directors.
(2)
In the event the office of the Chairman of the Board of Directors is vacant or he/she cannot take an
action due to some impedance, another director shall serve in an order of precedence which is
determined in advance by the Board of Directors.
(3) Convocation notice of a meeting shall be dispatched to each director at least three (3) days prior to
the scheduled date of the meeting. Notwithstanding, this period may be shortened in cases of
emergency.
(4) Convocation procedures may be omitted in the convocation of a meeting of the Board of Directors
when the unanimous consent of all directors is obtained.
(5) To request convocation of a meeting of the Board of Directors, a director shall submit to the
Chairman of the Board of Directors a document in writing setting forth the matters that are the
object of the meeting.
(6) Notwithstanding the provisions of Paragraph 1, 2 and 5 of this Article, the Audit and Supervisory
Committee Member selected by the Audit and Supervisory Committee may convene the meetings
of the Board of Directors, subject to the manner stipulated in Paragraph 3 of this Article.
Article 3: (Chair)
The Chairman of the Board of Directors shall serve as the Chair for meetings of the Board of
Directors.
(2)
In the event the office of the Chairman of the Board of Directors is vacant or he/she cannot take an
action due to some impedance, Paragraph 2 of Article 2 shall apply mutatis mutandis.
Article 4: (Time and place of meeting)
Meetings of the Board of Directors shall be held at least once every 3 months and at least 6 times a
year, and shall be held on an as-needed basis.
(2) Meetings of the Board of Directors shall in principle be held at the Osaka head office or the Tokyo
head office. However, meetings may be held at any other place when necessary.
Article 5: (Meeting via video conferencing and telephone conferencing)
Meetings of the Board of Directors may be conducted by making use of video conferencing systems
and/or telephone conferencing systems.
Article 6: (Matters to be resolved by the Board of Directors
The matters listed as “Board Resolution Matters” in the Attachment 1 “List of the Board Resolution
Matters, Board Reporting Matters, and procedures and other rules to submit them to the Board of the
Directors’ meeting” shall be resolved by the Board of Directors.
Bylaws of Board of Directors
Rule No. 1
Article 7: (Resolution procedures)
Resolutions of the Board of Directors shall require a majority vote of the attending directors at a
meeting under the presence of the majority of the directors.
(2) Directors with special interests in matters to be resolved as provided for in Paragraph 1 of Article 7 are
prohibited from participating in resolutions. In such circumstances, the number of directors provided
for in Paragraph 1 of Article 7 shall not include the number of the said interested directors.
Article 8: (Resolution in writing)
Notwithstanding the provisions of Article 7, the Board of Directors shall be deemed to have taken a
resolution regarding a matter to be resolved by the Board of Directors when all directors express consent in
written or electronic form.
Article 9: (Reporting on the execution of duties)
Executive Directors shall report to the Board of Directors regarding the status of the execution of their
duties. The matters listed as “Board Reporting Matters” in the Attachment 1 “List of the Board
Resolution Matters, Board Reporting Matters, and procedures and other rules to submit them to the
Board of the Directors’ meeting” shall be reported to the Board of Directors.
(2) Executive Directors may cause other directors or employees to furnish reports pursuant
to the
preceding paragraph.
(3) Directors engaging in any of the transactions stipulated in each item of Paragraph 1, Article 356 of the
Companies Act shall report material facts with respect to said transaction to the Board of Directors
without delay.
Article 10: (Written reports)
Reporting to the Board of Directors shall not be required in the event that a director or accounting
auditor notifies all directors in writing of matters to be reported to the Board of Directors.
(2) The provisions of Paragraph 1 of Article 10 shall not apply to reports on the status of execution of
duties by directors pursuant to Paragraph 2, Article 363 of the Companies Act.
Article 11: (Attendance of advisors, counselors and employees)
The Chair may, when necessary, request the attendance of consultants and/or advisors and seek their
opinions.
(2) The Chair may, when necessary, cause employees to attend as observers.
Article 12: (Minutes of the Board of Directors’ meeting)
The minutes of the Board of Directors’ meeting shall be prepared outlining the course of discussions,
results and other necessary matters with respect to the agenda. The directors present shall put their
seals on their typewritten name. The said minutes shall be kept at the Osaka head office for a period of
10 years.
(2)
In the event that a resolution is deemed to have been taken by the Board of Directors pursuant to
Article 8, and in the event that actual reporting at the Board of Directors’ meeting is not required as
written report has been delivered pursuant to Article 10, minutes shall be prepared noting the nature of
said matters or other necessary matters and shall be kept at the headquarters for a period of 10 years.
Bylaws of Board of Directors
Rule No. 1
Article 13: (Secretariat for the Board of Directors)
Japan Legal shall serve as the Secretariat for the Board of Directors and shall arrange and coordinate
agenda for the meeting and the matters to be resolved by and to be reported to the Board of Directors,
dispatch the convocation notice, prepare the draft minutes of the Board Directors’ meeting and keep the
minutes and provide other secretarial services.
(2) Details with respect to Paragraph 1 of Article 13 shall be prescribed in the Attachment 2.
Article 14: (Amendment)
The text of these bylaws and the columns of “Board Resolution Matters” and “Board Reporting
Matters” in the Attachment 1 may be amended by resolution of the Board of Directors. The other
columns in the Attachment 1, and the Attachment 2 may be amended by the decision of Global General
Counsel (“GGC”).
(2)
In the case referred to in the second sentence of the preceding paragraph, the amendment may be
reported with documents to the Board of Directors when deemed necessary by GGC.
Resolution at Board of
Directors
Enacted 1951.11.30
Implemented 1951.11.30
Name of Company
Regulation
Amendment date
Rule No. 1
Effective date
Bylaws of Board of Directors
Amendment date
Effective date
1969.5.11
1975.5.28
1977.1.27
1982.9.29
1986.11.1
1995.4.1
1996.10.1
1997.7.1
1998.7.1
2001.12.26
2002.8.27
2004.4.1
2005.3.30
2005.4.27
2007.5.18
2009.8.1
2009.10.30
2015. 4. 1
2016. 4. 1
2016.6.29
2017.11.1
1969.5.11
1975.5.28
1977.1.27
1982.10.1
1986.11.1
1995.4.1
1996.10.1
1997.7.1
1998.6.26
2001.10.1
2002.9.1
2004.4.1
2005.3.30
2005.4.27
2007.6.1
2009.8.1
2009.11.1
2015. 4. 1
2016. 4. 1
2016.6.29
2017.6.28
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Attachment 2
Detail of Secretariat duties
Chapter 1: Resolution by and Report to the Board Directors
1. Notification of the Board Resolution Matters and Board Reporting Matters
The relevant divisions shall notify Global General Counsel of the Board Resolution Matters and Board
Reporting Matters attaching explanatory materials to the standard notification form in principle at least
10 days prior to the scheduled date of the monthly meeting. However, this shall not apply for matters
requiring confidential handling etc.
(2) The relevant divisions shall create explanatory materials in the Japanese and English languages, with the
Japanese version considered the true copy.
2. Conduct of proposals and reports
Even if annual plan has received blanket approval from the Board of Directors, in implementing matters
contained therein, such matters shall be submitted to the Board of Directors individually as the individual
Board Resolution Matters and Board Reporting Matters in accordance with the category of item.
(2) Board Resolution Matters shall,
if necessary, be deliberated and reviewed by the Business Review
Committee, the Portfolio Review Committee or the Audit, Risk and Compliance Committee, be circulated
for comment or complete other procedures in advance of referral.
(3) Proposals that span multiple Board Resolution Matters or Board Reporting Matters may for convenience be
proposed or reported as a single item.
(4) The proposers/reporters of the Board Resolution Matters and Board Reporting Matters may, if necessary,
cause other directors or employees to make proposals or reports.
(5) Global General Counsel shall, at the instruction of the Chair of the Board of Directors meeting, provide the
following secretarial services with respect to resolution by and report to the Board of Directors.
i)
Consult and coordinate with the Corporate Strategy Department and other relevant divisions/
departments regarding actual operation of the bylaws
ii) Select and implement matters for written reporting pursuant to Article 10 of the bylaws
iii) Provide follow-up reports to the Board of Directors when instructed by the Board of Directors to
conduct further studies and investigations
iv) When appropriate, report to the Board of Directors concerning reporting items on behalf of the relevant
division without requiring the attendance of the relevant division head
(6) With regard to items in foreign currency, the monetary criteria is applied based on the amount converted
into yen using Annual Plan Rate fixed at formulation of annual plan, provided, however, the modified rate
shall be used in the case that an additional guidance setting such modified rate is provided due to exchange
fluctuations during the fiscal term.
Chapter 2: Creation of minutes
1. Confidentiality
All parties involved in the preparation, circulation and keeping of minutes shall pay strict attention to the
confidentiality of all relevant matters.
2. Preparation of draft minutes
Japan Legal shall prepare draft minutes.
(2) Draft minutes shall in principle be prepared as quickly as possible, subject to confidentiality considerations.
3. Circulation and signing of draft minutes
Draft minutes shall be circulated to all directors. Thereafter, Japan Legal shall affix the seal of the directors
and corporate auditors to the minutes on their behalf.
4. Keeping minutes
Japan Legal at Osaka head office shall keep the original copy of the minutes with a duplicate copy retained
by Japan Legal at Tokyo head office.
(2) Original and duplicate copies of the minutes shall be retained in perpetuity. In the event that a translation is
prepared of draft minutes for circulation pursuant to Paragraph 3 above, the translation of the draft minutes
shall also be kept in perpetuity.
5. Publication of copies and extracts
Copies and/or extracts of minutes may be submitted in accordance with the judgment of Global General
Counsel when required by governmental authorities, securities exchanges, banks or other business
transaction counterparties etc.
Supplementary provisions
These procedures shall apply mutatis mutandis to the preparation, circulation, and affixing the seal to the
minutes of General Meetings of Shareholders, but retention shall be treated as shown below.
Division
Retention period
Original
Copy
Duplicate (Note)
Japan Legal at Osaka
Head Office
Japan Legal at Tokyo
Head Office
Japan Legal at Tokyo
Head Office
Perpetuity
Perpetuity
5 years
(Note) The purpose for this retention is to fulfill the obligation as the branch office under the
Companies Act.
End of Document
Exhibit 1.3
Company Shares, etc. Handling Rule
Rule No. 2
Article 1
(Purpose)
Chapter 1 General Provisions
Procedures for handling shares and share options of the Company and for exercising shareholders’ rights
shall be set forth in accordance with provisions of Japan Securities Depository Center, Inc. (hereinafter
referred to as “Center”), functioning as the transfer institution, and securities companies, etc., functioning as
account management
institutions for the transfer account of shareholders (hereinafter referred to as
“Securities Companies, etc.”), and provisions of this Rule, as stipulated in Article 11 of the Articles of
Incorporation of the Company.
Article 2
(Administrator of Shareholder Registry)
The Company’s administrator of shareholder registry and the handling site shall be as indicated below.
Administrator of shareholder registry:
1-4-5 Marunouchi, Chiyoda-ku, Tokyo
Mitsubishi UFJ Trust and Banking Corporation
Share handling site:
3-6-3 Fushimi-machi, Chuo-ku, OsakaOsaka Corporate Agency Division, Mitsubishi
UFJ Trust and Banking Corporation
Article 3
(Request or Notice)
All requests or notices under this Rule shall be made with formats stipulated by the Company. However, this
provision shall not apply to requests or notices made through Securities Companies, etc. or the Center, or
cases stipulated in Paragraph 1, Article 24.
(2) When the request or notice set forth in the preceding paragraph is made through a proxy, a document
evidencing the authority of the proxy shall be submitted. When a consent of a curator or assistant is
necessary, a document evidencing such consent shall be submitted.
(3) Whenever the requests or notices set forth in Paragraph 1 are made through Securities Companies, etc.
and the Center, or Securities Companies, etc., the Company may treat such requests or notices as made by
shareholders.
(4) The Company may request a person who has made a request or notice set forth in Paragraph 1 to submit a
document evidencing that he/she is a shareholder or his/her proxy.
(5) When the Company requires submission of the document stipulated in the preceding paragraph, the
Company shall not accept the request or the notice set forth in Paragraph 1, unless the document is
submitted.
(6) A guarantor required for making a request or a notice under this Rule shall be a person whom the
Company deems appropriate.
Chapter 2 Entries and Records in Shareholder Registry, Etc.
Article 4
(Entries and Records in Shareholder Registry)
The Company shall make entries and records in the Shareholder Registry pursuant to General Shareholder
Notification, as received from the Center.
(2) Upon receiving notices of address changes and other notices of changes in matters entered in the
Shareholder Registry from the Center, the Company shall make proper changes in the Shareholder
Registry pursuant to the notices.
Company Shares, etc. Handling Rule
Rule No. 2
(3)
In addition to the provisions of the preceding two paragraphs, in case of issuing new shares or other cases
stipulated by laws and regulations, entries and records are made in the Shareholder Registry.
Article 5
(Letters, Etc. Used in Shareholder Registry)
Entries and records in the Shareholder Registry of the Company shall be made using the letters and symbols
specified by the Center.
Article 6
(Entries and Records in Share Option Registry, Etc.)
Requests for entries and records in the Share Option Registry, registration, transfer, or cancellation of
pledges for the share options, or requests for indication or deletion of trust properties, shall be made in
writing to the Administrator of Shareholder Registry.
(2)
In addition to the provisions of the preceding paragraph, share option handling procedures may be
established separately.
Article 7
(Registration and Cancellation of Pledges)
Chapter 3 Registration of Pledges
Requests for registration, modification, or cancellation of pledges shall be made pursuant to the procedures
of the Center.
Article 8
(Notification of addresses and names of shareholders, etc.)
Chapter 4 Notification
Persons entered or recorded in the Shareholder Registry (hereinafter referred to as “Shareholders”) shall
notify the Company of their addresses and names.
(2) The notices set forth in the preceding paragraph or any changes to them shall be submitted through the
Securities Companies, etc., and the Center. However, this provision shall not apply to cases set forth in
Paragraph 3, Article 4.
Article 9
(Notification of Shareholders, etc. Residing Abroad)
Shareholders, etc. residing abroad shall either appoint a standing proxy in Japan, or designate a place in
Japan to receive notices and report the relevant information to the Company.
(2) The standing proxy shall be included in the Shareholders, etc. stipulated in Paragraph 1 of the preceding
article.
(3) The notices set forth in Paragraph 1 or any changes to them shall be made through the Securities
Companies, etc., and the Center. However, this provision shall not apply to cases set forth in Paragraph 3,
Article 4.
Article 10
(Representative of a Corporation)
If a shareholder is a corporation, the title and the name of one (1) representative thereof shall be reported to
the Company.
(2) The notices set forth in the preceding paragraph or any changes to them shall be submitted through the
Securities Companies, etc., and the Center. However, this provision shall not apply to cases set forth in
Paragraph 3, Article 4.
Article 11
(Representative of Joint Shareholders)
Shareholders who jointly own shares shall appoint one (1) representative, and report the address and the
name of the representative to the Company.
Company Shares, etc. Handling Rule
Rule No. 2
(2) The notices set forth in the preceding paragraph or any changes to them shall be submitted through the
Securities Companies, etc., and the Center. However, this provision shall not apply to cases set forth in
Paragraph 3, Article 4.
Article 12
(Statutory Agent)
Person who has parental authorities, guardians, or other statutory agents, if any, shall report the addresses
and names of the statutory agents to the Company.
(2) The notices set forth in the preceding paragraph or any changes to, or cancellation of, them shall be made
through the Securities Companies, etc., and the Center. However, this provision shall not apply to cases
set forth in Paragraph 3, Article 4.
Article 13
(Other Notices)
All notices to the Company, as well as those stipulated from Article 8 through the preceding article, shall be
made through the Securities Companies, etc. and the Center, or the Securities Companies, etc., unless
specific notification methods are designated by the Company. However, this provision shall not apply to
cases set forth in Paragraph 3, Article 4.
(2) Notices that cannot be accepted or handled by the Securities Companies, etc. shall be submitted to the
Administrator of Shareholder Registry.
Article 14
(Notices of Holders of Share Options, Etc.)
Provisions from Article 8 through the preceding article shall apply mutatis mutandis to notification items
and methods for persons entered and recorded in the Share Option Registry of the Company. However, the
notices shall be submitted to the Administrator of Shareholder Registry, unless otherwise stipulated pursuant
to Paragraph 2, Article 6.
Article 15
(Method of Requesting Purchase)
Chapter 5 Purchase of Shares Less than One Unit
Any requests to purchase shares of less than one unit shall be submitted through the Securities Companies,
etc. and the Center, as set forth by the Center.
(2) A shareholder who has made a request for purchasing shares of less than one unit set forth in the
preceding paragraph shall not be allowed to cancel the request, unless otherwise stipulated by the Center.
Article 16
(Determination of Purchase Price)
The per-share purchase price for a request set out in the preceding article for shares of less than one unit
shall be the closing price at the share market held by Tokyo Stock Exchange, Inc. (hereinafter referred to as
“Tokyo Market”) on the day on which the request stipulated in the preceding article reaches the share
handling site of the Administrator of Shareholder Registry set forth in Article 2. However, if there is no
trading in Tokyo Market on that day, the purchase price shall be the price settled at the first sale in Tokyo
Market thereafter.
(2) The proceeds for purchase shall be obtained by multiplying the number of shares to be purchased by the
purchase price per share in the preceding paragraph.
Article 17
(Payment of Proceeds for Purchase)
The Company shall pay, unless otherwise set forth by the Company, proceeds for purchase to the person
requesting the purchase on the fourth (4th) business day from the day immediately following the day on
which the purchase price is determined.
Company Shares, etc. Handling Rule
Rule No. 2
(2) However, in the case set forth in the preceding paragraph, if the purchase price involves a price cum
rights, such as one relating to distribution of surplus and share spilt, etc., the proceeds shall be paid by the
relevant record date.
Article 18
(Transfer of Shares Purchased)
The shares less than one unit, for which a request for purchase is made, shall be transferred to the account of
the Company on the day on which the payment procedure of the proceeds for purchase has been completed
in accordance with the preceding article.
Chapter 6 Additional Purchase of Shares Less than One Unit
Article 19
(Method of Requesting Additional Purchase)
In case a shareholder who owns shares less than one unit requests the additional purchase of shares
(hereinafter referred to as “Request for Additional Purchase”) by requesting that the Company sell the
number of shares that would constitute one unit together with the shares he/she owns, the Request for
Additional Purchase shall be submitted to the Company through the Securities Companies, etc. and the
Center in accordance with the relevant provisions stipulated by the Center.
(2) A shareholder who has made a request for additional purchase of shares of less than one unit set forth in
the preceding paragraph shall not be allowed to cancel the request, unless otherwise stipulated by the
Center.
Article 20
(Limitation on Request for Additional Purchase)
If the total number of shares for which the Request for Additional Purchase is made on the same day
exceeds the number of the treasury shares available for transfer by the Company, none of the Requests for
Additional Purchase made on the day shall take effect.
Article 21
(Determination of Price of Shares to Be Additionally Purchased)
The price per share of shares less than one unit to be additionally purchased shall be the closing price at
Tokyo Market on the day on which the request stipulated in Article 19 reaches the share handling site of the
Administrator of Shareholder Registry set forth in Article 2. However, if there is no trading in Tokyo
Market on that day, the proviso of Paragraph 1, Article 16 shall apply mutatis mutandis.
(2) The proceeds for purchase of shares to be additionally purchased shall be obtained by multiplying the
number of additional shares to be purchased by the purchase price per share in the preceding paragraph.
Article 22
(Period during which Requests for Additional Purchase are Not Accepted)
The Company shall suspend the acceptance of any Requests for Additional Purchase during the period
commencing on the 10th business day prior to the dates mentioned below and ending on any of these dates.
(1) March 31
(2)
June 30
(3) September 30
(4) December 31
(5) Other dates for determining shareholders
(2) Notwithstanding the preceding paragraph,
the Company may set other periods during which the
acceptance of Requests for Additional Purchase is suspended, if the Company or the Center deems it
necessary.
Company Shares, etc. Handling Rule
Rule No. 2
Article 23
(Transfer Timing for Shares Additionally Purchased)
The Company shall apply for a transfer of title with regard to the shares less than one unit, for which a
Request for Additional Purchase has been made, to the said shareholder, on the day on which the Company
has confirmed a remittance by the shareholder into the bank account designated by the Company.
Chapter 7 Method of Exercising Minority Shareholders’ Rights, Etc.
Article 24
(Method of Exercising Minority Shareholders’ Rights, Etc.)
If the minority shareholders’ rights set forth in Paragraph 4, Article 147 of Act on Book-Entry Transfer of
Company Bonds, Shares, etc. (hereinafter referred to as “Transfer Act”) are directly exercised against the
Company, a document bearing the signature or the name and seal of the shareholder exercising the said
rights shall be submitted after a request to Securities Companies etc. for the Individual Shareholder
Notification (stipulated in Paragraph 3, Article 154 of the Transfer Act).
(2) Provisions of Paragraph 2, Paragraph 4, and Paragraph 5 of Article 3 shall apply to the exercise of the
minority shareholders’ rights, as stipulated in the preceding paragraph.
Article 25
(Reference Document for Shareholders’ Meeting for Proposals by Shareholders)
If a shareholder intends to make a request pursuant to Paragraph 1, Article 305 of the Companies Act, as set
forth in Paragraph 1 of the preceding article, he/she shall describe the following contents of the proposal
within the specified number of words, respectively (or such other volumes as may be deemed necessary and
specified by the Company), on the document set forth in Paragraph 1 of the preceding article. In this case, if
their outlines are requested separately by the Company, the shareholder shall submit such outlines to the
Company.
1. Reasons for proposal: 400 letters (in Japanese)
2. Gist of proposed agenda: 400 letters (in Japanese)
(However, as for agenda of election of directors, corporate auditors, and accounting auditors, the
matters specified respectively in Article 74, Article 76, and Article 77 of the Ordinance for
Enforcement of the Companies Act shall be given in 400 letters (in Japanese) for each candidate).
Article 26
(Special Treatments for Special Accounts)
Chapter 8 Special Treatments for Special Accounts
The handling of special accounts, including the name identification of shareholders whose special accounts
have been opened by the Company, shall be governed not only by this Rule, but also the relevant provisions
of account management organizations for special accounts.
All modifications to this Rule shall be made at resolutions of the Board of Directors.
Supplementary Provision
Resolution at Board of
Directors
Enacted : March 23, 1967
Implemented : April 1, 1967
End of Document
Company Shares, etc. Handling
Rule
Revision Date
Implementation
Date
Name of
Company
Regulation
Revision Date
March 25, 1971
February 23, 1977
April 27, 1977
October 31, 1979
September 29, 1982
January 24, 1989
December 20, 1991
September 29, 1999
May 19, 2000
September 26, 2001
November 27, 2001
August 27, 2002
March 25, 2003
June 29, 2004
June 30, 2005
September 21, 2005
June 29, 2006
May 7, 2007
January 1, 2008
April 25, 2008
November 26, 2008
October 1, 2009
February 1, 2010
July 16, 2013
Rule No. 2
Implementation
Date
April 1, 1971
March 7, 1977
May 1, 1977
December 3, 1979
October 1, 1982
February 13, 1989
December 20, 1991
October 1, 1999
May 19, 2000
October 1, 2001
January 15, 2002
September 2, 2002
April 1, 2003
June 29, 2004
June 30, 2005
October 1, 2005
June 29, 2006
May 7, 2007
January 1, 2008
April 25, 2008
January 5, 2009
October 13, 2009
January 6, 2010
July 16, 2013
Exhibit 2.1
TAKEDA PHARMACEUTICAL COMPANY LIMITED
AND
THE BANK OF NEW YORK MELLON
As Depositary
AND
OWNERS AND HOLDERS OF AMERICAN DEPOSITARY SHARES
Amended and Restated Deposit Agreement
Dated as of
, 2018
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.01 American Depositary Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.02 Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.03 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.04 Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.05 Deliver; Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.06 Deposit Agreement
SECTION 1.07 Depositary; Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.08 Deposited Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.09 Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.10 DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.11
Foreign Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.12 Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.13 Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.14 Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.15 Registrar
SECTION 1.16 Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities Act of 1933 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.17
SECTION 1.18
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.19 Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 2.
FORM OF RECEIPTS, DEPOSIT OF SHARES, DELIVERY, TRANSFER AND
SURRENDER OF AMERICAN DEPOSITARY SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.01
Form of Receipts; Registration and Transferability of American Depositary
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.02 Deposit of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.03 Delivery of American Depositary Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.04 Registration of Transfer of American Depositary Shares; Combination and Split-up
of Receipts; Interchange of Certificated and Uncertificated American Depositary Shares . . . . . . . . . .
SECTION 2.05
Surrender of American Depositary Shares and Withdrawal of Deposited
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Limitations on Delivery, Transfer and Surrender of American Depositary Shares . . .
SECTION 2.06
SECTION 2.07
Lost Receipts, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.08 Cancellation and Destruction of Surrendered Receipts . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.09 DTC Direct Registration System and Profile Modification System . . . . . . . . . . . . . . .
ARTICLE 3. CERTAIN OBLIGATIONS OF OWNERS AND HOLDERS OF AMERICAN
DEPOSITARY SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Filing Proofs, Certificates and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.01
SECTION 3.02
Liability of Owner for Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.03 Warranties on Deposit of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.04 Disclosure of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.05 Ownership Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.06 Reporting Obligations and Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 4.
THE DEPOSITED SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.01 Cash Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.02 Distributions Other Than Cash, Shares or Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.03 Distributions in Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.04 Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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SECTION 4.05 Conversion of Foreign Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.06
Fixing of Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.07 Voting of Deposited Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.08 Changes Affecting Deposited Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.09 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.10
Lists of Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.11 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information Required for Reports to Governmental Agencies . . . . . . . . . . . . . . . . . . .
SECTION 4.12
ARTICLE 5.
THE DEPOSITARY, THE CUSTODIANS AND THE COMPANY . . . . . . . . . . . . . . . . . . .
SECTION 5.01 Maintenance of Office and Transfer Books by the Depositary . . . . . . . . . . . . . . . . . . .
SECTION 5.02
Prevention or Delay in Performance by the Depositary or the Company . . . . . . . . . . .
SECTION 5.03 Obligations of the Depositary, the Custodian and the Company . . . . . . . . . . . . . . . . .
SECTION 5.04 Resignation and Removal of the Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.05
The Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.06 Notices and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.07 Distribution of Additional Shares, Rights, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.08
SECTION 5.09 Charges of Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.10 Retention of Depositary Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.11
Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
List of Restricted Securities Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.12
SECTION 5.13 Change in Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information for Regulatory Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.14
ARTICLE 6. AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.01 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.02
ARTICLE 7. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.01 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.02 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.03
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.04 Owners and Holders as Parties; Binding Effect
SECTION 7.05 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Submission to Jurisdiction; Appointment of Agent for Service of Process; Jury Trial
SECTION 7.06
Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.07 Waiver of Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.08 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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AMENDED AND RESTATED DEPOSIT AGREEMENT
AMENDED AND RESTATED DEPOSIT AGREEMENT dated as of
, 2018 among
TAKEDA PHARMACEUTICAL COMPANY LIMITED, a joint-stock corporation incorporated under the laws
of Japan (herein called the Company), THE BANK OF NEW YORK MELLON, a New York banking
corporation (herein called the Depositary), and all Owners (as hereinafter defined) and Holders (as hereinafter
defined) from time to time of American Depositary Shares (as hereinafter defined) issued hereunder.
W I T N E S S E T H:
WHEREAS, the Company and the Depositary entered into a deposit agreement dated as of May 10,
2010 (the “Prior Deposit Agreement”) for the purposes stated in that agreement; and
WHEREAS, the Company and the Depositary now wish to amend and restate the Prior Deposit
Agreement to (i) reflect that the Company has become a reporting company under the Securities Exchange Act of
1934, as amended, and (ii) to amend and update the Prior Deposit Agreement in certain other respects; and
WHEREAS, the Company desires to provide, as hereinafter set forth in this Amended and Restated
Deposit Agreement, for the deposit of Shares (as hereinafter defined) of the Company from time to time with the
Depositary or with the Custodian (as hereinafter defined) as agent of the Depositary for the purposes set forth in
this Amended and Restated Deposit Agreement, for the creation of American Depositary Shares representing the
Shares so deposited and for the execution and delivery of American Depositary Receipts (as hereinafter defined)
evidencing the American Depositary Shares; and
WHEREAS, the American Depositary Receipts are to be substantially in the form of Exhibit A
annexed hereto, with appropriate insertions, modifications and omissions, as hereinafter provided in this
Amended and Restated Deposit Agreement;
NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties hereto
that the Prior Deposit Agreement is hereby amended and restated as follows:
ARTICLE 1. DEFINITIONS
The following definitions shall for all purposes, unless otherwise clearly indicated, apply to the respective
terms used in this Deposit Agreement:
SECTION 1.01
American Depositary Shares.
The term “American Depositary Shares” shall mean the securities created under this Deposit
Agreement representing rights and interests with respect to the Deposited Securities. American Depositary
Shares may be certificated securities evidenced by Receipts or uncertificated securities. The form of Receipt
annexed as Exhibit A to this Deposit Agreement shall be the prospectus required under the Securities Act of 1933
for sales of both certificated and uncertificated American Depositary Shares. Except for those provisions of this
Deposit Agreement that refer specifically to Receipts, all the provisions of this Deposit Agreement shall apply to
both certificated and uncertificated American Depositary Shares. Each American Depositary Share shall
represent the number of Shares specified in Exhibit A to this Deposit Agreement, until there shall occur a
distribution upon Deposited Securities covered by Section 4.03 or a change in Deposited Securities covered by
Section 4.08 with respect to which additional American Depositary Shares are not delivered, and thereafter
American Depositary Shares shall represent the amount of Shares or Deposited Securities specified in such
Sections.
SECTION 1.02
Commission.
The term “Commission” shall mean the Securities and Exchange Commission of the United States or
any successor governmental agency in the United States.
SECTION 1.03
Company.
The term “Company” shall mean Takeda Pharmaceutical Company Limited, a joint-stock corporation
incorporated under the laws of Japan, and its successors.
SECTION 1.04
Custodian.
The term “Custodian” shall, as of the date hereof, mean the Tokyo, Japan office of Sumitomo Mitsui
Banking Corporation, as agent of the Depositary for the purposes of this Deposit Agreement, and any other firm
or corporation which may hereafter be appointed by the Depositary pursuant to the terms of Section 5.05, as
substitute or additional custodian or custodians hereunder, as the context shall require and shall also mean all of
them collectively.
SECTION 1.05
Deliver; Surrender.
(a)
The term “deliver”, or its noun form, when used with respect to Shares or other Deposited
Securities, shall mean (i) book-entry transfer of those Shares or other Deposited Securities to an account
maintained by an institution authorized under applicable law to effect transfers of such securities designated by
the person entitled to that delivery or (ii) physical transfer of certificates evidencing those Shares or other
Deposited Securities registered in the name of, or duly endorsed or accompanied by proper instruments of
transfer to, the person entitled to that delivery.
(b)
The term “deliver”, or its noun form, when used with respect to American Depositary Shares,
shall mean (i) book-entry transfer of American Depositary Shares to an account at DTC designated by the person
entitled to such delivery, evidencing American Depositary Shares registered in the name requested by that
person, (ii) registration of American Depositary Shares not evidenced by a Receipt on the books of the
Depositary in the name requested by the person entitled to such delivery and mailing to that person of a statement
confirming that registration or (iii) if requested by the person entitled to such delivery, delivery at the Corporate
Trust Office of the Depositary to the person entitled to such delivery of one or more Receipts.
(c)
The term “surrender”, when used with respect to American Depositary Shares, shall mean
(i) one or more book-entry transfers of American Depositary Shares to the DTC account of the Depositary,
(ii) delivery to the Depositary at its Corporate Trust Office of an instruction to surrender American Depositary
Shares not evidenced by a Receipt or (iii) surrender to the Depositary at its Corporate Trust Office of one or more
Receipts evidencing American Depositary Shares.
SECTION 1.06
Deposit Agreement.
The term “Deposit Agreement” shall mean this Amended and Restated Deposit Agreement, as the same
may be amended from time to time in accordance with the provisions hereof.
SECTION 1.07
Depositary; Corporate Trust Office.
The term “Depositary” shall mean The Bank of New York Mellon, a New York banking corporation,
and any successor as depositary hereunder. The term “Corporate Trust Office”, when used with respect to the
Depositary, shall mean the office of the Depositary which at the date of this Deposit Agreement is 240
Greenwich Street, New York, New York 10286.
SECTION 1.08
Deposited Securities.
The term “Deposited Securities” as of any time shall mean Shares at such time deposited or deemed to
be deposited under this Deposit Agreement, including without limitation Shares that have not been successfully
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delivered upon surrender of American Depositary Shares, and any and all other securities, property and cash
received by the Depositary or the Custodian in respect thereof and at such time held under this Deposit
Agreement, subject as to cash to the provisions of Section 4.05.
SECTION 1.09
Dollars.
The term “Dollars” shall mean United States dollars.
SECTION 1.10
DTC.
The term “DTC” shall mean The Depository Trust Company or its successor.
SECTION 1.11
Foreign Registrar.
The term “Foreign Registrar” shall mean the entity that presently carries out the duties of registrar for
the Shares or any successor as registrar for the Shares and any other appointed agent of the Company for the
transfer and registration of Shares, including without limitation any securities depository for the Shares.
SECTION 1.12
Holder.
The term “Holder” shall mean any person holding a Receipt or a security entitlement or other interest
in American Depositary Shares, whether for its own account or for the account of another person. A Holder may
or may not be an Owner.
SECTION 1.13
Owner.
The term “Owner” shall mean the person in whose name American Depositary Shares are registered on
the books of the Depositary maintained for such purpose.
SECTION 1.14
Receipts.
The term “Receipts” shall mean the American Depositary Receipts issued hereunder evidencing
certificated American Depositary Shares, as the same may be amended from time to time in accordance with the
provisions hereof.
SECTION 1.15
Registrar.
The term “Registrar” shall mean any bank or trust company having an office in the Borough of
Manhattan, The City of New York, that is appointed by the Depositary to register American Depositary Shares
and transfers of American Depositary Shares as herein provided.
SECTION 1.16
Restricted Securities.
The term “Restricted Securities” shall mean Shares, or American Depositary Shares representing
Shares, that are acquired directly or indirectly from the Company or its affiliates (as defined in Rule 144 under
the Securities Act of 1933) in a transaction or chain of transactions not involving any public offering, or that are
subject to resale limitations under Regulation D under the Securities Act of 1933 or both, or which are held by an
officer, director (or persons performing similar functions) or other affiliate of the Company, or that would require
registration under the Securities Act of 1933 in connection with the offer and sale thereof in the United States, or
that are subject to other restrictions on sale or deposit under the laws of the United States or Japan, or under a
shareholder agreement or the Articles of Incorporation or other similar document of the Company.
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SECTION 1.17
Securities Act of 1933.
The term “Securities Act of 1933” shall mean the United States Securities Act of 1933, as from time to
time amended.
SECTION 1.18
Shares.
The term “Shares” shall mean shares of the common stock of the Company that are validly issued and
outstanding and fully paid, nonassessable and that were not issued in violation of any pre-emptive or similar
rights of the holders of outstanding securities of the Company; provided, however, that, if there shall occur any
change in nominal value, a split-up or consolidation or any other reclassification or, upon the occurrence of an
event described in Section 4.08, an exchange or conversion in respect of the Shares of the Company, the term
“Shares” shall thereafter also mean the successor securities resulting from such change in nominal value, split-up
or consolidation or such other reclassification or such exchange or conversion.
SECTION 1.19
Units.
The term “Unit” shall mean 100 Shares or such other number of Shares as the Articles of Incorporation
of the Company may provide as a “Unit of Shares” for purposes of the Companies Act of Japan, as such Articles
of Incorporation may be amended from time to time.
ARTICLE 2. FORM OF RECEIPTS, DEPOSIT OF SHARES, DELIVERY, TRANSFER AND SURRENDER
OF AMERICAN DEPOSITARY SHARES
SECTION 2.01
Form of Receipts; Registration and Transferability of American Depositary Shares.
Definitive Receipts shall be substantially in the form set forth in Exhibit A annexed to this Deposit
Agreement, with appropriate insertions, modifications and omissions, as hereinafter provided. No Receipt shall
be entitled to any benefits under this Deposit Agreement or be valid or obligatory for any purpose, unless such
Receipt shall have been (i) executed by the Depositary by the manual signature of a duly authorized officer of the
Depositary or (ii) executed by the facsimile signature of a duly authorized officer of the Depositary and
countersigned by the manual signature of a duly authorized signatory of the Depositary or a Registrar. The
Depositary shall maintain books on which (x) each Receipt so executed and delivered as hereinafter provided and
the transfer of each such Receipt shall be registered and (y) all American Depositary Shares delivered as
hereinafter provided and all registrations of transfer of American Depositary Shares shall be registered. A
Receipt bearing the facsimile signature of a person that was at any time a proper officer of the Depositary shall,
subject to the other provisions of this paragraph, bind the Depositary, notwithstanding that such person was not a
proper officer of the Depositary on the date of issuance of that Receipt.
The Receipts may with the Company’s consent (which shall not be unreasonably withheld) be endorsed
with or have incorporated in the text thereof such legends or recitals or modifications not inconsistent with the
provisions of this Deposit Agreement as may be required by the Depositary or the Company or required to
comply with any applicable law or regulations thereunder or with the rules and regulations of any securities
exchange upon which American Depositary Shares may be listed or to conform with any usage with respect
thereto, or to indicate any special limitations or restrictions to which any particular Receipts are subject by reason
of the date of issuance of the underlying Deposited Securities or otherwise.
American Depositary Shares evidenced by a Receipt, when properly endorsed or accompanied by
proper instruments of transfer, shall be transferable as certificated registered securities under the laws of New
York. American Depositary Shares not evidenced by a Receipt shall be transferable as uncertificated registered
securities under the laws of New York. The Depositary, notwithstanding any notice to the contrary, may treat the
Owner of American Depositary Shares as the absolute owner thereof for the purpose of determining the person
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entitled to distribution of dividends or other distributions or to any notice provided for in this Deposit Agreement
and for all other purposes, and neither the Depositary nor the Company shall have any obligation or be subject to
any liability under this Deposit Agreement to any Holder of American Depositary Shares unless that Holder is
the Owner of those American Depositary Shares.
SECTION 2.02
Deposit of Shares.
Subject to the terms and conditions of this Deposit Agreement and applicable law, Shares (other than
Restricted Securities) may be deposited by delivery thereof to any Custodian hereunder, accompanied by any
appropriate instruments or instructions for transfer, or endorsement, in form satisfactory to the Custodian,
together with all such certifications as may be required by the Depositary or the Custodian in accordance with the
provisions of this Deposit Agreement, and, if the Depositary requires, together with a written order directing the
Depositary to deliver to, or upon the written order of, the person or persons stated in such order, the number of
American Depositary Shares representing such deposit.
No Share shall be accepted for deposit unless accompanied by evidence satisfactory to the Depositary
that any necessary approval has been granted by any governmental body in Japan that is then performing the
function of the regulation of currency exchange. If required by the Depositary, Shares presented for deposit at
any time, whether or not the transfer books of the Company or the Foreign Registrar, if applicable, are closed,
shall also be accompanied by an agreement or assignment, or other instrument satisfactory to the Depositary,
which will provide for the prompt transfer to the Custodian of any dividend, or right to subscribe for additional
Shares or to receive other property which any person in whose name the Shares are or have been recorded may
thereafter receive upon or in respect of such deposited Shares, or in lieu thereof, such agreement of indemnity or
other agreement as shall be satisfactory to the Depositary.
At the request, risk and expense of any person proposing to deposit Shares, and for the account of such
person, the Depositary may receive Shares to be deposited, or evidence or record that irrevocable instruments or
instructions have been given to cause the transfer of Shares to the account of the Custodian, together with the
other instruments herein specified, for the purpose of forwarding such Shares, evidence or record to the
Custodian for deposit hereunder.
Upon each delivery to a Custodian of Shares to be deposited hereunder, together with the other
if any, such Custodian shall, as soon as transfer and recordation can be
documents specified above,
if applicable, for transfer and
accomplished, notify and instruct
recordation of the Shares being deposited in the name of the Depositary or its nominee or such Custodian or its
nominee.
the Company or the Foreign Registrar,
Deposited Securities shall be held by the Depositary or by a Custodian for the account and to the order
of the Depositary or at such other place or places as the Depositary shall determine. In its capacity as such, the
Depositary agrees that it shall not lend Deposited Securities.
The Depositary will use reasonable efforts to comply with written instructions of the Company to not
accept for deposit under this Deposit Agreement any Shares identified in such instructions at such time and under
such circumstances as may reasonably be specified in such instructions in order to facilitate the Company’s
compliance with the securities laws in the United States.
SECTION 2.03
Delivery of American Depositary Shares.
Upon receipt by any Custodian of any deposit pursuant to Section 2.02, together with the other
documents required as specified above, such Custodian shall notify the Depositary of such deposit and the person
or persons to whom or upon whose written order American Depositary Shares are deliverable in respect thereof
and the number of American Depositary Shares to be so delivered. Such notification shall be made by letter
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(delivered by hand or sent via first class mail postage prepaid) or, at the request, risk and expense of the person
making the deposit, by facsimile transmission or electronic e-mail (and in addition, if the transfer books of the
Company or the Foreign Registrar, if applicable, are open, the Depositary may in its sole discretion require a
proper acknowledgment or other evidence from the Company or the Foreign Registrar that any Deposited
Securities have been recorded upon the books of the Company or the Foreign Registrar, if applicable, in the name
of the Depositary or its nominee or such Custodian or its nominee). Upon receiving such notice from such
Custodian, or upon the receipt of Shares by the Depositary, the Depositary, subject to the terms and conditions of
this Deposit Agreement, shall deliver without unreasonable delay, to or upon the order of the person or persons
entitled thereto, the number of American Depositary Shares issuable in respect of that deposit, but only upon
payment to the Depositary of the fees and expenses of the Depositary for the delivery of such American
Depositary Shares as provided in Section 5.09, and of all taxes and governmental charges and fees payable in
connection with such deposit and the transfer of the Deposited Securities.
SECTION 2.04
Registration of Transfer of American Depositary Shares; Combination and Split-up of
Receipts; Interchange of Certificated and Uncertificated American Depositary Shares.
The Depositary, subject
to the terms and conditions of this Deposit Agreement, shall without
unreasonable delay register transfers of American Depositary Shares on its transfer books from time to time,
upon (i) in the case of certificated American Depositary Shares, surrender of the Receipt evidencing those
American Depositary Shares, by the Owner in person or by a duly authorized attorney, properly endorsed or
accompanied by proper instruments of transfer or (ii) in the case of uncertificated American Depositary Shares,
receipt from the Owner of a proper instruction (including, for the avoidance of doubt, instructions through DRS
and Profile as provided in Section 2.09), and, in either case, duly stamped as may be required by the laws of the
State of New York and of the United States of America. Thereupon the Depositary shall deliver those American
Depositary Shares to or upon the order of the person entitled thereto.
The Depositary, subject
to the terms and conditions of this Deposit Agreement, shall without
unreasonable delay upon surrender of a Receipt or Receipts for the purpose of effecting a split-up or combination
of such Receipt or Receipts, execute and deliver a new Receipt or Receipts for any authorized number of
American Depositary Shares requested, evidencing the same aggregate number of American Depositary Shares
as the Receipt or Receipts surrendered.
The Depositary, upon surrender of certificated American Depositary Shares for the purpose of
exchanging for uncertificated American Depositary Shares, shall cancel those certificated American Depositary
Shares and send the Owner a statement confirming that the Owner is the owner of the same number of
uncertificated American Depositary Shares. The Depositary, upon receipt of a proper instruction (including, for
the avoidance of doubt, instructions through DRS and Profile as provided in Section 2.09) from the Owner of
uncertificated American Depositary Shares for the purpose of exchanging for certificated American Depositary
Shares, shall cancel those uncertificated American Depositary Shares and deliver, without unreasonable delay, to
the Owner the same number of certificated American Depositary Shares.
The Depositary may appoint one or more co-transfer agents for the purpose of effecting registration of
transfers of American Depositary Shares and combinations and split-ups of Receipts at designated transfer
offices on behalf of the Depositary. In carrying out its functions, a co-transfer agent may require evidence of
authority and compliance with applicable laws and other requirements by Owners or persons entitled to
American Depositary Shares and will be entitled to protection and indemnity to the same extent as the
Depositary. The Depositary shall require each co-transfer agent that it appoints under this Section 2.04 to accept
its appointment in writing and agree in writing to abide by the applicable provisions of this Deposit Agreement.
The Depositary shall notify the Company as promptly as practicable of any appointment it makes under this
paragraph.
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SECTION 2.05
Surrender of American Depositary Shares and Withdrawal of Deposited Securities.
Upon surrender at the Corporate Trust Office of the Depositary of American Depositary Shares for the
purpose of withdrawal of the Deposited Securities represented thereby, and upon payment of the fee of the
Depositary for the surrender of American Depositary Shares as provided in Section 5.09 and payment of all taxes
and governmental charges payable in connection with such surrender and withdrawal of the Deposited Securities,
and subject to the terms and conditions of this Deposit Agreement, and the Company’s Articles of Incorporation
and any other applicable law and regulation and to the extent delivery can then be practicably made, the Owner
of those American Depositary Shares shall be entitled to delivery, to him or as instructed, of the amount of
Deposited Securities at the time represented by those American Depositary Shares. Such delivery shall be made,
as hereinafter provided, without unreasonable delay.
A Receipt surrendered for such purposes may be required by the Depositary to be properly endorsed in
blank or accompanied by proper instruments of transfer in blank. The Depositary may require the surrendering
Owner to execute and deliver to the Depositary a written order directing the Depositary to cause the Deposited
Securities being withdrawn to be delivered to or upon the written order of a person or persons designated in such
order. Thereupon the Depositary shall direct the Custodian to deliver at the office of such Custodian, without
unreasonable delay and subject to Sections 2.06, 3.01 and 3.02 and to the other terms and conditions of this
Deposit Agreement,
the Company’s Articles of Incorporation and applicable laws or regulations now or
hereinafter in effect to or upon the written order of the person or persons designated in the order delivered to the
Depositary as above provided, the amount of Deposited Securities represented by the surrendered American
Depositary Shares, and the Depositary may charge the surrendering Owner a fee and its expenses for giving that
direction by cable (including SWIFT) or facsimile transmission. The Depositary may make delivery to such
person or persons at the Corporate Trust Office of the Depositary of any dividends or distributions with respect to
the Deposited Securities represented by those American Depositary Shares, or of any proceeds of sale of any
dividends, distributions or rights, which may at the time be held by the Depositary.
At the request, risk and expense of any Owner so surrendering American Depositary Shares, and for
the account of such Owner, the Depositary shall direct the Custodian to forward any cash or other property (other
than rights) comprising, and forward a certificate or certificates, if applicable, and other proper documents of title
for, the Deposited Securities represented by the surrendered American Depositary Shares to the Depositary for
delivery at the Corporate Trust Office of the Depositary.
SECTION 2.06
Limitations on Delivery, Transfer and Surrender of American Depositary Shares.
As a condition precedent to the delivery, registration of transfer or surrender of any American
Depositary Shares or split-up or combination of any Receipt or withdrawal of any Deposited Securities, the
Depositary, Custodian or Registrar may require payment from the depositor of Shares or the presenter of the
Receipt or instruction for registration of transfer or surrender of American Depositary Shares not evidenced by a
Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or
registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being
deposited or withdrawn) and payment of any applicable fees as herein provided, may require the production of
proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with
any regulations the Depositary may establish consistent with the provisions of this Deposit Agreement, including,
without limitation, this Section 2.06.
The delivery of American Depositary Shares against deposit of Shares generally or against deposit of
particular Shares may be suspended, or the transfer of American Depositary Shares in particular instances may be
refused, or the registration of transfer of outstanding American Depositary Shares generally may be suspended,
during any period when the transfer books of the Depositary are closed, or if any such action is deemed necessary
or advisable by the Depositary or the Company at any time or from time to time because of any requirement of
law or of any government or governmental body or commission, or under any provision of this Deposit
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Agreement, or for any other reason, subject to the provisions of the following sentence. Notwithstanding
anything to the contrary in this Deposit Agreement, the surrender of outstanding American Depositary Shares
and withdrawal of Deposited Securities may not be suspended subject only to (i) temporary delays caused by
closing the transfer books of the Depositary or the Company or the Foreign Registrar, if applicable, or the deposit
of Shares in connection with voting at a shareholders’ meeting, or the payment of dividends, (ii) the payment of
fees, taxes and similar charges, and (iii) compliance with any United States or foreign laws or governmental
regulations relating to the American Depositary Shares or to the withdrawal of the Deposited Securities. Without
limitation of the foregoing, the Depositary shall not knowingly accept for deposit under this Deposit Agreement
any Shares which would be required to be registered under the provisions of the Securities Act of 1933 for public
offer and sale in the United States unless a registration statement is in effect as to such Shares for such offer and
sale.
SECTION 2.07
Lost Receipts, etc.
In case any Receipt shall be mutilated, destroyed, lost or stolen, the Depositary shall deliver to the
Owner the American Depositary Shares evidenced by that Receipt in uncertificated form or, if requested by the
Owner, execute and deliver a new Receipt of like tenor in exchange and substitution for such mutilated Receipt,
upon cancellation thereof, or in lieu of and in substitution for such destroyed, lost or stolen Receipt. Before the
Depositary shall deliver American Depositary Shares in uncertificated form or execute and deliver a new
Receipt, in substitution for a destroyed, lost or stolen Receipt, the Owner thereof shall have (a) filed with the
Depositary (i) a request for such execution and delivery before the Depositary has notice that the Receipt has
been acquired by a bona fide purchaser and (ii) a sufficient indemnity bond and (b) satisfied any other reasonable
requirements imposed by the Depositary.
SECTION 2.08
Cancellation and Destruction of Surrendered Receipts.
All Receipts surrendered to the Depositary shall be cancelled by the Depositary. The Depositary is
authorized to destroy Receipts so cancelled. Cancelled Receipts shall not be entitled to any benefits under this
Deposit Agreement or be valid for any purpose.
SECTION 2.09
DTC Direct Registration System and Profile Modification System.
(a)
the parties acknowledge that
Notwithstanding the provisions of Section 2.04,
the Direct
Registration System (“DRS”) and Profile Modification System (“Profile”) shall apply to uncertificated American
Depositary Shares upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to
which the Depositary may register the ownership of uncertificated American Depositary Shares, which
ownership shall be evidenced by periodic statements issued by the Depositary to the Owners entitled thereto.
Profile is a required feature of DRS which allows a DTC participant, claiming to act on behalf of an Owner of
American Depositary Shares, to direct the Depositary to register a transfer of those American Depositary Shares
to DTC or its nominee and to deliver those American Depositary Shares to the DTC account of that DTC
participant without receipt by the Depositary of prior authorization from the Owner to register such transfer.
(b)
In connection with and in accordance with the arrangements and procedures relating to DRS/
Profile, the parties understand that the Depositary will not verify, determine or otherwise ascertain that the DTC
participant which is claiming to be acting on behalf of an Owner in requesting a registration of transfer and
delivery as described in subsection (a) has the actual authority to act on behalf of the Owner (notwithstanding
any requirements under the Uniform Commercial Code). For the avoidance of doubt, the provisions of Sections
5.03 and 5.08 shall apply to the matters arising from the use of the DRS. The parties agree that the Depositary’s
reliance on and compliance with instructions received by the Depositary through the DRS/Profile System and in
accordance with this Deposit Agreement shall not constitute negligence or bad faith on the part of the Depositary.
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ARTICLE 3. CERTAIN OBLIGATIONS OF OWNERS AND HOLDERS OF AMERICAN DEPOSITARY
SHARES
SECTION 3.01
Filing Proofs, Certificates and Other Information.
Any person presenting Shares for deposit or any Owner or Holder may be required, and each Holder
and Owner agrees, from time to time to provide to the Depositary or the Custodian such proof of citizenship or
residence, taxpayer status, exchange control approval, legal or beneficial ownership of such Shares, or such
information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to
execute such certificates and to make such representations and warranties, as the Depositary may deem
reasonably necessary or proper. The Depositary may withhold the delivery or registration of transfer of American
Depositary Shares or the distribution of any dividend or sale or distribution of rights or of the proceeds thereof or
the delivery of any Deposited Securities until such proof or other information is provided or such certificates are
executed or such representations and warranties made, in each case to the Depositary’s and the Company’s
satisfaction. Upon written request of the Company, the Depositary shall deliver to the Company copies of the
documents or instruments delivered to the Depositary pursuant to this Section 3.01.
SECTION 3.02
Liability of Owner for Taxes.
If any present or future tax or other governmental charge shall become payable by the Custodian or the
Depositary with respect to any American Depositary Shares or any Deposited Securities represented by any
American Depositary Shares, such tax or other governmental charge shall be the sole responsibility of the Owner
of such American Depositary Shares, payable by such Owner to the Depositary. The Depositary may refuse to
register any transfer of those American Depositary Shares or any withdrawal of Deposited Securities represented
by those American Depositary Shares until such payment is made, and may withhold any dividends or other
distributions, or may sell for the account of the Owner thereof any part or all of the Deposited Securities
represented by those American Depositary Shares, and may apply such dividends or other distributions or the
proceeds of any such sale in payment of such tax or other governmental charge and the Owner of such American
Depositary Shares shall remain liable for any deficiency.
SECTION 3.03
Warranties on Deposit of Shares.
Every person depositing Shares under this Deposit Agreement shall be deemed thereby to represent and
if applicable, are validly issued, fully paid,
that (a) such Shares and each certificate therefor,
warrant
nonassessable and were legally obtained by such person, (b) all preemptive rights (and similar) rights, if any,
with respect to such Shares have been validly waived or exercised, (c) the Shares presented for deposit are free
and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, and are not, and the
American Depositary Shares issuable upon such deposit will not be, Restricted Securities, (d) the Shares
presented for deposit have not been stripped of any rights or entitlements and (e) that the person making such
deposit is duly authorized so to do. Such representations and warranties shall survive the deposit and withdrawal
of Shares, the issuance and cancellation of American Depositary Shares in respect thereof and the transfer of
such American Depositary Shares. If any such representations or warranties are false in any way with respect to
any person depositing Shares under this Deposit Agreement or any Holder or Owner of American Depositary
Shares, such person or such Holder or Owner shall be deemed to have waived any claims against the Company
and the Depositary related to the consequences thereof and to have assumed sole responsibility therefor and the
Company and Depositary shall be authorized, at the cost and expense of the person depositing Shares, to take any
and all actions necessary to correct the consequences thereof.
SECTION 3.04
Disclosure of Interests.
The Company may from time to time request Owners, through the Depositary, to provide information
as to the capacity in which such Owners own or owned American Depositary Shares and regarding the identity of
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any other persons then or previously interested in such American Depositary Shares and the nature of such
interest and various other matters.
Each Owner agrees to provide any information reasonably requested by the Company or the Depositary
pursuant to this Section 3.04. The Depositary agrees to comply with reasonable written instructions from the
Company requesting that the Depositary forward any requests to the Owners and to forward promptly to the
Company any such responses to such requests by the Depositary.
SECTION 3.05
Ownership Restrictions.
Notwithstanding any other provision in this Deposit Agreement or any Receipt, the Company may
restrict transfers of the Shares where such transfer might result in ownership of Shares exceeding limits imposed
by applicable law or regulation or the Articles of Incorporation of the Company. The Company may also restrict,
in such manner as it deems appropriate, transfers of the American Depositary Shares where such transfer may
result in the total number of Shares represented by the American Depositary Shares owned by a single Holder or
Owner to exceed any such limits. The Company may, in its sole discretion but subject to applicable law, instruct
the Depositary to take action with respect to the ownership interest of any Holder or Owner in excess of the
limits set forth in the preceding sentence, including, but not limited to, the imposition of restrictions on the
transfer of American Depositary Shares, the removal or limitation of voting rights or mandatory sale or
disposition on behalf of a Holder or Owner of the Shares represented by the American Depositary Shares held by
such Holder or Owner in excess of such limitations, if and to the extent such disposition is permitted by
applicable law and the Articles of Incorporation of the Company. Nothing herein shall be interpreted as
obligating the Depositary or the Company to ensure compliance with the ownership restrictions described in this
Section 3.05.
SECTION 3.06
Reporting Obligations and Regulatory Approvals.
Applicable laws and regulations may require holders and beneficial owners of Shares, including the
Holders and Owners, to satisfy reporting requirements and obtain regulatory approvals in certain circumstances.
Holders and Owners are solely responsible for determining and complying with such reporting requirements and
obtaining such approvals. Each Holder and each Owner hereby agrees to make such determination, file such
reports, and obtain such approvals to the extent and in the form required by applicable laws and regulations as in
effect from time to time. Neither the Depositary, the Custodian, the Company nor any of their respective agents
or affiliates shall be required to take any actions whatsoever on behalf of Holders or Owners to determine or
satisfy such reporting requirements or obtain such regulatory approvals under applicable laws and regulations.
ARTICLE 4. THE DEPOSITED SECURITIES
SECTION 4.01
Cash Distributions.
the Depositary shall, subject
Whenever the Depositary shall receive any cash dividend or other cash distribution on any Deposited
Securities from the Company through the Custodian,
to the provisions of
Section 4.05, promptly convert or cause to be converted such dividend or distribution into Dollars and shall,
without unreasonable delay, distribute the amount thus received (net of the fees and expenses of the Depositary
as provided in Section 5.09) to the Owners entitled thereto, in proportion to the number of American Depositary
Shares representing such Deposited Securities held by them respectively; provided, however, that in the event
that the Company, the Custodian or the Depositary shall be required to withhold and does withhold from such
cash dividend or such other cash distribution an amount on account of taxes or other governmental charges, the
amount distributed to the Owner of the American Depositary Shares representing such Deposited Securities shall
be reduced accordingly. Such withheld or deducted amounts shall be forwarded by the Company, the Custodian
or the Depositary, as the case may be, to the relevant governmental authority. The Depositary shall distribute
only such amount, however, as can be distributed without attributing to any Owner a fraction of one cent. Any
such fractional amounts shall be rounded to the nearest whole cent and so distributed to Owners entitled thereto.
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SECTION 4.02
Distributions Other Than Cash, Shares or Rights.
Subject to the provisions of Sections 4.11 and 5.09, whenever the Depositary shall receive any
distribution from the Company through the Custodian other than a distribution described in Section 4.01, 4.03 or
4.04, the Depositary shall cause the securities or property received by it to be distributed to the Owners entitled
thereto, after deduction or upon payment of any fees and expenses of the Depositary or any taxes or other
governmental charges, in proportion to the number of American Depositary Shares representing such Deposited
Securities held by them respectively, in any manner that the Depositary may reasonably deem equitable and
practicable for accomplishing such distribution; provided, however, that if, after consultation with the Company
to the extent practicable, the Depositary determines that distribution is not lawful or reasonably practicable for
any reason (including, but not limited to, such distribution cannot be made proportionately among the Owners
entitled thereto or that such securities must be registered under the Securities Act of 1933 in order to be
distributed to Owners), the Depositary shall endeavor to sell or cause such property or securities to be sold in a
public or private sale, at such place or places and upon such terms as it may deem proper, and the net proceeds of
any such sale (net of the fees and expenses of the Depositary as provided in Section 5.09) shall be distributed
without unreasonable delay by the Depositary to the Owners entitled thereto, all in the manner and subject to the
conditions described in Section 4.01. The Depositary may withhold any distribution of securities under this
Section 4.02 if it has not received satisfactory assurances from the Company that the distribution does not require
registration under the Securities Act of 1933. The Depositary may sell, by public or private sale, an amount of
securities or other property it would otherwise distribute under this Section 4.02 that is sufficient to pay its fees
and expenses in respect of that distribution. If the Depositary is unable to sell such property or securities, the
Depositary may dispose of such property or securities in any way it deems reasonably practicable under the
circumstances. Neither the Depositary nor the Company shall be responsible for (a) any failure to determine
whether it is lawful or practicable to make such property or securities available to the Owners nor (b) any foreign
exchange exposure or loss incurred in connection with the sale or disposal of such property or securities.
SECTION 4.03
Distributions in Shares.
If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of,
Shares, the Depositary may, and shall if the Company so requests in writing, deliver to the Owners entitled
thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held
by them respectively, an aggregate number of American Depositary Shares representing the amount of Shares
received as such dividend or free distribution, subject to the terms and conditions of this Deposit Agreement with
respect to the deposit of Shares and after deduction or upon issuance of American Depositary Shares, including
the withholding of any tax or other governmental charge as provided in Section 4.11 and the payment of the fees
and expenses of the Depositary as provided in Section 5.09 (and the Depositary may sell, by public or private
sale, an amount of the Shares received sufficient to pay its fees and expenses in respect of that distribution). The
Depositary may withhold any such delivery of American Depositary Shares if it has not received satisfactory
assurances from the Company that such distribution does not require registration under the Securities Act of
1933. In lieu of delivering fractional American Depositary Shares in any such case, the Depositary shall sell the
amount of Shares represented by the aggregate of such fractions by public or private sale (or, if such sale is not
possible with respect to any portion of such Shares which is less than a full Unit, by sale of such portion to the
Company in accordance with the applicable provisions of the Articles of Incorporation, other similar documents
of the Company, Companies Act of Japan and any other Japanese law or regulation) and distribute the net
proceeds, all in the manner and subject to the conditions described in Section 4.01. If additional American
Depositary Shares are not so delivered, each American Depositary Share shall thenceforth also represent the
additional Shares distributed upon the Deposited Securities represented thereby.
SECTION 4.04
Rights.
In the event that the Company shall offer or cause to be offered to the holders of any Deposited
Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary shall
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have reasonable discretion, after consultation with the Company, as to the procedure to be followed in making
such rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net
proceeds available to such Owners or, if by the terms of such rights offering or for any other reason, the
Depositary may not either make such rights available to any Owners or dispose of such rights and make the net
proceeds available to such Owners, then the Depositary shall allow the rights to lapse. If at the time of the
offering of any rights the Depositary determines in its discretion, after consultation with the Company, that it is
lawful and feasible to make such rights available to all or certain Owners but not to other Owners, the Depositary
may distribute to any Owner to whom it determines in its discretion, after consultation with the Company, the
distribution to be lawful and feasible, in proportion to the number of American Depositary Shares held by such
Owner, warrants or other instruments therefor in such form as it deems appropriate.
In circumstances in which rights would otherwise not be distributed,
if an Owner requests the
distribution of warrants or other instruments in order to exercise the rights allocable to the American Depositary
Shares of such Owner hereunder, the Depositary will make such rights available to such Owner upon written
notice from the Company to the Depositary that (a) the Company has elected in its sole discretion to permit such
rights to be exercised and (b) such Owner has executed such documents as the Company has determined in its
sole discretion are reasonably required under applicable law.
If the Depositary has distributed warrants or other instruments for rights to all or certain Owners, then
upon instruction from such an Owner pursuant to such warrants or other instruments to the Depositary from such
Owner to exercise such rights, upon payment by such Owner to the Depositary for the account of such Owner of
an amount equal to the purchase price of the Shares to be received upon the exercise of the rights, and upon
payment of the fees and expenses of the Depositary and any other charges as set forth in such warrants or other
instruments, the Depositary shall, on behalf of such Owner, exercise the rights and purchase the Shares, and the
Company shall cause the Shares so purchased to be delivered to the Depositary on behalf of such Owner. As
agent for such Owner, the Depositary will cause the Shares so purchased to be deposited pursuant to Section 2.02
of this Deposit Agreement, and shall, pursuant to Section 2.03 of this Deposit Agreement, deliver American
Depositary Shares to such Owner. In the case of a distribution pursuant to the second paragraph of this Section,
such deposit shall be made, and depositary shares shall be delivered, under depositary arrangements which
provide for issuance of depositary shares subject to the appropriate restrictions on sale, deposit, cancellation, and
transfer under applicable United States laws.
If the Depositary determines in its discretion, after consultation with the Company, that it is not lawful
or feasible to make such rights available to all or certain Owners, it shall, unless requested by the Company in
writing not to, sell the rights, warrants or other instruments in proportion to the number of American Depositary
Shares held by the Owners to whom it has determined it may not lawfully or feasibly make such rights available,
and allocate the net proceeds of such sales (net of the fees and expenses of the Depositary as provided in
Section 5.09 and all taxes and governmental charges payable in connection with such rights and subject to the
terms and conditions of this Deposit Agreement) for the account of such Owners otherwise entitled to such
rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions
among such Owners because of exchange restrictions or the date of delivery of any American Depositary Shares
or otherwise.
The Depositary will not offer rights to Owners unless both the rights and the securities to which such
rights relate are either exempt from registration under the Securities Act of 1933 with respect to a distribution to
all Owners or are registered under the provisions of such Act; provided, that nothing in this Deposit Agreement
shall create any obligation on the part of the Company to file a registration statement with respect to such rights
or underlying securities or to endeavor to have such a registration statement declared effective. If an Owner
requests the distribution of warrants or other instruments, notwithstanding that there has been no such registration
under the Securities Act of 1933, the Depositary shall not effect such distribution unless it has received an
opinion from recognized counsel in the United States for the Company upon which the Depositary may rely that
such distribution to such Owner is exempt from such registration.
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There can be no assurance that Owners generally, or any Owner in particular, will be given the
opportunity to exercise rights on the same terms and conditions as the holders of Shares. Neither the Depositary
nor the Company shall be responsible for any failure to determine that it may be lawful or feasible to make such
rights available to Owners in general or any Owner in particular.
SECTION 4.05
Conversion of Foreign Currency.
Whenever the Depositary or the Custodian shall receive foreign currency, by way of dividends or other
distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt
thereof the foreign currency so received can in the reasonable judgment of the Depositary be converted on a
reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall
convert or cause to be converted by sale or in any other manner that it may determine such foreign currency into
Dollars, and such Dollars shall be distributed without unreasonable delay to the Owners entitled thereto or, if the
Depositary shall have distributed any warrants or other instruments which entitle the holders thereof to such
Dollars, then to the holders of such warrants and/or instruments upon surrender thereof for cancellation in whole
or in part depending upon the terms of such warrants or other instruments. Such distribution may be made upon
an averaged or other practicable basis without regard to any distinctions among Owners on account of exchange
restrictions, the date of delivery of any American Depositary Shares or otherwise and shall be net of any
expenses of conversion into Dollars incurred by the Depositary as provided in Section 5.09.
If such conversion or distribution can be effected only with the approval or license of any government
or agency thereof, the Depositary shall file such application for approval or license, if any, as it may deem
desirable.
If at any time the Depositary shall determine that in its judgment any foreign currency received by the
Depositary or the Custodian is not convertible on a reasonable basis into Dollars transferable to the United States,
or if any approval or license of any government or agency thereof which is required for such conversion is denied
or in the reasonable opinion of the Depositary is not obtainable, or if any such approval or license is not obtained
within a reasonable period as determined by the Depositary, the Depositary may distribute the foreign currency
(or an appropriate document evidencing the right to receive such foreign currency) received by the Depositary to,
or in its discretion may hold such foreign currency uninvested and without liability for interest thereon for the
respective accounts of, the Owners entitled to receive the same.
If any such conversion of foreign currency, in whole or in part, cannot be effected for distribution to
some of the Owners entitled thereto, the Depositary may in its discretion make such conversion and distribution
in Dollars to the extent permissible to the Owners entitled thereto and may distribute the balance of the foreign
currency received by the Depositary to, or hold such balance uninvested and without liability for interest thereon
for the respective accounts of, the remaining Owners entitled thereto.
The Depositary may convert currency itself or through any of its affiliates and, in those cases, acts as
principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and
earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The
revenue is based on, among other things, the difference between the exchange rate assigned to the currency
conversion made under this Deposit Agreement and the rate that the Depositary or its affiliate receives when
buying or selling foreign currency for its own account. The Depositary makes no representation that the exchange
rate used or obtained in any currency conversion under this Deposit Agreement will be the most favorable rate
that could be obtained at the time or that the method by which that rate will be determined will be the most
favorable to Owners, subject to the Depositary’s obligations under Section 5.03. The methodology used to
determine exchange rates used in currency conversions is available upon request.
SECTION 4.06
Fixing of Record Date.
Whenever any cash dividend or other cash distribution shall become payable or any distribution other
than cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever
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the Depositary shall receive notice of any meeting of holders of Shares or other Deposited Securities, or
whenever for any reason the Depositary causes a change in the number of Shares that are represented by each
American Depositary Share, or whenever the Depositary shall find it necessary or convenient, the Depositary
shall fix a record date which shall be the same date as the record date, if any, applicable to the deposited Shares,
or as close thereto as practicable (a) for the determination of the Owners who shall be (i) entitled to receive such
dividend, distribution or rights or the net proceeds of the sale thereof, (ii) entitled to give instructions for the
exercise of voting rights at any such meeting or (iii) responsible for any fee or charge assessed by the Depositary
pursuant to this Deposit Agreement, or (b) on or after which each American Depositary Share will represent the
changed number of Shares. Subject to the provisions of Sections 4.01 through 4.05 and to the other terms and
conditions of this Deposit Agreement, the Owners on such record date shall be entitled, as the case may be, to
receive the amount distributable by the Depositary with respect to such dividend or other distribution or such
rights or the net proceeds of sale thereof in proportion to the number of American Depositary Shares held by
them respectively and to give voting instructions and to act in respect of any other such matter.
SECTION 4.07 Voting of Deposited Securities.
(a)
Upon receipt of notice of any meeting of holders of Shares at which holders of Shares will be
entitled to vote, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter,
send to the Owners a notice, the form of which shall be in the sole discretion of the Depositary, that shall contain
(i) the information contained in the notice of meeting received by the Depositary, (ii) a statement that the Owners
as of the close of business on a specified record date will be entitled, subject to any applicable provision of
Japanese law or regulation and of the Articles of Incorporation or similar documents of the Company, to instruct
the Depositary as to the exercise of the voting rights pertaining to the amount of Shares represented by their
respective American Depositary Shares (iii) a statement as to the manner in which those instructions may be
given, including an express indication that instructions may be deemed given in accordance with the last sentence
of paragraph (b) below, if no instruction is received, to the Depositary to give a discretionary proxy to a person
designated by the Company and (iv) the last date on which the Depositary will accept instructions (the
“Instruction Cutoff Date”).
(b)
Upon the written request of an Owner of American Depositary Shares, as of the date of the
request or, if a record date was specified by the Depositary, as of that record date, received on or before
any Instruction Cutoff Date established by the Depositary, the Depositary may, and if the Depositary sent a
notice under the preceding paragraph shall, endeavor, in so far as practicable, to vote or cause to be voted the
amount of deposited Shares represented by those American Depositary Shares in accordance with the instructions
set forth in that request. So long as under the Articles of Incorporation or other similar documents of the
Company and Japanese law or regulation votes may only be cast in respect of one or more whole Units of Shares,
(i) the same instructions received from Owners shall be aggregated and the Depositary shall, subject to applicable
law or regulation and market practice, endeavor to vote or cause to be voted the number of whole Units in respect
of which such instructions as so aggregated have been received, in accordance with such instructions, and
(ii) such Owners acknowledge and agree that, if the Depositary has received the same instructions any portion of
which, after aggregation of all such instructions, constitutes instructions with respect to less than a whole Unit of
Shares, the Depositary will be unable to vote or cause to be voted the Shares to which such portion of the
instructions applies. The Depositary shall not vote or attempt to exercise the right to vote that attaches to the
deposited Shares other than in accordance with instructions given by Owners and received by the Depositary or
as provided in the following sentence. If
(i)
the Company instructed the Depositary to send a notice under paragraph (a) above and gave the
Depositary notice of the meeting and details of the matters to be voted upon at least 28 days before the meeting
date,
(ii)
no instructions are received by the Depositary from an Owner with respect to a matter and an
amount of American Depositary Shares of that Owner on or before the Instruction Cutoff Date and
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(iii)
the Depositary has received from the Company, not later than the New York business day
following the Instruction Cutoff Date, a written confirmation that, as of the Instruction Cutoff Date, (x) the
Company wishes a proxy to be given under this sentence, (y) the Company reasonably does not know of any
substantial opposition to the matter and (z) the matter is not materially adverse to the interests of shareholders,
then, the Depositary shall deem that Owner to have instructed the Depositary to give a discretionary proxy to a
person designated by the Company with respect to that matter and the amount of deposited Shares represented by
that amount of American Depositary Shares and the Depositary shall give a discretionary proxy to a person
designated by the Company to vote that amount of deposited Shares as to that matter; provided, however, that no
discretionary proxy shall be given with respect to the number of deposited Shares represented by American
Depositary Shares held by CREST Depository Limited and represented by CREST depository interests (CDIs).
(c)
There can be no assurance that Owners generally or any Owner in particular will receive the
notice described in paragraph (a) above in time to enable Owners to give instructions to the Depositary prior to
the Instruction Cutoff Date.
(d)
If the Company will request the Depositary to send a notice under paragraph (a) above, the
Company shall endeavor to give the Depositary at least 28 days’ prior notice of any meeting of holders of Shares
and the details of the matters to be voted upon, unless such advance notice is not possible because less than 30
days’ notice of the meeting has been given in accordance with the Company’s Articles of Incorporation and
Japanese law, in which case Company will provide to the Depositary such advance notice of the meeting as may
be possible under the circumstances.
SECTION 4.08
Changes Affecting Deposited Securities.
Upon any change in nominal value, split-up, consolidation or any other reclassification of Deposited
Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the
Company or to which it is a party, or upon the redemption or cancellation by the Company of the Deposited
Securities, any securities, cash or property which shall be received by the Depositary or a Custodian in exchange
for, in conversion of, in lieu of or in respect of Deposited Securities, shall be treated as new Deposited Securities
under this Deposit Agreement, and American Depositary Shares shall thenceforth represent, in addition to the
existing Deposited Securities, the right to receive the new Deposited Securities so received, unless additional
American Depositary Shares are delivered pursuant to the following sentence. In any such case the Depositary
may, and shall if the Company requests in writing, deliver additional American Depositary Shares as in the case
of a dividend in Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts
specifically describing such new Deposited Securities.
SECTION 4.09
Reports.
The Depositary shall make available for inspection by Owners at its Corporate Trust Office any reports
and communications, including any proxy solicitation material, received from the Company which are both
(a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the
holders of such Deposited Securities by the Company. The Depositary shall also, upon written request by the
Company, send to the Owners copies of such reports when furnished by the Company pursuant to Section 5.06.
Any such reports and communications, including any such proxy soliciting material, furnished to the Depositary
by the Company shall be furnished in English, to the extent such materials are required to be translated into
English pursuant to any regulations of the Commission.
SECTION 4.10
Lists of Owners.
Promptly upon request by the Company, the Depositary shall furnish to it a list, as of a recent date, of
the names, addresses and holdings of American Depositary Shares by all persons in whose names American
Depositary Shares are registered on the books of the Depositary.
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Any other records maintained by the Depositary, the Custodian, the Registrar or any co-transfer agent
or co-registrar under this Deposit Agreement shall be promptly made available to the Company upon its
reasonable request.
SECTION 4.11
Withholding.
In the event that the Depositary determines that any distribution in property (including Shares and
rights to subscribe therefor) is subject to any tax or other governmental charge which the Depositary is obligated
to withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including
Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems necessary
and practicable to pay such taxes or charges and the Depositary shall distribute the net proceeds of any such sale
after deduction of such taxes or charges to the Owners entitled thereto in proportion to the number of American
Depositary Shares held by them respectively.
Services for Owners and Holders that may permit them to obtain reduced rates of tax withholding at
source or reclaim excess tax withheld, and the fees and costs associated with using services of that kind, are not
provided under, and are outside the scope of, this Deposit Agreement.
Each Owner and Holder agrees to indemnify the Company, the Depositary, the Custodian and their
respective directors, employees, agents and affiliates for, and hold each of them harmless against, any claim by
any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund
of taxes, reduced withholding at source or other tax benefit received by it.
SECTION 4.12
Information Required for Reports to Governmental Agencies.
The Depositary will forward to the Company or its agents such information from its records as the
to enable the Company or its agents to file necessary reports with
Company may reasonably request
governmental agencies.
ARTICLE 5. THE DEPOSITARY, THE CUSTODIANS AND THE COMPANY
SECTION 5.01
Maintenance of Office and Transfer Books by the Depositary.
Until termination of this Deposit Agreement in accordance with its terms, the Depositary shall maintain
in the Borough of Manhattan, The City of New York, an office and facilities for the execution and delivery,
registration, registration of transfers and surrender of American Depositary Shares in accordance with the
provisions of this Deposit Agreement.
The Depositary shall keep books, at its Corporate Trust Office, for the registration of American
Depositary Shares and transfers of American Depositary Shares which at all reasonable times shall be open for
inspection by the Owners, provided that such inspection shall not be for the purpose of communicating with
Owners in the interest of a business or object other than the business of the Company or a matter related to this
Deposit Agreement or the American Depositary Shares.
The Depositary may close the transfer books, at any time or from time to time, when deemed expedient
by it in connection with the performance of its duties hereunder.
If any American Depositary Shares are listed on one or more stock exchanges in the United States, the
Depositary shall act as Registrar or appoint a Registrar or one or more co-registrars for registry of such American
Depositary Shares in accordance with any requirements of such exchange or exchanges.
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SECTION 5.02
Prevention or Delay in Performance by the Depositary or the Company.
Neither the Depositary nor the Company nor any of their respective directors, employees, agents or
affiliates shall be obligated to do or perform any act which is inconsistent with the provisions of this Deposit
Agreement or shall incur any liability to any Owner or Holder (i) if by reason of any provision of any present or
future law or regulation of the United States, Japan or any other country, or of any governmental or regulatory
authority or stock exchange, or by reason of any provision, present or future, of the Articles of Incorporation or
other similar document of the Company, or by reason of any provision of any securities issued or distributed by
the Company, or any offering or distribution thereof, or by reason of any act of God or war or terrorism or other
circumstances beyond its control, the Depositary or the Company shall be prevented, delayed or forbidden from,
or be subject to any civil or criminal penalty on account of, doing or performing any act or thing which by the
terms of this Deposit Agreement or the Deposited Securities it is provided shall be done or performed, (ii) by
reason of any non-performance or delay, caused as aforesaid, in the performance of any act or thing which by the
terms of this Deposit Agreement it is provided shall or may be done or performed, (iii) by reason of any exercise
of, or failure to exercise, any discretion provided for in this Deposit Agreement, (iv) for the inability of any
Owner or Holder to benefit from any distribution, offering, right or other benefit which is made available to
Holders of Deposited Securities but is not, under the terms of this Deposit Agreement, made available to Owners
or Holders, or (v) for any special, consequential or punitive damages for any breach of the terms of this Deposit
Agreement. Where, by the terms of a distribution pursuant to Section 4.01, 4.02 or 4.03, or an offering or
distribution pursuant to Section 4.04, or for any other reason, such distribution or offering may not be made
available to Owners, and the Depositary may not dispose of such distribution or offering on behalf of such
Owners and make the net proceeds available to such Owners, then the Depositary shall not make such
distribution or offering, and shall allow any rights, if applicable, to lapse.
SECTION 5.03
Obligations of the Depositary, the Custodian and the Company.
The Company assumes no obligation nor shall it be subject to any liability under this Deposit
Agreement to any Owner or Holder (including, without limitation, liability with respect to the validity or worth
of the Deposited Securities), except that the Company agrees to perform its obligations specifically set forth in
this Deposit Agreement without negligence or bad faith.
The Depositary assumes no obligation nor shall it be subject to any liability under this Deposit
Agreement to any Owner or Holder (including, without limitation, liability with respect to the validity or worth
of the Deposited Securities), except that the Depositary agrees to perform its obligations specifically set forth in
this Deposit Agreement without negligence or bad faith, and the Depositary shall not be a fiduciary or have any
fiduciary duty to Owners or Holders.
Neither the Depositary nor the Company shall be under any obligation to appear in, prosecute or defend
any action, suit or other proceeding in respect of any Deposited Securities or in respect of the American
Depositary Shares on behalf of any Owner or Holder or any other person.
Neither the Depositary nor the Company shall be liable for any action or nonaction by it in reliance
upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any
Owner or Holder or any other person believed by it in good faith to be competent to give such advice or
information.
The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in
connection with a previous act or omission of the Depositary or in connection with any matter arising wholly
after the removal or resignation of the Depositary, provided that in connection with the issue out of which such
potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as
Depositary.
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The Depositary shall not be liable for the acts or omissions of any securities depository, clearing
agency or settlement system in connection with or arising out of book-entry settlement of Deposited Securities or
otherwise.
The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the
Deposited Securities or for the manner in which any such vote is cast or the effect of any such vote, provided that
any such action or non-action is in good faith.
Neither the Depositary nor the Company shall incur any liability for any failure to determine that any
distribution or action may be lawful, feasible or reasonably practicable, or for any tax consequences that may
result from the ownership of American Depositary Shares or Deposited Securities, for the credit-worthiness of
any third party or for allowing any rights to lapse upon the terms of this Deposit Agreement.
No disclaimer of liability under the United States federal securities laws is intended by any provision of
this Deposit Agreement.
SECTION 5.04
Resignation and Removal of the Depositary.
The Depositary may at any time resign as Depositary hereunder by written notice of its resignation
delivered to the Company, such resignation to take effect upon the appointment of a successor depositary and its
acceptance of such appointment as hereinafter provided.
The Depositary may at any time be removed by the Company by 90 days’ prior written notice of such
removal, to become effective upon the later of (i) the 90th day after delivery of the notice to the Depositary and
(ii) the appointment of a successor depositary and its acceptance of such appointment as hereinafter provided.
In case at any time the Depositary acting hereunder shall resign or be removed, the Company shall use
its reasonable efforts to appoint a successor depositary, which shall be a bank or trust company having an office
in the Borough of Manhattan, The City of New York. Every successor depositary shall execute and deliver to its
predecessor and to the Company an instrument in writing accepting its appointment hereunder, and thereupon
such successor depositary, without any further act or deed, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor; but such predecessor, nevertheless, upon payment of all sums due it and
on the written request of the Company shall execute and deliver an instrument transferring to such successor all
rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest
in the Deposited Securities to such successor and shall deliver to such successor a list of the Owners of all
outstanding Receipts. Any such successor depositary shall promptly mail notice of its appointment to the
Owners.
Any corporation into or with which the Depositary may be merged or consolidated shall be the
successor of the Depositary without the execution or filing of any document or any further act. The Depositary
agrees to give written notice of any such merger or consolidation to the Company.
SECTION 5.05
The Custodian.
The Custodian and its successors acting hereunder shall be subject at all times and in all respects to the
directions of the Depositary and shall be responsible solely to it. The Depositary in its discretion may at any time
appoint a substitute or additional custodian or custodians, each of which shall thereafter be one of the Custodians
under this Deposit Agreement. If the Depositary receives notice that a Custodian is resigning and, upon the
effectiveness of that resignation there would be no Custodian acting under this Deposit Agreement,
the
Depositary shall, as promptly as practicable after receiving that notice, appoint a substitute custodian or
custodians, each of which shall thereafter be a Custodian under this Deposit Agreement. The Depositary shall
notify the Company of any change in custodian as promptly as practicable. The Depositary shall require any
Custodian that resigns or is removed to deliver all Deposited Securities held by it to another Custodian.
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Upon the appointment of any successor depositary hereunder, each Custodian then acting hereunder
shall forthwith become, without any further act or writing, the agent hereunder of such successor depositary and
the appointment of such successor depositary shall in no way impair the authority of each Custodian hereunder;
but the successor depositary so appointed shall, nevertheless, on the written request of any Custodian, execute
and deliver to such Custodian all such instruments as may be proper to give to such Custodian full and complete
power and authority as agent hereunder of such successor depositary.
SECTION 5.06
Notices and Reports.
On or before the first date on which the Company gives notice, by publication or otherwise, of any
meeting of holders of Shares or other Deposited Securities, or of any adjourned meeting of such holders, or of the
taking of any action in respect of any cash or other distributions or the offering of any rights, the Company
agrees to transmit to the Depositary and the Custodian a copy of the notice thereof in the form given or to be
given to holders of Shares or other Deposited Securities.
The Company will arrange for the translation into English, if not already in English, to the extent
required pursuant to any regulations of the Commission, and the prompt transmittal by the Company to the
Depositary and the Custodian of such notices and any other reports and communications which are made
generally available by the Company to holders of its Shares. If requested in writing by the Company, the
Depositary will arrange for the mailing, at the Company’s expense, of copies of such notices, reports and
communications to all Owners. The Company will timely provide the Depositary with the quantity of such
notices, reports, and communications, as requested by the Depositary from time to time, in order for the
Depositary to effect such mailings.
The Company represents that as of the date of this Deposit Agreement, the statements in Article 11 of
the Receipt with respect to the Company’s obligation to file periodic reports under the United States Securities
Exchange Act of 1934, as amended, are true and correct. The Company agrees to promptly notify the Depositary
upon becoming aware of any change in the truth of any of those statements.
SECTION 5.07
Distribution of Additional Shares, Rights, etc.
If the Company determines, or the Company knows that an affiliate of the Company determines, to
make any issuance or distribution of (1) additional Shares, (2) rights to subscribe for Shares, (3) securities
convertible into Shares, or (4) rights to subscribe for such securities (each a “Distribution”), the Company shall
notify the Depositary in writing in English as promptly as practicable and in any event before the Distribution
starts and, if requested in writing by the Depositary, the Company shall promptly furnish to the Depositary either
(i) evidence satisfactory to the Depositary that the Distribution is registered under the Securities Act of 1933 or
(ii) a written opinion from U.S. counsel for the Company that is reasonably satisfactory to the Depositary, stating
that the Distribution does not require, or, if made in the United States, would not require, registration under the
Securities Act of 1933.
In the event that registration under the Securities Act of 1933 would be required in connection with any
such Distribution, the Company shall have no obligation to effect such registration and, in the absence of such
registration, the Depositary shall (where applicable) pursuant to Section 4.02, 4.03 or 4.04 dispose of such
additional securities in accordance with such Sections.
The Company agrees with the Depositary that neither the Company nor any company controlled by,
controlling or under common control with the Company will at any time deposit any Shares, either originally
issued or previously issued and reacquired by the Company or any such affiliate, unless a registration statement
is in effect as to such Shares under the Securities Act of 1933 or an exemption under the Securities Act of 1933 is
otherwise available in respect of such Shares or the Company delivers to the Depositary an opinion of United
States counsel, satisfactory to the Depositary, to the effect that, upon deposit, those Shares will be eligible for
public resale in the United States without further registration under the Securities Act of 1933.
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Notwithstanding the foregoing, nothing in this Deposit Agreement shall create any obligation on the
part of the Company (i) to file a registration statement with respect to the deposit of any Shares or other
Deposited Securities, or the issuance of (x) additional Shares or other Deposited Securities, (y) rights to subscribe
for such Shares or other Deposited Securities, securities convertible into or exchangeable for Shares or other
Deposited Securities, (z) rights to subscribe for such securities, or to endeavor to have such a registration
statement declared effective or (ii) to alter in any manner the terms and conditions of any offering or issuance of
such Shares or other Deposited Securities, rights, or convertible or exchangeable securities.
SECTION 5.08
Indemnification.
The Company agrees to indemnify the Depositary, its directors, employees, agents and affiliates and
any Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited
to the reasonable fees and expenses of counsel) which may arise out of or in connection with (a) any registration
with the Commission of American Depositary Shares or Deposited Securities or the offer or sale thereof in the
United States or (b) acts performed or omitted, pursuant to the provisions of or in connection with this Deposit
Agreement and of the Receipts, as the same may be amended, modified or supplemented from time to time, (i) by
either the Depositary or a Custodian or their respective directors, employees, agents and affiliates, except for any
liability or expense arising out of the negligence or bad faith of either of them, or (ii) by the Company or any of
its directors, employees, agents and affiliates.
The Depositary agrees to indemnify the Company, its directors, employees, agents and affiliates and
hold them harmless from any liability or expense (including, but not limited to, the reasonable fees and expenses
of counsel) which may arise out of acts performed or omitted by the Depositary or its Custodian or their
respective directors, employees, agents and affiliates due to their negligence or any act or omission in bad faith.
Any person seeking indemnification hereunder (an “Indemnified Person”) shall notify the person from
whom it is seeking indemnification (the “Indemnifying Person”) of the commencement of any indemnifiable
action or claim promptly after such Indemnified Person becomes aware of such commencement (provided that
the failure to make such notification shall not affect such Indemnified Person’s rights to indemnification except
to the extent the Indemnifying Person is materially prejudiced by such failure) and shall consult in good faith
with the Indemnifying Person as to the conduct of the defense of such action or claim, which defense shall be
reasonable under the circumstances. No Indemnified Person shall compromise or settle any such action or claim
without the consent in writing of the Indemnifying Person (which shall not be unreasonably withheld).
The obligations set forth in this Section shall survive the termination of this Deposit Agreement and the
succession or substitution of any party hereto.
SECTION 5.09
Charges of Depositary.
The Company agrees to pay the fees and out-of-pocket expenses of the Depositary and those of any
Registrar only in accordance with agreements in writing entered into between the Depositary and the Company
from time to time.
The following charges shall be incurred by any party depositing or withdrawing Shares or by any party
surrendering American Depositary Shares or to whom American Depositary Shares are issued (including,
without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange
of stock regarding the American Depositary Shares or Deposited Securities or a delivery of American Depositary
Shares pursuant to Section 4.03), or by Owners, as applicable: (1) taxes and other governmental charges, (2) such
registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the
Share register of the Company or Foreign Registrar and applicable to transfers of Shares to or from the name of
the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals
hereunder, (3) such cable (including SWIFT) and facsimile transmission expenses as are expressly provided in
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this Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign
currency pursuant to Section 4.5, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion
thereof) for the delivery of American Depositary Shares pursuant to Section 2.03, 4.03 or 4.04 and the surrender
of American Depositary Shares pursuant to Section 2.05 or 6.02, (6) a fee of $.05 or less per American
Depositary Share (or portion thereof) for any cash distribution made pursuant to this Deposit Agreement,
including, but not limited to Sections 4.01 through 4.04 hereof, (7) a fee for the distribution of securities pursuant
to Section 4.02, such fee being in an amount equal to the fee for the execution and delivery of American
Depositary Shares referred to above which would have been charged as a result of the deposit of such securities
(for purposes of this clause 7 treating all such securities as if they were Shares) but which securities are instead
distributed by the Depositary to Owners, (8) in addition to any fee charged under clause 6, a fee of $.05 or less
per American Depositary Share (or portion thereof) per annum for depositary services, which will be payable as
provided in clause 9 below, (9) any other charges payable by the Depositary, any of the Depositary’s agents,
including the Custodian, or the agents of the Depositary’s agents in connection with the servicing of Shares or
other Deposited Securities (which charge shall be assessed against Owners as of the date or dates set by the
Depositary in accordance with Section 4.06 and shall be payable at the sole discretion of the Depositary by
billing such Owners for such charge or by deducting such charge from one or more cash dividends or other cash
distributions).
The Depositary may own and deal in any class of securities of the Company and its affiliates and in
American Depositary Shares.
SECTION 5.10
Retention of Depositary Documents.
The Depositary is authorized to destroy those documents, records, bills and other data compiled during
the term of this Deposit Agreement at the times permitted by the laws or regulations governing the Depositary
unless the Company requests that such papers be retained for a longer period or turned over to the Company or to
a successor depositary.
SECTION 5.11
Exclusivity.
The Company agrees not to appoint any other depositary for issuance of American depositary shares or
receipts so long as The Bank of New York Mellon is acting as Depositary hereunder.
SECTION 5.12
List of Restricted Securities Owners.
From time to time, the Company shall provide to the Depositary a list setting forth, to the actual
knowledge of the Company, those persons or entities who beneficially own Restricted Securities and the
Company shall update that list on a regular basis. The Company agrees to advise in writing each of the persons or
entities so listed that such Restricted Securities are ineligible for deposit hereunder. The Depositary may rely on
such a list or update and shall not be liable for any loss, damage or expense incurred as a result of errors or
omissions with respect to any information contained in such list or update which is utilized by the Depositary
hereunder.
SECTION 5.13
Change in Unit.
The Company agrees that it shall give notice to the Depositary of any proposed amendment to its
Articles of Incorporation which would change the number of Shares previously designated as a Unit. Such notice
shall be given as far in advance of the date on which such amendment is scheduled to become effective as is
practicable under the circumstances.
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SECTION 5.14
Information for Regulatory Compliance.
Each of the Company and the Depositary shall provide to the other, as promptly as practicable,
information from its records or otherwise available to it that is reasonably requested by the other to permit the
other to comply with applicable law or requirements of governmental or regulatory authorities.
ARTICLE 6. AMENDMENT AND TERMINATION
SECTION 6.01
Amendment.
The form of the Receipts and any provisions of this Deposit Agreement may at any time and from time
to time be amended by written agreement between the Company and the Depositary without the consent of
Owners or Holders in any respect which they may deem necessary or desirable. Any amendment which shall
impose or increase any fees or charges (other than taxes and other governmental charges, registration fees, or
facsimile transmission delivery expenses or other such expenses), or which shall otherwise prejudice any
substantial existing right of Owners, shall, however, not become effective as to outstanding American Depositary
Shares until the expiration of thirty days after notice of such amendment shall have been given to the Owners of
outstanding American Depositary Shares. Every Owner and Holder, at the time any amendment so becomes
effective, shall be deemed, by continuing to hold such American Depositary Shares or any interest therein, to
consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no
event shall any amendment impair the right of the Owner to surrender American Depositary Shares and receive
therefor the Deposited Securities represented thereby, except in order to comply with mandatory provisions of
applicable law. Notwithstanding the foregoing, if any governmental body or clearing institution should adopt
new laws, rules or regulations which would require amendment of this Deposit Agreement to ensure compliance
therewith or any amendment to the Articles of Incorporation of the Company is made that would require
amendment of this Deposit Agreement to ensure compliance therewith, the Company and the Depositary may
amend this Deposit Agreement and the Receipts at any time in accordance with such changed laws, rules or
regulations or such amendment to the Articles of Incorporation. Such amendment to this Deposit Agreement in
such circumstances may become effective before a notice of such amendment or supplement is given to Owners
and Holders or within any other period of time as required for compliance with such laws, rules or regulations or
such amendment to the Articles of Incorporation.
SECTION 6.02
Termination.
The Company may at any time terminate this Deposit Agreement by instructing the Depositary to mail
a notice of termination to the Owners of all American Depositary Shares then outstanding at least 30 days prior
to the termination date included in such notice. The Depositary may likewise terminate this Deposit Agreement if
at any time 90 days shall have expired after the Depositary delivered to the Company a written resignation notice
and if a successor depositary shall not have been appointed and accepted its appointment as provided in
Section 5.04; in such case the Depositary shall mail a notice of termination to the Owners of all American
Depositary Shares then outstanding at least 30 days prior to the termination date. If the definition of “Unit”
applies and the Companies Act of Japan or any other applicable Japanese law restricts delivery of Shares other
than in a Unit, then a notice of termination sent to Owners shall state that (i) the right of an Owner to surrender
American Depositary Shares and receive delivery of the underlying Shares will be subject to those restrictions
and (ii) as a consequence of those restrictions and the fact that transfers of American Depositary Shares may not
be registered after the termination date, Owners may wish to dispose of American Depositary Shares that do not
represent integral Units of Shares prior to the termination date. On and after the date of termination, the Owner of
American Depositary Shares will, upon (a) surrender of such American Depositary Shares, (b) payment of the fee
of the Depositary for the surrender of American Depositary Shares referred to in Section 2.05, and (c) payment of
any applicable taxes or governmental charges, be entitled to delivery, to him or upon his order, of the amount of
Deposited Securities represented by those American Depositary Shares. If any American Depositary Shares shall
remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of
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transfers of American Depositary Shares, shall suspend the distribution of dividends to the Owners thereof, and
shall not give any further notices or perform any further acts under this Deposit Agreement, except that the
Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell
rights and other property as provided in this Deposit Agreement, and shall continue to deliver Deposited
Securities, together with any dividends or other distributions received with respect thereto and the net proceeds
of the sale of any rights or other property, upon surrender of American Depositary Shares (after deducting, in
each case, the fee of the Depositary for the surrender of American Depositary Shares, any expenses for the
account of the Owner of such American Depositary Shares in accordance with the terms and conditions of this
Deposit Agreement, and any applicable taxes or governmental charges).
At any time after the expiration of four (4) months from the date of termination, the Depositary may
sell the Deposited Securities then held under this Deposit Agreement and may thereafter hold uninvested the net
proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without
liability for interest, for the pro rata benefit of the Owners of American Depositary Shares that have not
theretofore been surrendered, such Owners thereupon becoming general creditors of the Depositary with respect
to such net proceeds. After making such sale, the Depositary shall be discharged from all obligations under this
Deposit Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee
of the Depositary for the surrender of American Depositary Shares, any expenses for the account of the Owner of
such American Depositary Shares in accordance with the terms and conditions of this Deposit Agreement, and
any applicable taxes or governmental charges) and its obligations to the Company under Section 5.08. Upon the
termination of this Deposit Agreement, the Company shall be discharged from all obligations under this Deposit
Agreement except for its obligations to the Depositary under Sections 5.08 and 5.09.
ARTICLE 7. MISCELLANEOUS
SECTION 7.01
Counterparts.
This Deposit Agreement may be executed in any number of counterparts, each of which shall be
deemed an original and all of such counterparts shall constitute one and the same instrument. Copies of this
Deposit Agreement shall be filed with the Depositary and the Custodian and shall be open to inspection by any
Owner or Holder during business hours.
SECTION 7.02
No Third Party Beneficiaries.
This Deposit Agreement is for the exclusive benefit of the parties hereto and shall not be deemed to
give any legal or equitable right, remedy or claim whatsoever to any other person. Nothing in this Deposit
Agreement shall be deemed to give rise to a partnership or joint venture among the parties hereto nor establish a
fiduciary or similar relationship among the parties.
SECTION 7.03
Severability.
In case any one or more of the provisions contained in this Deposit Agreement or in the Receipts
should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby.
SECTION 7.04
Owners and Holders as Parties; Binding Effect.
The Owners and Holders from time to time shall be parties to this Deposit Agreement and shall be
bound by all of the terms and conditions hereof and of the Receipts by acceptance of American Depositary
Shares or any interest therein.
- 23 -
SECTION 7.05
Notices.
Any and all notices to be given to the Company shall be deemed to have been duly given if personally
delivered or sent by mail, courier or facsimile transmission or by electronic mail confirmed by letter, addressed
to Takeda Pharmaceutical Company Limited, 1-1, Nihonbashi-Honcho 2-Chome Chuo-ku, Tokyo 103-8668
Japan, Attention: General Manager, Finance and Accounting Department, Facsimile number +81-3-3278-2198,
or any other place to which the Company may have transferred its principal office with notice to the Depositary.
Any and all notices to be given to the Depositary shall be deemed to have been duly given if in English
and personally delivered or sent by mail, courier or facsimile transmission or by electronic mail confirmed by
letter, addressed to The Bank of New York Mellon, 240 Greenwich Street, New York, New York 10286,
Attention: American Depositary Receipt Administration, Fax number 212-571-3050, or any other place to which
the Depositary may have transferred its Corporate Trust Office with notice to the Company.
Any and all notices to be given to any Owner shall be deemed to have been duly given if personally
delivered or sent by mail, courier or facsimile transmission or by electronic mail confirmed by letter, addressed
to such Owner at the address of such Owner as it appears on the transfer books for American Depositary Shares
of the Depositary, or, if such Owner shall have filed with the Depositary a written request that notices intended
for such Owner be mailed to some other address, at the address designated in such request.
Delivery of a notice sent by mail, courier, facsimile transmission or by electronic mail, shall be deemed
to be effected at the time when a duly addressed letter containing the same (or a confirmation thereof in the case
of a facsimile transmission or electronic mail) is deposited, postage prepaid, in a post-office letter box. The
Depositary or the Company may, however, act upon any facsimile transmission or electronic mail received by it,
notwithstanding that such facsimile transmission or electronic mail shall not subsequently be confirmed by letter
as aforesaid.
SECTION 7.06
Submission to Jurisdiction; Appointment of Agent for Service of Process; Jury Trial
Waiver.
The Company hereby (i) irrevocably designates and appoints the person or entity named in Exhibit A
to this Deposit Agreement, as the Company’s authorized agent upon which process may be served in any suit or
proceeding arising out of or relating to the Shares or Deposited Securities, the American Depositary Shares, the
Receipts or this Agreement, (ii) consents and submits to the jurisdiction of any state or federal court in the State
of New York in which any such suit or proceeding may be instituted, and (iii) agrees that service of process upon
said authorized agent shall be deemed in every respect effective service of process upon the Company in any
such suit or proceeding. The Company agrees to deliver, upon the execution and delivery of this Deposit
Agreement, a written acceptance by such agent of its appointment as such agent. The Company further agrees to
take any and all action, including the filing of any and all such documents and instruments, as may be necessary
to continue such designation and appointment in full force and effect for so long as any American Depositary
Shares or Receipts remain outstanding or this Agreement remains in force. In the event the Company fails to
continue such designation and appointment in full force and effect, the Company hereby waives personal service
of process upon it and consents that any such service of process may be made by certified or registered mail,
return receipt requested, directed to the Company at its address last specified for notices hereunder, and service
so made shall be deemed completed five (5) days after the same shall have been so mailed.
EACH PARTY TO THIS DEPOSIT AGREEMENT (INCLUDING, FOR AVOIDANCE OF DOUBT,
EACH OWNER AND HOLDER) HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING AGAINST THE COMPANY AND/OR THE DEPOSITARY DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THE SHARES OR OTHER DEPOSITED
SECURITIES, THE AMERICAN DEPOSITARY SHARES OR THE RECEIPTS, THIS DEPOSIT
- 24 -
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREIN OR THEREIN, OR THE BREACH
HEREOF OR THEREOF,
INCLUDING WITHOUT LIMITATION ANY QUESTION REGARDING
EXISTENCE, VALIDITY OR TERMINATION (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY).
SECTION 7.07
Waiver of Immunities.
To the extent that the Company or any of its properties, assets or revenues may have or may hereafter
become entitled to, or have attributed to it, any right of immunity, on the grounds of sovereignty or otherwise,
from any legal action, suit or proceeding, from the giving of any relief in any respect thereof, from setoff or
counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to
judgment, from attachment in aid of execution or judgment, or from execution of judgment, or other legal
process or proceeding for the giving of any relief or for the enforcement of any judgment, in any jurisdiction in
which proceedings may at any time be commenced, with respect to its obligations, liabilities or any other matter
under or arising out of or in connection with the Shares or Deposited Securities, the American Depositary Shares,
the Receipts or this Agreement, the Company, to the fullest extent permitted by law, hereby irrevocably and
unconditionally waives, and agrees not to plead or claim, any such immunity and consents to such relief and
enforcement.
SECTION 7.08
Governing Law.
This Deposit Agreement and the Receipts shall be interpreted and all rights hereunder and thereunder
and provisions hereof and thereof shall be governed by the laws of the State of New York, without regard to
conflicts of laws principles thereof, except with respect to its authorization and execution by the Company, which
shall be governed by the laws of Japan.
[Signature Page Follows]
- 25 -
IN WITNESS WHEREOF, TAKEDA PHARMACEUTICAL COMPANY LIMITED and THE BANK
OF NEW YORK MELLON have duly executed this Deposit Agreement as of the day and year first set forth
above and all Owners and Holders shall become parties hereto upon acceptance by them of American Depositary
Shares or any interest therein.
TAKEDA PHARMACEUTICAL COMPANY
LIMITED
By:
Name:
Title:
THE BANK OF NEW YORK MELLON,
as Depositary
By:
Name:
Title:
- 26 -
EXHIBIT A
AMERICAN DEPOSITARY SHARES
(Each American Depositary Share represents
One half (1/2) of one deposited Share)
THE BANK OF NEW YORK MELLON
AMERICAN DEPOSITARY RECEIPT
FOR SHARES OF COMMON STOCK
OF
TAKEDA PHARMACEUTICAL COMPANY LIMITED
(INCORPORATED UNDER THE LAWS OF JAPAN)
that
The Bank of New York Mellon, as depositary (hereinafter called the “Depositary”), hereby certifies
IS THE OWNER OF
registered
assigns
or
,
AMERICAN DEPOSITARY SHARES
representing deposited common stock (herein called “Shares”) of Takeda Pharmaceutical Company Limited, a
stock company incorporated under the laws of Japan (herein called the “Company”). At the date hereof, each
American Depositary Share represents one half (1/2) of one Share deposited or subject to deposit under the
Deposit Agreement (as such term is hereinafter defined) at the Tokyo, Japan office of Sumitomo Mitsui Banking
Corporation (herein called the “Custodian”). The Depositary’s Corporate Trust and its principal executive office
are located at 240 Greenwich Street, New York, N.Y. 10286.
THE DEPOSITARY’S CORPORATE TRUST OFFICE ADDRESS IS
240 GREENWICH STREET, NEW YORK, N.Y. 10286
1.
THE DEPOSIT AGREEMENT.
This American Depositary Receipt is one of an issue (herein called “Receipts”), all issued and to be issued
upon the terms and conditions set forth in the Amended and Restated Deposit Agreement dated as of
, 2018 (herein called the “Deposit Agreement”) by and among the Company, the Depositary, and all
Owners and Holders from time to time of American Depositary Shares issued thereunder, each of whom by
accepting American Depositary Shares agrees to become a party thereto and become bound by all the terms and
conditions thereof. The Deposit Agreement sets forth the rights of Owners and Holders and the rights and duties
of the Depositary in respect of the Shares deposited thereunder and any and all other securities, property and cash
from time to time received in respect of such Shares and held thereunder (such Shares, securities, property, and
cash are herein called “Deposited Securities”). Copies of the Deposit Agreement are on file at the Depositary’s
Corporate Trust Office in New York City and at the office of the Custodian.
The statements made on the face and reverse of this Receipt are summaries of certain provisions of the
Deposit Agreement and are qualified by and subject to the detailed provisions of the Deposit Agreement, to
which reference is hereby made. Capitalized terms defined in the Deposit Agreement and not defined herein shall
have the meanings set forth in the Deposit Agreement.
2.
SURRENDER OF RECEIPTS AND WITHDRAWAL OF SHARES.
Upon surrender at the Corporate Trust Office of the Depositary of American Depositary Shares, and upon
payment of the fee of the Depositary provided in this Receipt, and subject to the terms and conditions of the
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Deposit Agreement, the Company’s Articles of Incorporation and any other applicable laws and regulation and to
the extent delivery can then be practicably made, the Owner of those American Depositary Shares is entitled to
delivery, to him or as instructed, of the amount of Deposited Securities at the time represented by those American
Depositary Shares. Delivery of such Deposited Securities may be made by the delivery of (a) certificates or
account transfer in the name of the Owner hereof or as ordered by him, with proper endorsement or accompanied
by proper instruments or instructions of transfer and (b) any other securities, property and cash to which such
Owner is then entitled in respect of this Receipt. The Depositary shall direct the Custodian with respect to
delivery of Deposited Securities and may charge the surrendering Owner a fee and its expenses for giving that
direction by cable (including SWIFT) or facsimile transmission. Such delivery will be made at the option of the
Owner hereof, either at the office of the Custodian or at the Corporate Trust Office of the Depositary, provided
that the forwarding of certificates for Shares or other Deposited Securities for such delivery at the Corporate
Trust Office of the Depositary shall be at the risk and expense of the Owner hereof.
3.
TRANSFERS, SPLIT-UPS, AND COMBINATIONS OF RECEIPTS.
Transfers of American Depositary Shares may be registered on the books of the Depositary by the Owner in
person or by a duly authorized attorney, upon surrender of those American Depositary Shares properly endorsed
for transfer or accompanied by proper instruments of transfer, in the case of a Receipt, or pursuant to a proper
instruction (including, for the avoidance of doubt,
instructions through DRS and Profile as provided in
Section 2.09 of the Deposit Agreement), in the case of uncertificated American Depositary Shares, and funds
sufficient to pay any applicable transfer taxes and the expenses of the Depositary and upon compliance with such
regulations, if any, as the Depositary may establish for such purpose. This Receipt may be split into other such
Receipts, or may be combined with other such Receipts into one Receipt, evidencing the same aggregate number
of American Depositary Shares as the Receipt or Receipts surrendered. The Depositary, upon surrender of
certificated American Depositary Shares for the purpose of exchanging for uncertificated American Depositary
Shares, shall cancel those certificated American Depositary Shares and send the Owner a statement confirming
that the Owner is the owner of uncertificated American Depositary Shares. The Depositary, upon receipt of a
proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in
Section 2.09 of the Deposit Agreement) from the Owner of uncertificated American Depositary Shares for the
purpose of exchanging for certificated American Depositary Shares, shall cancel those uncertificated American
Depositary Shares and deliver to the Owner the same number of certificated American Depositary Shares. As a
condition precedent to the delivery, registration of transfer, or surrender of any American Depositary Shares or
split-up or combination of any Receipt or withdrawal of any Deposited Securities, the Depositary, the Custodian,
or Registrar may require payment from the depositor of the Shares or the presenter of the Receipt or instruction
for registration of transfer or surrender of American Depositary Shares not evidenced by a Receipt of a sum
sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with
respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn)
and payment of any applicable fees as provided in the Deposit Agreement, may require the production of proof
satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any
regulations the Depositary may establish consistent with the provisions of the Deposit Agreement.
The delivery of American Depositary Shares against deposit of Shares generally or against deposit of
particular Shares may be suspended, or the transfer of American Depositary Shares in particular instances may be
refused, or the registration of transfer of outstanding American Depositary Shares generally may be suspended,
during any period when the transfer books of the Depositary are closed, or if any such action is deemed necessary
or advisable by the Depositary or the Company at any time or from time to time because of any requirement of
law or of any government or governmental body or commission, or under any provision of the Deposit
Agreement, or for any other reason, subject to the provisions of the following sentence. Notwithstanding
anything to the contrary in the Deposit Agreement or this Receipt, the surrender of outstanding American
Depositary Shares and withdrawal of Deposited Securities may not be suspended subject only to (i) temporary
delays caused by closing the transfer books of the Depositary or the Company or the Foreign Registrar, if
applicable, or the deposit of Shares in connection with voting at a shareholders’ meeting, or the payment of
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dividends, (ii) the payment of fees, taxes and similar charges, and (iii) compliance with any U.S. or foreign laws
or governmental regulations relating to the American Depositary Shares or to the withdrawal of the Deposited
Securities. Without limitation of the foregoing, the Depositary shall not knowingly accept for deposit under the
Deposit Agreement any Shares which would be required to be registered under the provisions of the Securities
Act of 1933, unless a registration statement is in effect as to such Shares or such Shares are exempt from
registration thereunder.
4.
LIABILITY OF OWNER FOR TAXES.
If any present or future tax or other governmental charge shall become payable with respect to any
American Depositary Shares or any Deposited Securities represented by any American Depositary Shares, such
tax or other governmental charge shall be the sole responsibility of the Owner of such American Depositary
Shares, payable by such Owner to the Depositary. The Depositary may refuse to register any transfer of those
American Depositary Shares or any withdrawal of Deposited Securities represented by those American
Depositary Shares until such payment is made, and may withhold any dividends or other distributions, or may
sell for the account of the Owner any part or all of the Deposited Securities represented by those American
Depositary Shares, and may apply such dividends or other distributions or the proceeds of any such sale in
payment of such tax or other governmental charge and the Owner shall remain liable for any deficiency.
5. WARRANTIES ON DEPOSIT OF SHARES.
that (a) such Shares and each certificate therefor,
Every person depositing Shares under the Deposit Agreement shall be deemed thereby to represent and
warrant
if applicable, are validly issued, fully paid,
nonassessable and were legally obtained by such person, (b) all preemptive rights (and similar) rights, if any,
with respect to such Shares have been validly waived or exercised, (c) the Shares presented for deposit are free
and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, and are not, and the
American Depositary Shares issuable upon such deposit will not be, Restricted Securities, (d) the Shares
presented for deposit have not been stripped of any rights or entitlements and (e) that the person making such
deposit is duly authorized so to do. Such representations and warranties shall survive the deposit and withdrawal
of Shares, the issuance and cancellation of American Depositary Shares in respect thereof and the transfer of
such American Depositary Shares. If any such representations or warranties are false in any way with respect to
any person depositing Shares under the Deposit Agreement or any Holder or Owner of American Depositary
Shares, such person or such Holder or Owner shall be deemed to have waived any claims against the Company
and the Depositary related to the consequences thereof and to have assumed sole responsibility therefor and the
Company and Depositary shall be authorized, at the cost and expense of the person depositing Shares, to take any
and all actions necessary to correct the consequences thereof.
6.
FILING PROOFS, CERTIFICATES, AND OTHER INFORMATION.
Any person presenting Shares for deposit or any Owner or Holder may be required, and each Holder and
Owner agrees, from time to time to provide to the Depositary or the Custodian such proof of citizenship or
residence, taxpayer status, exchange control approval, legal or beneficial ownership of such Shares, or such
information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to
execute such certificates and to make such representations and warranties, as the Depositary may deem
reasonably necessary or proper. The Depositary may withhold the delivery or registration of transfer of American
Depositary Shares or the distribution of any dividend or sale or distribution of rights or of the proceeds thereof or
the delivery of any Deposited Securities until such proof or other information is provided or such certificates are
executed or such representations and warranties made, in each case to the Depositary’s and the Company’s
satisfaction. No Share shall be accepted for deposit unless accompanied by evidence satisfactory to the
Depositary that any necessary approval has been granted by any governmental body in Japan that is then
performing the function of the regulation of currency exchange.
A-3
7. CHARGES OF DEPOSITARY.
The following charges shall be incurred by any party depositing or withdrawing Shares or by any party
surrendering American Depositary Shares or to whom American Depositary Shares are issued (including,
without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange
of stock regarding the American Depositary Shares or Deposited Securities or a delivery of American Depositary
Shares pursuant to Section 4.03 of the Deposit Agreement), or by Owners, as applicable: (1) taxes and other
governmental charges, (2) such registration fees as may from time to time be in effect for the registration of
transfers of Shares generally on the Share register of the Company or Foreign Registrar and applicable to
transfers of Shares to or from the name of the Depositary or its nominee or the Custodian or its nominee on the
making of deposits or withdrawals under the terms of the Deposit Agreement, (3) such cable (including SWIFT)
and facsimile transmission expenses as are expressly provided in the Deposit Agreement, (4) such expenses as
are incurred by the Depositary in the conversion of foreign currency pursuant to Section 4.05 of the Deposit
Agreement, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the delivery of
American Depositary Shares pursuant to Section 2.03, 4.03 or 4.04 of the Deposit Agreement and the surrender
of American Depositary Shares pursuant to Section 2.05 or 6.02 of the Deposit Agreement, (6) a fee of $.05 or
less per American Depositary Share (or portion thereof) for any cash distribution made pursuant to the Deposit
Agreement, including, but not limited to Sections 4.01 through 4.04 of the Deposit Agreement, (7) a fee for the
distribution of securities pursuant to Section 4.02 of the Deposit Agreement, such fee being in an amount equal to
the fee for the execution and delivery of American Depositary Shares referred to above which would have been
charged as a result of the deposit of such securities (for purposes of this clause 7 treating all such securities as if
they were Shares) but which securities are instead distributed by the Depositary to Owners, (8) in addition to any
fee charged under clause 6, a fee of $.05 or less per American Depositary Share (or portion thereof) per annum
for depositary services, which will be payable as provided in clause 9 below, (9) any other charges payable by the
Depositary, any of the Depositary’s agents, including the Custodian, or the agents of the Depositary’s agents in
connection with the servicing of Shares or other Deposited Securities (which charge shall be assessed against
Owners as of the date or dates set by the Depositary in accordance with Section 4.06 of the Deposit Agreement
and shall be payable at the sole discretion of the Depositary by billing such Owners for such charge or by
deducting such charge from one or more cash dividends or other cash distributions).
The Depositary may collect any of its fees by deduction from any cash distribution payable, or by selling a
portion of any securities to be distributed, to Owners that are obligated to pay those fees.
The Depositary may own and deal in any class of securities of the Company and its affiliates and in
American Depositary Shares.
From time to time, the Depositary may make payments to the Company to reimburse the Company for costs
and expenses generally arising out of establishment and maintenance of the American Depositary Shares
program, waive fees and expenses for services provided by the Depositary or share revenue from the fees
collected from Owners or Holders. In performing its duties under the Deposit Agreement, the Depositary may
use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated with the
Depositary and that may earn or share fees, spreads or commissions.
8. DISCLOSURE OF INTERESTS.
The Company may from time to time request Owners to provide information as to the capacity in which
such Owners own or owned Receipts and regarding the identity of any other persons then or previously interested
in such Receipts and the nature of such interest and various other matters.
Each Owner agrees to provide any information reasonably requested by the Company or the Depositary
pursuant to Section 3.04 of the Deposit Agreement. The Depositary agrees to comply with reasonable written
instructions received from the Company requesting that the Depositary forward any such requests to the Owners
and to forward promptly to the Company any such responses to such requests received by the Depositary.
A-4
Notwithstanding any other provision in the Deposit Agreement or any Receipt, the Company may restrict
transfers of the Shares where such transfer might result in ownership of Shares exceeding limits imposed by
applicable law or regulation or the Articles of Incorporation of the Company. The Company may also restrict, in
such manner as it deems appropriate, transfers of the American Depositary Shares where such transfer may result
in the total number of Shares represented by the American Depositary Shares owned by a single Holder or Owner
to exceed any such limits. The Company may, in its sole discretion but subject to applicable law, instruct the
Depositary to take action with respect to the ownership interest of any Holder or Owner in excess of the limits set
forth in the preceding sentence, including, but not limited to, the imposition of restrictions on the transfer of
American Depositary Shares, the removal or limitation of voting rights or mandatory sale or disposition on
behalf of a Holder or Owner of the Shares represented by the American Depositary Shares held by such Holder
or Owner in excess of such limitations, if and to the extent such disposition is permitted by applicable law and
the Articles of Incorporation of the Company. Nothing herein shall be interpreted as obligating the Depositary or
the Company to ensure compliance with the ownership restrictions described in Section 3.05 of the Deposit
Agreement.
Applicable laws and regulations may require holders and beneficial owners of Shares, including the Holders
and Owners, to satisfy reporting requirements and obtain regulatory approvals in certain circumstances. Holders
and Owners are solely responsible for determining and complying with such reporting requirements and
obtaining such approvals. Each Holder and each Owner hereby agrees to make such determination, file such
reports, and obtain such approvals to the extent and in the form required by applicable laws and regulations as in
effect from time to time. Neither the Depositary, the Custodian, the Company nor any of their respective agents
or affiliates shall be required to take any actions whatsoever on behalf of Holders or Owners to determine or
satisfy such reporting requirements or obtain such regulatory approvals under applicable laws and regulations.
9.
TITLE TO RECEIPTS.
It is a condition of this Receipt, and every successive Owner and Holder of this Receipt by accepting or
holding the same consents and agrees, that when properly endorsed or accompanied by proper instruments of
transfer, shall be transferable as certificated registered securities under the laws of New York. American
Depositary Shares not evidenced by Receipts shall be transferable as uncertificated registered securities under the
laws of New York. The Depositary, notwithstanding any notice to the contrary, may treat the Owner of American
Depositary Shares as the absolute owner thereof for the purpose of determining the person entitled to distribution
of dividends or other distributions or to any notice provided for in the Deposit Agreement and for all other
purposes, and neither the Depositary nor the Company shall have any obligation or be subject to any liability
under the Deposit Agreement to any Holder of American Depositary Shares unless that Holder is the Owner of
those American Depositary Shares.
10. VALIDITY OF RECEIPT.
This Receipt shall not be entitled to any benefits under the Deposit Agreement or be valid or obligatory for
any purpose, unless this Receipt shall have been (i) executed by the Depositary by the manual signature of a duly
authorized officer of the Depositary or (ii) executed by the facsimile signature of a duly authorized officer of the
Depositary and countersigned by the manual signature of a duly authorized signatory of the Depositary or a
Registrar.
11. REPORTS; INSPECTION OF TRANSFER BOOKS.
The Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 and,
accordingly, files certain reports with the Securities and Exchange Commission. Those reports will be available
for inspection and copying through the Commission’s EDGAR system or at public reference facilities maintained
by the Commission in Washington, D.C.
A-5
including any proxy soliciting material,
The Depositary will make available for inspection by Owners at its Corporate Trust Office any reports and
communications,
received from the Company which are both
(a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the
holders of such Deposited Securities by the Company. The Depositary will also, upon written request by the
Company, send to Owners copies of such reports when furnished by the Company pursuant to the Deposit
Agreement. Any such reports and communications, including any such proxy soliciting material, furnished to the
Depositary by the Company shall be furnished in English to the extent such materials are required to be
translated into English pursuant to any regulations of the Commission.
The Depositary will keep books, at its Corporate Trust Office, for the registration of American Depositary
Shares and transfers of American Depositary Shares which at all reasonable times shall be open for inspection by
the Owners, provided that such inspection shall not be for the purpose of communicating with Owners in the
interest of a business or object other than the business of the Company or a matter related to the Deposit
Agreement or the American Depositary Shares.
12. DIVIDENDS AND DISTRIBUTIONS.
the Depositary shall, subject
Whenever the Depositary shall receive any cash dividend or other cash distribution on any Deposited
Securities from the Company through the Custodian,
to the provisions of
Section 4.05 of the Deposit Agreement, promptly convert or cause to be converted such dividend or distribution
into Dollars and shall, without unreasonable delay, distribute the amount thus received (net of the fees and
expenses of the Depositary as provided in Section 5.09 of the Deposit Agreement) to the Owners entitled thereto,
in proportion to the number of American Depositary Shares representing such Deposited Securities held by them
respectively; provided, however, that in the event that the Company, the Custodian or the Depositary shall be
required to withhold and does withhold from such cash dividend or such other cash distribution an amount on
account of taxes or other governmental charges, the amount distributed to the Owner of the American Depositary
Shares representing such Deposited Securities shall be reduced accordingly. Such withheld or deducted amounts
shall be forwarded by the Company, the Custodian or the Depositary, as the case may be, to the relevant
governmental authority. The Depositary shall distribute only such amount, however, as can be distributed without
attributing to any Owner a fraction of one cent. Any such fractional amounts shall be rounded to the nearest
whole cent and so distributed to Owners entitled thereto. The Custodian or the Depositary will forward to the
Company or its agent such information from its records as the Company may reasonably request to enable the
Company or its agent to file necessary reports with governmental agencies.
Subject to the provisions of Sections 4.11 and 5.09 of the Deposit Agreement, whenever the Depositary
shall receive any distribution from the Company through the Custodian other than a distribution described in
Section 4.01, 4.03 or 4.04 of the Deposit Agreement, the Depositary shall cause the securities or property
received by it to be distributed to the Owners entitled thereto, after deduction or upon payment of any fees and
expenses of the Depositary or any taxes or other governmental charges, in proportion to the number of American
Depositary Shares representing such Deposited Securities held by them respectively, in any manner that the
Depositary may reasonably deem equitable and practicable for accomplishing such distribution; provided,
however, that if, after consultation with the Company to the extent practicable, the Depositary determines that
distribution is not lawful or reasonably practicable for any reason (including, but not limited to, such distribution
cannot be made proportionately among the Owners entitled thereto or that such securities must be registered
under the Securities Act of 1933 in order to be distributed to Owners), the Depositary shall endeavor to sell or
cause such property or securities to be sold in a public or private sale, at such place or places and upon such
terms as it may deem proper, and the net proceeds of any such sale (net of the fees and expenses of the
Depositary as provided in Article 7 hereof and Section 5.09 of the Deposit Agreement) shall be distributed
without unreasonable delay by the Depositary to the Owners entitled thereto, all in the manner and subject to the
conditions described in Section 4.01. The Depositary may withhold any distribution of securities under
Section 4.02 of the Deposit Agreement if it has not received satisfactory assurances from the Company that the
distribution does not require registration under the Securities Act of 1933. The Depositary may sell, by public or
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private sale, an amount of securities or other property it would otherwise distribute under Section 4.02 of the
Deposit Agreement that is sufficient to pay its fees and expenses in respect of that distribution. If the Depositary
is unable to sell such property or securities, the Depositary may dispose of such property or securities in any way
it deems reasonably practicable under the circumstances. Neither the Depositary nor the Company shall be
responsible for (a) any failure to determine whether it is lawful or practicable to make such property or securities
available to the Owners nor (b) any foreign exchange exposure or loss incurred in connection with the sale or
disposal of such property or securities.
If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares,
the Depositary may, and shall if the Company so requests in writing, deliver to the Owners entitled thereto, in
proportion to the number of American Depositary Shares representing such Deposited Securities held by them
respectively, an aggregate number of American Depositary Shares representing the amount of Shares received as
such dividend or free distribution, subject to the terms and conditions of the Deposit Agreement with respect to
the deposit of Shares and after deduction or upon issuance of American Depositary Shares, including the
withholding of any tax or other governmental charge as provided in Section 4.11 of the Deposit Agreement and
the payment of the fees and expenses of the Depositary as provided in Article 7 hereof and Section 5.09 of the
Deposit Agreement (and the Depositary may sell, by public or private sale, an amount of the Shares received
sufficient to pay its fees and expenses in respect of that distribution). The Depositary may withhold any such
delivery of American Depositary Shares if it has not received satisfactory assurances from the Company that
such distribution does not require registration under the Securities Act of 1933. In lieu of delivering fractional
American Depositary Shares in any such case, the Depositary shall sell the amount of Shares represented by the
aggregate of such fractions by public or private sale (or, if such sale is not possible with respect to any portion of
such Shares which is less than a full Unit, by sale of such portion to the Company in accordance with the
applicable provisions of the Articles of Incorporation, other similar documents of the Company, Companies Act
of Japan and any other Japanese law or regulation) and distribute the net proceeds, all in the manner and subject
to the conditions described in Section 4.01 of the Deposit Agreement. If additional American Depositary Shares
are not so delivered, each American Depositary Share shall thenceforth also represent the additional Shares
distributed upon the Deposited Securities represented thereby.
In the event that the Depositary determines that any distribution in property (including Shares and rights to
subscribe therefor) is subject to any tax or other governmental charge which the Depositary is obligated to
withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including
Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems necessary
and practicable to pay such taxes or charges and the Depositary shall distribute the net proceeds of any such sale
after deduction of such taxes or charges to the Owners entitled thereto in proportion to the number of American
Depositary Shares held by them respectively.
Each Owner and Holder agrees to indemnify the Company, the Depositary, the Custodian and their
respective directors, employees, agents and affiliates for, and hold each of them harmless against, any claim by
any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund
of taxes, reduced withholding at source or other tax benefit received by it. Services for Owners and Holders that
may permit them to obtain reduced rates of tax withholding at source or reclaim excess tax withheld, and the fees
and costs associated with using services of that kind, are not provided under, and are outside the scope of, the
Deposit Agreement.
13. RIGHTS.
In the event that the Company shall offer or cause to be offered to the holders of any Deposited Securities
any rights to subscribe for additional Shares or any rights of any other nature, the Depositary shall have
reasonable discretion, after consultation with the Company, as to the procedure to be followed in making such
rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net
proceeds available to such Owners or, if by the terms of such rights offering or for any other reason, the
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Depositary may not either make such rights available to any Owners or dispose of such rights and make the net
proceeds available to such Owners, then the Depositary shall allow the rights to lapse. If at the time of the
offering of any rights the Depositary determines in its discretion, after consultation with the Company, that it is
lawful and feasible to make such rights available to all or certain Owners but not to other Owners, the Depositary
may distribute to any Owner to whom it determines, in its discretion, after consultation with the Company, the
distribution to be lawful and feasible, in proportion to the number of American Depositary Shares held by such
Owner, warrants or other instruments therefor in such form as it deems appropriate.
In circumstances in which rights would otherwise not be distributed, if an Owner requests the distribution of
warrants or other instruments in order to exercise the rights allocable to the American Depositary Shares of such
Owner under the Deposit Agreement, the Depositary will make such rights available to such Owner upon written
notice from the Company to the Depositary that (a) the Company has elected in its sole discretion to permit such
rights to be exercised and (b) such Owner has executed such documents as the Company has determined in its
sole discretion are reasonably required under applicable law.
If the Depositary has distributed warrants or other instruments for rights to all or certain Owners, then upon
instruction from such an Owner pursuant to such warrants or other instruments to the Depositary from such
Owner to exercise such rights, upon payment by such Owner to the Depositary for the account of such Owner of
an amount equal to the purchase price of the Shares to be received upon the exercise of the rights, and upon
payment of the fees and expenses of the Depositary and any other charges as set forth in such warrants or other
instruments, the Depositary shall, on behalf of such Owner, exercise the rights and purchase the Shares, and the
Company shall cause the Shares so purchased to be delivered to the Depositary on behalf of such Owner. As
agent for such Owner, the Depositary will cause the Shares so purchased to be deposited pursuant to Section 2.02
of the Deposit Agreement, and shall, pursuant to Section 2.03 of the Deposit Agreement, deliver American
Depositary Shares to such Owner. In the case of a distribution pursuant to the second paragraph of this Article
13, such deposit shall be made, and depositary shares shall be delivered, under depositary arrangements which
provide for issuance of depositary shares subject to the appropriate restrictions on sale, deposit, cancellation, and
transfer under applicable United States laws.
If the Depositary determines in its discretion, after consultation with the Company, that it is not lawful or
feasible to make such rights available to all or certain Owners, it shall, unless requested by the Company in
writing not to, sell the rights, warrants or other instruments in proportion to the number of American Depositary
Shares held by the Owners to whom it has determined it may not lawfully or feasibly make such rights available,
and allocate the net proceeds of such sales (net of the fees and expenses of the Depositary as provided in
Section 5.09 of the Deposit Agreement and all taxes and governmental charges payable in connection with such
rights and subject to the terms and conditions of the Deposit Agreement) for the account of such Owners
otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without
regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any
American Depositary Shares or otherwise.
The Depositary will not offer rights to Owners unless both the rights and the securities to which such rights
relate are either exempt from registration under the Securities Act of 1933 with respect to a distribution to all
Owners or are registered under the provisions of such Act; provided, that nothing in the Deposit Agreement shall
create any obligation on the part of the Company to file a registration statement with respect to such rights or
underlying securities or to endeavor to have such a registration statement declared effective. If an Owner requests
the distribution of warrants or other instruments, notwithstanding that there has been no such registration under
the Securities Act of 1933, the Depositary shall not effect such distribution unless it has received an opinion from
recognized counsel in the United States for the Company upon which the Depositary may rely that such
distribution to such Owner is exempt from such registration.
There can be no assurance that Owners generally, or any Owner in particular, will be given the opportunity
to exercise rights on the same terms and conditions as the holders of Shares. Neither the Depositary nor the
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Company shall be responsible for any failure to determine that it may be lawful or feasible to make such rights
available to Owners in general or any Owner in particular.
14. CONVERSION OF FOREIGN CURRENCY.
Whenever the Depositary or the Custodian shall receive foreign currency, by way of dividends or other
distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt
thereof the foreign currency so received can in the reasonable judgment of the Depositary be converted on a
reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall
convert or cause to be converted by sale or in any other manner that it may determine, such foreign currency into
Dollars, and such Dollars shall be distributed without unreasonable delay to the Owners entitled thereto or, if the
Depositary shall have distributed any warrants or other instruments which entitle the holders thereof to such
Dollars, then to the holders of such warrants and/or instruments upon surrender thereof for cancellation. Such
distribution may be made upon an averaged or other practicable basis without regard to any distinctions among
Owners on account of exchange restrictions, the date of delivery of any American Depositary Shares or otherwise
and shall be net of any expenses of conversion into Dollars incurred by the Depositary as provided in
Section 5.09 of the Deposit Agreement.
If such conversion or distribution can be effected only with the approval or license of any government or
agency thereof, the Depositary shall file such application for approval or license, if any, as it may deem desirable.
If at any time the Depositary shall determine that in its judgment any foreign currency received by the
Depositary or the Custodian is not convertible on a reasonable basis into Dollars transferable to the United States,
or if any approval or license of any government or agency thereof which is required for such conversion is denied
or in the reasonable opinion of the Depositary is not obtainable, or if any such approval or license is not obtained
within a reasonable period as determined by the Depositary, the Depositary may distribute the foreign currency
(or an appropriate document evidencing the right to receive such foreign currency) received by the Depositary to,
or in its discretion may hold such foreign currency uninvested and without liability for interest thereon for the
respective accounts of, the Owners entitled to receive the same.
If any such conversion of foreign currency, in whole or in part, cannot be effected for distribution to some of
the Owners entitled thereto, the Depositary may in its discretion make such conversion and distribution in
Dollars to the extent permissible to the Owners entitled thereto and may distribute the balance of the foreign
currency received by the Depositary to, or hold such balance uninvested and without liability for interest thereon
for the respective accounts of, the remaining Owners entitled thereto.
The Depositary may convert currency itself or through any of its affiliates and, in those cases, acts as
principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and
earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The
revenue is based on, among other things, the difference between the exchange rate assigned to the currency
conversion made under the Deposit Agreement and the rate that the Depositary or its affiliate receives when
buying or selling foreign currency for its own account. The Depositary makes no representation that the exchange
rate used or obtained in any currency conversion under the Deposit Agreement will be the most favorable rate
that could be obtained at the time or that the method by which that rate will be determined will be the most
favorable to Owners, subject to the Depositary’s obligations under Section 5.03 of that Agreement. The
methodology used to determine exchange rates used in currency conversions is available upon request
15. RECORD DATES.
Whenever any cash dividend or other cash distribution shall become payable or any distribution other than
cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever the
Depositary shall receive notice of any meeting of holders of Shares or other Deposited Securities, or whenever
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for any reason the Depositary causes a change in the number of Shares that are represented by each American
Depositary Share, or whenever the Depositary shall find it necessary or convenient, the Depositary shall fix a
record date which shall be the same date as the record date, if any, applicable to the deposited Shares, or as close
thereto as practicable (a) for the determination of the Owners who shall be (i) entitled to receive such dividend,
distribution or rights or the net proceeds of the sale thereof, (ii) entitled to give instructions for the exercise of
voting rights at any such meeting or (iii) responsible for any fee assessed by the Depositary pursuant to the
Deposit Agreement, or (b) on or after which each American Depositary Share will represent the changed number
of Shares, subject to the provisions of the Deposit Agreement.
16. VOTING OF DEPOSITED SECURITIES.
(a)
Upon receipt of notice of any meeting of holders of Shares at which holders of Shares will be entitled to
vote, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter, send to the
Owners a notice, the form of which shall be in the sole discretion of the Depositary, that shall contain (i) the
information contained in the notice of meeting received by the Depositary, (ii) a statement that the Owners as of
the close of business on a specified record date will be entitled, subject to any applicable provision of Japanese
law or regulation and of the Articles of Incorporation or similar documents of the Company, to instruct the
Depositary as to the exercise of the voting rights pertaining to the amount of Shares represented by their
respective American Depositary Shares (iii) a statement as to the manner in which those instructions may be
given, including an express indication that instructions may be deemed given in accordance with the last sentence
of paragraph (b) below, if no instruction is received, to the Depositary to give a discretionary proxy to a person
designated by the Company and (iv) the last date on which the Depositary will accept instructions (the
“Instruction Cutoff Date”).
that
record date,
specified by the Depositary, as of
Upon the written request of an Owner of American Depositary Shares, as of the date of the request or, if
(b)
received on or before
a record date was
any Instruction Cutoff Date established by the Depositary, the Depositary may, and if the Depositary sent a
notice under the preceding paragraph shall, endeavor, in so far as practicable, to vote or cause to be voted the
amount of deposited Shares represented by those American Depositary Shares in accordance with the instructions
set forth in that request. So long as under the Articles of Incorporation or other similar documents of the
Company and Japanese law or regulation votes may only be cast in respect of one or more whole Units of Shares,
(i) the same instructions received from Owners shall be aggregated and the Depositary shall, subject to applicable
law or regulation and market practice, endeavor to vote or cause to be voted the number of whole Units in respect
of which such instructions as so aggregated have been received, in accordance with such instructions, and
(ii) such Owners acknowledge and agree that, if the Depositary has received the same instructions any portion of
which, after aggregation of all such instructions, constitutes instructions with respect to less than a whole Unit of
Shares, the Depositary will be unable to vote or cause to be voted the Shares to which such portion of the
instructions applies. The Depositary shall not vote or attempt to exercise the right to vote that attaches to the
deposited Shares other than in accordance with instructions given by Owners and received by the Depositary or
as provided in the following sentence. If
the Company instructed the Depositary to send a notice under paragraph (a) above and gave the Depositary
(i)
notice of the meeting and details of the matters to be voted upon at least 28 days before the meeting date,
no instructions are received by the Depositary from an Owner with respect to a matter and an amount of
(ii)
American Depositary Shares of that Owner on or before the Instruction Cutoff Date and
(iii)
the Depositary has received from the Company, not later than the New York business day following the
Instruction Cutoff Date, a written confirmation that, as of the Instruction Cutoff Date, (x) the Company wishes a
proxy to be given under this sentence, (y) the Company reasonably does not know of any substantial opposition
to the matter and (z) the matter is not materially adverse to the interests of shareholders,
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then, the Depositary shall deem that Owner to have instructed the Depositary to give a discretionary proxy to a
person designated by the Company with respect to that matter and the amount of deposited Shares represented by
that amount of American Depositary Shares and the Depositary shall give a discretionary proxy to a person
designated by the Company to vote that amount of deposited Shares as to that matter; provided, however, that no
discretionary proxy shall be given with respect to the number of deposited Shares represented by American
Depositary Shares held by CREST Depository Limited and represented by CREST depository interests (CDIs).
(c) There can be no assurance that Owners generally or any Owner in particular will receive the notice
described in paragraph (a) above in time to enable Owners to give instructions to the Depositary prior to the
Instruction Cutoff Date.
(d)
If the Company will request the Depositary to send a notice under paragraph (a) above, the Company
shall endeavor to give the Depositary at least 28 days’ prior notice of any meeting of holders of Shares and the
details of the matters to be voted upon, unless such advance notice is not possible because less than 30 days’
notice of the meeting has been given in accordance with the Company’s Articles of Incorporation and Japanese
law, in which case Company will provide to the Depositary such advance notice of the meeting as may be
possible under the circumstances.
17. CHANGES AFFECTING DEPOSITED SECURITIES.
Upon any change in nominal value, split-up, consolidation, or any other reclassification of Deposited
Securities, or upon any recapitalization, reorganization, merger or consolidation, or sale of assets affecting the
Company or to which it is a party, or upon the redemption or cancellation by the Company of the Deposited
Securities, any securities, cash or property which shall be received by the Depositary or a Custodian in exchange
for, in conversion of, in lieu of or in respect of Deposited Securities shall be treated as new Deposited Securities
under the Deposit Agreement, and American Depositary Shares shall thenceforth represent, in addition to the
existing Deposited Securities, the right to receive the new Deposited Securities so received, unless additional
Receipts are delivered pursuant to the following sentence. In any such case the Depositary may, and shall if the
Company requests in writing, deliver additional American Depositary Shares as in the case of a dividend in
Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing
such new Deposited Securities.
18. LIABILITY OF THE COMPANY AND DEPOSITARY.
Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates
shall be obligated to do or perform any act which is inconsistent with the provisions of the Deposit Agreement or
shall incur any liability to any Owner or Holder (i) if by reason of any provision of any present or future law or
regulation of the United States, Japan or any other country, or of any governmental or regulatory authority, or by
reason of any provision, present or future, of the Articles of Incorporation or any other similar document of the
Company, or by reason of any provision of any securities issued or distributed by the Company, or any offering
or distribution thereof, or by reason of any act of God or war or terrorism or other circumstances beyond its
control, the Depositary or the Company shall be prevented, delayed or forbidden from or be subject to any civil
or criminal penalty on account of doing or performing any act or thing which by the terms of the Deposit
Agreement or Deposited Securities it
is provided shall be done or performed, (ii) by reason of any
non-performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of the
Deposit Agreement it is provided shall or may be done or performed, (iii) by reason of any exercise of, or failure
to exercise, any discretion provided for in the Deposit Agreement, (iv) for the inability of any Owner or holder to
benefit from any distribution, offering, right or other benefit which is made available to holders of Deposited
Securities but is not, under the terms of the Deposit Agreement, made available to Owners or holders, or (v) for
any special, consequential or punitive damages for any breach of the terms of the Deposit Agreement. Where, by
the terms of a distribution pursuant to Section 4.01, 4.02 or 4.03 of the Deposit Agreement, or an offering or
distribution pursuant to Section 4.04 of the Deposit Agreement, such distribution or offering may not be made
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available to Owners of Receipts, and the Depositary may not dispose of such distribution or offering on behalf of
such Owners and make the net proceeds available to such Owners, then the Depositary shall not make such
distribution or offering, and shall allow any rights, if applicable, to lapse. Neither the Company nor the
Depositary assumes any obligation or shall be subject to any liability under the Deposit Agreement to Owners or
holders, except that they agree to perform their obligations specifically set forth in the Deposit Agreement
without negligence or bad faith, and the Depositary shall not be a fiduciary or have any fiduciary duty to Owners
or Holders. The Depositary shall not be subject to any liability with respect to the validity or worth of the
Deposited Securities. Neither the Depositary nor the Company shall be under any obligation to appear in,
prosecute or defend any action, suit, or other proceeding in respect of any Deposited Securities or in respect of
the American Depositary Shares, on behalf of any Owner or holder or other person. Neither the Depositary nor
the Company shall be liable for any action or non-action by it in reliance upon the advice of or information from
legal counsel, accountants, any person presenting Shares for deposit, any Owner or holder, or any other person
believed by it in good faith to be competent to give such advice or information. The Depositary shall not be liable
for any acts or omissions made by a successor depositary whether in connection with a previous act or omission
of the Depositary or in connection with a matter arising wholly after the removal or resignation of the
Depositary, provided that in connection with the issue out of which such potential liability arises, the Depositary
performed its obligations without negligence or bad faith while it acted as Depositary. The Depositary shall not
be liable for the acts or omissions of any securities depository, clearing agency or settlement system in
connection with or arising out of book-entry settlement of Deposited Securities or otherwise. The Depositary
shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities or for
the manner in which any such vote is cast or the effect of any such vote, provided that any such action or
non-action is in good faith. Neither the Depositary nor the Company shall incur any liability for any failure to
determine that any distribution or action may be lawful, feasible or reasonably practicable, or for any tax
consequences that may result from the ownership of American Depositary Shares or Deposited Securities, for the
credit-worthiness of any third party or for allowing any rights to lapse upon the terms of the Deposit Agreement.
No disclaimer of liability under the United States federal securities laws is intended by any provision of the
Deposit Agreement.
19. RESIGNATION AND REMOVAL OF THE DEPOSITARY; APPOINTMENT OF SUCCESSOR
CUSTODIAN.
The Depositary may at any time resign as Depositary under the Deposit Agreement by written notice of its
resignation delivered to the Company, such resignation to take effect upon the earlier of (i) the appointment of a
successor depositary and its acceptance of such appointment as provided in the Deposit Agreement or
(ii) termination by the Depositary pursuant to Section 6.02 of the Deposit Agreement. The Depositary may at any
time be removed by the Company by 90 days’ prior written notice of such removal, to become effective upon the
later of (i) the 90th day after delivery of the notice to the Depositary and (ii) the appointment of a successor
depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary in its
discretion may at any time appoint a substitute or additional custodian or custodians.
20. AMENDMENT.
The form of the Receipts and any provisions of the Deposit Agreement may at any time and from time to
time be amended by written agreement between the Company and the Depositary without the consent of Owners
or Holders in any respect which they may deem necessary or desirable. Any amendment which shall impose or
increase any fees or charges (other than taxes and other governmental charges, registration fees, cable, telex or
facsimile transmission delivery expenses or other such expenses), or which shall otherwise prejudice any
substantial existing right of Owners, shall, however, not become effective as to outstanding American Depositary
Shares until the expiration of thirty days after notice of such amendment shall have been given to the Owners of
outstanding American Depositary Shares. Every Owner and Holder of American Depositary Shares, at the time
any amendment so becomes effective, shall be deemed, by continuing to hold such American Depositary Shares
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or any interest therein, to consent and agree to such amendment and to be bound by the Deposit Agreement as
amended thereby. In no event shall any amendment impair the right of the Owner to surrender American
Depositary Shares and receive therefor the Deposited Securities represented thereby, except in order to comply
with mandatory provisions of applicable law. Notwithstanding the foregoing, if any governmental body or
clearing institution should adopt new laws, rules or regulations which would require amendment of the Deposit
Agreement to ensure compliance therewith or any amendment to the Articles of Incorporation of the Company is
made that would require amendment of the Deposit Agreement to ensure compliance therewith, the Company
and the Depositary may amend the Deposit Agreement and the Receipts at any time in accordance with such
changed laws, rules or regulations or such amendment to the Articles of Incorporation. Such amendment to the
Deposit Agreement
in such circumstances may become effective before a notice of such amendment or
supplement is given to Owners and Holders or within any other period of time as required for compliance with
such laws, rules or regulations or such amendment to the Articles of Incorporation.
21. TERMINATION OF DEPOSIT AGREEMENT.
The Company may terminate the Deposit Agreement by instructing the Depositary to mail notice of
termination to the Owners of all American Depositary Shares then outstanding at least 30 days prior to the
termination date included in such notice. The Depositary may likewise terminate the Deposit Agreement, if at
any time 90 days shall have expired after the Depositary delivered to the Company a written resignation notice
and if a successor depositary shall not have been appointed and accepted its appointment as provided in the
Deposit Agreement; in such case the Depositary shall mail a notice of termination to the Owners of all American
Depositary Shares then outstanding at least 30 days prior to the termination date. If the definition of “Unit”
applies and the Companies Act of Japan or any other applicable Japanese law restricts delivery of Shares other
than in a Unit, then a notice of termination sent to Owners shall state that (i) the right of an Owner to surrender
American Depositary Shares and receive delivery of the underlying Shares will be subject to those restrictions
and (ii) as a consequence of those restrictions and the fact that transfers of American Depositary Shares may not
be registered after the termination date, Owners may wish to dispose of American Depositary Shares that do not
represent integral Units of Shares prior to the termination date. On and after the date of termination, the Owner of
American Depositary Shares will, upon (a) surrender of such American Depositary Shares, (b) payment of the fee
of the Depositary for the surrender of American Depositary Shares referred to in Section 2.05, and (c) payment of
any applicable taxes or governmental charges, be entitled to delivery, to him or upon his order, of the amount of
Deposited Securities represented by those American Depositary Shares. If any American Depositary Shares shall
remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of
transfers of American Depositary Shares, shall suspend the distribution of dividends to the Owners thereof, and
shall not give any further notices or perform any further acts under the Deposit Agreement, except that the
Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell
rights and other property as provided in the Deposit Agreement, and shall continue to deliver Deposited
Securities, together with any dividends or other distributions received with respect thereto and the net proceeds
of the sale of any rights or other property, upon surrender of American Depositary Shares (after deducting, in
each case, the fee of the Depositary for the surrender of American Depositary Shares, any expenses for the
account of the Owner of such American Depositary Shares in accordance with the terms and conditions of the
Deposit Agreement, and any applicable taxes or governmental charges). At any time after the expiration of four
months from the date of termination, the Depositary may sell the Deposited Securities then held under the
Deposit Agreement and may thereafter hold uninvested the net proceeds of any such sale, together with any other
cash then held by it thereunder, unsegregated and without liability for interest, for the pro rata benefit of the
Owners of American Depositary Shares that have not theretofore been surrendered, such Owners thereupon
becoming general creditors of the Depositary with respect to such net proceeds. After making such sale, the
Depositary shall be discharged from all obligations under the Deposit Agreement, except to account for such net
proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of American
Depositary Shares, any expenses for the account of the Owner of such American Depositary Shares in
accordance with the terms and conditions of the Deposit Agreement, and any applicable taxes or governmental
charges) and its obligations to the Company under Section 5.08 of the Deposit Agreement. Upon the termination
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of the Deposit Agreement, the Company shall be discharged from all obligations under the Deposit Agreement
except for its obligations to the Depositary with respect to indemnification, charges, and expenses.
22. DTC DIRECT REGISTRATION SYSTEM AND PROFILE MODIFICATION SYSTEM.
(a)
Notwithstanding the provisions of Section 2.04 of the Deposit Agreement, the parties acknowledge
that
the Direct Registration System (“DRS”) and Profile Modification System (“Profile”) shall apply to
uncertificated American Depositary Shares upon acceptance thereof to DRS by DTC. DRS is the system
administered by DTC pursuant to which the Depositary may register the ownership of uncertificated American
Depositary Shares, which ownership shall be evidenced by periodic statements issued by the Depositary to the
Owners entitled thereto. Profile is a required feature of DRS which allows a DTC participant, claiming to act on
behalf of an Owner, to direct the Depositary to register a transfer of those American Depositary Shares to DTC or
its nominee and to deliver those American Depositary Shares to the DTC account of that DTC participant without
receipt by the Depositary of prior authorization from the Owner to register such transfer.
(b)
In connection with and in accordance with the arrangements and procedures relating to DRS/Profile,
the parties understand that the Depositary will not verify, determine or otherwise ascertain that the DTC
participant which is claiming to be acting on behalf of an Owner in requesting registration of transfer and
delivery described in subsection (a) has the actual authority to act on behalf of the Owner (notwithstanding any
requirements under the Uniform Commercial Code). For the avoidance of doubt, the provisions of Sections 5.03
and 5.08 of the Deposit Agreement shall apply to the matters arising from the use of the DRS. The parties agree
that the Depositary’s reliance on and compliance with instructions received by the Depositary through the DRS/
Profile System and in accordance with the Deposit Agreement, shall not constitute negligence or bad faith on the
part of the Depositary.
23. SUBMISSION TO JURISDICTION; JURY TRIAL WAIVER; WAIVER OF IMMUNITIES.
In the Deposit Agreement, the Company has (i) appointed Takeda Pharmaceuticals U.S.A., Inc., One
Takeda Parkway, Deerfield, Illinois 60015, Attention: President, as the Company’s authorized agent upon which
process may be served in any suit or proceeding arising out of or relating to the Shares or Deposited Securities,
the American Depositary Shares, the Receipts or this Agreement, (ii) consented and submitted to the jurisdiction
of any state or federal court in the State of New York in which any such suit or proceeding may be instituted, and
(iii) agreed that service of process upon said authorized agent shall be deemed in every respect effective service
of process upon the Company in any such suit or proceeding.
EACH PARTY TO THE DEPOSIT AGREEMENT (INCLUDING, FOR AVOIDANCE OF DOUBT,
EACH OWNER AND HOLDER) THEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING AGAINST THE COMPANY AND/OR THE DEPOSITARY DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THE SHARES OR OTHER DEPOSITED
SECURITIES, THE AMERICAN DEPOSITARY SHARES OR THE RECEIPTS, THE DEPOSIT
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREIN OR THEREIN, OR THE BREACH
INCLUDING WITHOUT LIMITATION ANY QUESTION REGARDING
HEREOF OR THEREOF,
EXISTENCE, VALIDITY OR TERMINATION (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY).
To the extent that the Company or any of its properties, assets or revenues may have or hereafter become
entitled to, or have attributed to it, any right of immunity, on the grounds of sovereignty or otherwise, from any
legal action, suit or proceeding, from the giving of any relief in any respect thereof, from setoff or counterclaim,
from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from
attachment in aid of execution or judgment, or from execution of judgment, or other legal process or proceeding
for the giving of any relief or for the enforcement of any judgment, in any jurisdiction in which proceedings may
A-14
at any time be commenced, with respect to its obligations, liabilities or any other matter under or arising out of or
in connection with the Shares or Deposited Securities, the American Depositary Shares, the Receipts or the
Deposit Agreement, the Company, to the fullest extent permitted by law, hereby irrevocably and unconditionally
waives, and agrees not to plead or claim, any such immunity and consents to such relief and enforcement.
24. CHANGE IN UNIT.
The Company agrees that it shall give notice to the Depositary of any proposed amendment to its Articles of
Incorporation which would change the number of Shares previously designated as a Unit. Such notice shall be
given as far in advance of the date on which such amendment is scheduled to become effective as is practicable
under the circumstances.
A-15
Exhibit 10.1
CONFIDENTIAL
Execution Copy
COLLABORATION AGREEMENT
This COLLABORATION AGREEMENT (the “Agreement”) is entered into on December 14, 2009 (the
“Effective Date”) by and between Seattle Genetics, Inc., a Delaware corporation, with its principal place of
business at 21823 30th Drive SE, Bothell, WA 98021 (“SGI”), and Millennium Pharmaceuticals, Inc., with its
principal place of business at 40 Landsdowne Street, Cambridge, MA 02139 (“MPI”). SGI and MPI are
sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, SGI is developing a proprietary antibody-drug conjugate product, brentuximab-vedotin,
including Hodgkin
generally referred to as “SGN-35”, for the treatment of CD30-positive malignancies,
lymphoma and anaplastic large cell lymphoma, as well as potentially autoimmune diseases;
WHEREAS, MPI possesses substantial
commercialization of pharmaceutical products; and
resources and expertise in the development, marketing and
WHEREAS, MPI desires to collaborate with SGI on the development of SGN-35, and to obtain exclusive
rights to market and commercialize SGN-35 in the Licensed Territory (as defined below), and SGI is willing to
so collaborate and to grant such rights on the terms and conditions set forth below.
NOW THEREFORE, in consideration of the foregoing premises and the mutual promises, covenants and
conditions contained in this Agreement, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following initially capitalized terms, whether used in the singular or plural
form, shall have the meanings set forth in this Article 1.
1.1 “13D Group” has the meaning set forth in Section 15.6(a).
1.2 “Accounting Standard” has the meaning set forth in the definition of “Cost of Goods Sold” in this
Article 1.
1.3 “Acquired Party” has the meaning set forth in Section 15.7.
1.4 “Acquisition” has the meaning set forth in Section 15.6(f).
Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the
information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this
exhibit has been filed separately with the Securities and Exchange Commission.
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
-1-
1.5 “Advertising, Marketing, Medical Affairs and Promotion Expenses” has the meaning set forth in
Section 6.3(a).
1.6 “Affiliate” means, with respect to a particular Person, a Person that controls, is controlled by or is under
common control with such first Person. For the purposes of this definition, the word “control” (including, with
correlative meaning, the terms “controlled by” or “under the common control with”) means the actual power,
either directly or indirectly through one or more intermediaries,
to direct or cause the direction of the
management and policies of such entity, whether by the ownership of [***] or more of the voting stock of such
entity, or by contract or otherwise. Notwithstanding the foregoing, [***] shall be deemed an Affiliate of [***].
1.7 “Alliance Manager” has the meaning set forth in Section 3.19.
1.8 “Antibody” means an antibody, or fragment thereof, or a molecule that is derived from nucleotide
sequences encoding, or amino acid sequences of, any such antibody or fragment.
1.9 “Audited Party” has the meaning set forth in Section 8.11.
1.10 “Auditing Party” has the meaning set forth in Section 8.11.
1.11 “Best Knowledge” means, as applied to SGI, that one or more of SGI’s Chief Executive Officer, Chief
Medical Officer, Chief Financial Officer, Chief Business Officer, Executive Vice President, Development,
Executive Vice President, Technical Operations, Senior Vice President, Commercial, general counsel, most
senior internal intellectual property counsel and Senior Vice President, Regulatory is actually aware (or unaware,
as the context may require) of a particular fact or other matter, after reasonable inquiry, but without any duty to
conduct any patent searches or obtain any patent opinions that it has not already conducted or obtained in the
course of its commercially reasonable intellectual property diligence efforts as of the Effective Date (including
any country-specific patent searches or patent opinions in the Licensed Territory).
1.12 “Business Day” means a day other than Saturday or Sunday on which the banks in Seattle,
Washington and Boston, Massachusetts are open for business.
1.13 “Buy-In Right” has the meaning set forth in Section 4.7(b).
1.14
“Calendar Quarter” means
each
successive
period
of
three months
commencing
January 1, April 1, July 1, and October 1.
1.15 “Calendar Year” means, for the first Calendar Year, the period commencing on the Effective Date
and ending on December 31 of the year during which the Effective Date occurs, and each successive period of
twelve (12) months commencing on January 1.
1.16 “CD30 Product Activities” has the meaning set forth in Section 9.5(b)(ii).
1.17 “CDA” has the meaning set forth in the definition of “Confidential Information” in this Article 1.
1.18 “Change of Control” means, with respect to a Party, (a) the closing of a merger, tender offer, share
exchange, reorganization, consolidation or other similar transaction involving such Party or any of its Affiliates
that control (as defined in Section 1.6) such Party in which either its shareholders or the shareholders of such
Affiliate immediately prior to such transaction would hold [***] or less of the securities or other ownership or
voting interests representing the equity of the surviving or resulting entity immediately after such transaction, or
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
-2-
(b) the closing of any sale of all or substantially all of the assets of such Party, other than a sale of all or
substantially all of the assets of such Party to an entity of which more than [***] of the securities or other
ownership or voting interests representing the equity of such entity are owned after such sale by shareholders of
such Party in substantially the same proportions as their ownership of such Party immediately prior to such sale.
1.19 “Claims” has the meaning set forth in Section 11.1.
1.20 “CMC” means Chemistry, Manufacturing and Controls.
1.21 “[***]” means (a) [***], or (b) [***].
1.22 “Commercialization” means all activities, whether undertaken before and/or after obtaining
Regulatory Approvals of an MAA or NDA, relating specifically to the pre-launch, launch, promotion, marketing,
branding, sales, and distribution of the Licensed Product within the Field, including: (a) strategic marketing, sales
force detailing, advertising, medical education and liaison, reimbursement (other than Pricing Approval) and
market access activities and market and Licensed Product support; and (b) all customer support, Licensed
Product distribution,
invoicing and sales activities. For clarity, Commercialization shall exclude any
Manufacturing activities. “Commercialize” shall have a correlative meaning.
1.23 “Commercially Reasonable Efforts” means, with respect to a Party, the application by or on behalf of
such Party [***].
1.24 “Commercial Quality Agreement” has the meaning set forth in Section 7.4.
1.25 “Commercial Supply Agreement” has the meaning set forth in Section 7.4.
1.26 “Completion” has the meaning set forth in Section 2.6(d).
1.27 “Confidential Information” means, with respect to a Party, all Information of such Party or its
Affiliates that is disclosed to the other Party under this Agreement, whether in oral, written, graphic, or electronic
form (except as provided in Section 12.1). All Information relating to a Licensed Product disclosed by either
Party or its Affiliates pursuant to the Non-Disclosure Agreement between SGI and MPI dated [***], as amended,
and the [***] between [***], [***] and [***] dated [***] (each, a “CDA” and collectively, the “CDAs”), shall be
deemed to be such Party’s Confidential Information disclosed hereunder.
1.28 “Control” means, with respect to a Party and any material, Information, or intellectual property right
and with respect to a particular point in time, that such Party or any of its Affiliates owns or has a license to such
material, Information, or intellectual property right and has the ability to grant to the other Party access, a license,
or a sublicense (as applicable) to such material, Information, or intellectual property right on the terms and
conditions set forth herein without violating the terms of any agreement or other arrangement with any Third
Party existing at such time.
1.29 “Cost Allocation” has the meaning set forth in Section 8.2(b).
1.30 “Cost of Goods Sold” means, with respect to Licensed Product supplied by a Party to the other Party
hereunder, [***]:
(a) The amounts paid by the supplying Party or its Affiliates to a Third Party for (i) [***], and
(ii) [***]; and
(b) To the extent not included in subsection (a), [***].
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
-3-
For the avoidance of doubt, when calculating Cost of Goods Sold, [***]. For the sake of clarity, (i) [***], and
(ii) [***].
1.31 “Develop” or “Development” means the conduct of research, pre-clinical and clinical drug
development activities pertaining to a Licensed Product, including toxicology, pharmacology, test method
development, stability testing, process development, technology transfer, formulation development, delivery
system development, quality assurance and quality control development, statistical analysis, clinical studies
(including investigator-sponsored clinical trials, Phase 4 Clinical Trials and any post-approval studies required by
the relevant Regulatory Authority), regulatory affairs, pharmacovigilance, Regulatory Approval and Pricing
Approval, and clinical study regulatory activities (including regulatory activities directed to obtaining pricing and
reimbursement approvals).
1.32 “Developing Party” has the meaning set forth in Section 2.6(d).
1.33 “Development Budget” has the meaning assigned thereto in Section 4.2(a).
1.34 “Distributor” means any Third Party appointed by the relevant Party or its Affiliates, in accordance
with such Party’s or its Affiliate’s typical practices for its proprietary products, to distribute, market, and sell
Licensed Products, where such Third Party is not granted any right to make or have made or conduct clinical
Development of Licensed Products.
1.35 “Dollar” means a U.S. dollar, and “$” shall be interpreted accordingly.
1.36 “[***]” has the meaning set forth in Section [***].
1.37 “EMEA” means the European Medicines Agency, or any successor entity thereto.
1.38 “EU” means the countries of the European Union, as its membership may be altered from time to time,
and any successor thereto.
1.39 “Executive Officer” means, with respect to SGI, the chief executive officer of SGI (or senior
executive designee of such chief executive officer), and, with respect to MPI, the chief executive officer of MPI
(or senior executive designee of such chief executive officer).
1.40 “Existing Third Party Agreement” has the meaning set forth in Section 8.6.
1.41 “FDA” means the U.S. Food and Drug Administration, or any successor entity thereto.
1.42 “FD&C Act” means the U.S. Federal Food, Drug, and Cosmetic Act, as amended.
1.43 “Field” means the diagnosis, prevention, control, and/or treatment of any and all
therapeutic
indications.
1.44 “First [***] Indication” has the meaning set forth in Section 8.3(e).
1.45 “First Commercial Sale” means the first sale to a Third Party of a Licensed Product in a given
regulatory jurisdiction [***] has been obtained in such jurisdiction or, [***], after [***]. For clarity, First
Commercial Sale [***].
1.46 “First Opt-In Costs” has the meaning set forth in Section 2.6(d).
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
-4-
1.47 “First Opt-In Point” has the meaning set forth in Section 2.6(d).
1.48 “First Opt-In Right” has the meaning set forth in Section 2.6(d).
1.49 “Force Majeure” has the meaning set forth in Section 15.2.
1.50 “FTE” means the equivalent of a full-time employee of either Party (including normal vacations, sick
leave, and other similar matters) to the extent performing scientific, medical, technical, managerial, or other
activities (other than patent activities, accounting and other finance activities, and other G&A activities). An FTE
charged to either Party shall represent the actual time a full-time employee of such Party spends working on
activities assigned to such Party under the Global Product Development Plan or for services provided pursuant to
Section 4.2(c), as recorded in such Party’s project time reporting system. For the avoidance of doubt, the time
shall be recorded in a manner such that no employee of either Party can report him/herself as more than one
(1) FTE in any given month. An FTE is measured on the basis of a total of [***] per [***].
1.51 “FTE Rate” means the rate for an FTE to be charged to the Joint Development Costs for Joint
Development activities or for services provided pursuant to Section 4.2(c). The initial FTE rate shall be [***] and
[***] beginning [***] based on the [***]. [***].
1.52 “Future Third Party Agreement” means any license agreement entered into between SGI or MPI and
to Section 2.1(f), except as provided as in
any Third Party following the Effective Date pursuant
Section 2.1(f)(iv)(2).
1.53 “Generic Market Data” has the meaning set forth in Section 8.5(c).
1.54 “Generic Product” means a Third Party product (a) [***], and (b) [***]. Notwithstanding the
foregoing, [***].
1.55 “Global Product Development Plan” means the plan pursuant to which the Parties will conduct
certain collaborative activities relating to the Development of the Licensed Product in the Territory, as further set
forth in Section 4.2(a), and includes the relevant Development Budget.
1.56 “Global Regulatory Plan” has the meaning set forth in Section 5.1(a).
1.57 “Good Clinical Practices” or “GCP” means the then-current standards, practices and procedures
promulgated or endorsed by the FDA as set forth in the guidelines entitled “Guidance for Industry E6 Good
Clinical Practice: Consolidated Guidance,” including related regulatory requirements imposed by the FDA.
1.58 “Good Laboratory Practices” or “GLP” means the then-current good laboratory practice standards
promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58.
1.59 “Good Manufacturing Practices” or “GMP” means the then-current good manufacturing practices
required by the FDA, as set forth in the FD&C Act and the regulations promulgated thereunder, for the
manufacture and testing of pharmaceutical materials, and comparable laws or regulations applicable to the
manufacture and testing of pharmaceutical materials in jurisdictions outside the U.S., as they may be updated
from time to time. Good Manufacturing Practices shall include applicable quality guidelines promulgated under
the International Conference on Harmonization (“ICH”).
1.60 “Governmental Authority” means any multi-national, federal, state,
local, municipal or other
government authority of any nature (including any governmental division, prefecture, subdivision, department,
agency, bureau, branch, office, commission, council, court or other tribunal).
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
-5-
1.61 “[***] Indication” has the meaning set forth in Section 8.3(d).
1.62 “ICH” has the meaning set forth in the definition of “Good Manufacturing Practices” in this Article 1.
1.63 “Incremental Activity” has the meaning set forth in Section 4.7(a).
1.64 “IND” means (a) an Investigational New Drug Application as defined in the FD&C Act and applicable
regulations promulgated hereunder by the FDA, or (b) the equivalent application to the equivalent agency in any
other regulatory jurisdiction outside the U.S., the submission of which is necessary to commence or conduct
clinical
including a Clinical Trial
Authorization (CTA).
testing of a pharmaceutical product
in humans in such jurisdiction,
1.65 “Indemnified Party” has the meaning set forth in Section 11.3.
1.66 “Indemnifying Party” has the meaning set forth in Section 11.3.
1.67 “Independent Activity” has the meaning set forth in Section 4.7(b).
1.68 “Information” means any data, results, technology, business information and information of any type
whatsoever, in any tangible or intangible form, and any tangible materials, including know how, trade secrets,
practices, techniques, methods, processes, inventions, developments, specifications, formulations, formulae,
materials or compositions of matter of any type or kind (patentable or otherwise) (including biological materials,
cell
lines and assays), software, algorithms, marketing reports, expertise, technology, test data (including
pharmacological, biological, chemical, biochemical, toxicological, preclinical and clinical test data), analytical
and quality control data, stability data, other study data and procedures.
1.69 “Initial Global Product Development Plan” has the meaning set forth in Section 4.2(c).
1.70 “Initiation” means, with respect to a given clinical trial, the first dosing of the first person to be dosed
pursuant to the protocol for such clinical trial.
1.71 “Japan Development Activities” means those Development activities solely related to Development
in Japan or solely required for obtaining Regulatory Approval and Pricing Approval in Japan.
1.72 “Joint Commercialization Committee” or “JCC” means the committee formed by the Parties as
described in Section 3.9.
1.73 “Joint Development” means the respective activities of each Party to conduct the activities that are
included within the Global Product Development Plan.
1.74 “Joint Development Committee” or “JDC” means the committee formed by the Parties as described
in Section 3.5.
1.75 “Joint Development Costs” means all [***] by a Party or for its account and [***].
1.76 “Joint Inventions” has the meaning set forth in Section 9.1.
1.77 “Joint Manufacturing Committee” or “JMC” means the committee formed by the Parties as
described in Section 3.13.
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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1.78 “Joint Patent” has the meaning set forth in Section 9.3(c).
1.79 “Joint Results” has the meaning set forth in Section 4.6.
1.80 “Joint Steering Committee” or “JSC” means the committee formed by the Parties as described in
Section 3.1.
1.81 “Key Country” means each of the following countries: [***].
1.82 “Laws” means all laws, statutes, rules, regulations, ordinances and other pronouncements having the
effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision,
domestic or foreign, including applicable national and international (e.g., ICH, GCP, GLP, and GMP) guidelines.
1.83 “Lead Development Party” has the meaning set forth in Section 4.2(b).
1.84 “Licensed Product” means SGN-35, as described in more detail
in Exhibit D,
including all
formulations and dosage forms thereof.
1.85 “Licensed Technology” means, collectively, the SGI Patent Rights, the SGI Know How, SGI’s rights
under the SGI Third Party Patent Rights, and SGI’s interest in any Joint Inventions and Joint Patents (to the
extent relating to a Licensed Product).
1.86 “Licensed Territory” means the Territory except the SGI Territory.
1.87 “Linker-Conjugate” means one or more [***] or any [***], which [***] or [***] are owned or
Controlled by SGI or MPI (or one of their respective Affiliates).
1.88 “Linker-Conjugate Allocation” has the meaning set forth in Section 2.6(d).
1.89 “Major European Countries” means [***].
1.90 “Manufacture” means, with respect to a Licensed Product, those manufacturing-related activities that
support the Development (including the seeking and obtaining of Regulatory Approvals) and Commercialization
of such Licensed Product, including manufacturing process development and scale-up, validation, qualification
and audit of clinical and commercial manufacturing facilities, bulk production, fill/finish work and stability
testing, related quality assurance technical support activities and CMC activities, and including, in the case of a
clinical or commercial supply of such Licensed Product, the synthesis, manufacturing, processing, formulating,
packaging, labeling, holding, quality control testing and release of such Licensed Product. “Manufacturing” has a
correlative meaning.
1.91 “Marketing Authorization Application” or “MAA” means an application to the appropriate
Regulatory Authority for approval to sell the Licensed Product (but excluding Pricing Approval) in any particular
jurisdiction outside the U.S.
1.92 “Material Adverse SGI Breach” has the meaning set forth in Section 13.6.
1.93 “Measured Commercial Year” has the meaning set forth in Section 6.3(a).
1.94 “MHLW” means the Ministry of Health, Labour and Welfare in Japan, or any successor entity thereto.
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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1.95 “MPI Collaboration Technology” means the Sole Inventions (other
than MPI Drug-Linker
Inventions) made by MPI or its Affiliates’ employees, agents, or independent contractors in the course of
conducting its activities under this Agreement (to the extent relating to a Licensed Product) (the “MPI
Collaboration Know How”), together with all Patents claiming such inventions (the “MPI Collaboration
Patent Rights”). MPI Collaboration Know How includes all Information, and MPI Collaboration Patent Rights
includes all Patents, that are [***]. Notwithstanding anything to the contrary set forth in this definition, [***].
1.96 “MPI Drug-Linker Invention” has the meaning set forth in Section 9.1.
1.97 “MPI Indemnitees” has the meaning set forth in Section 11.1.
1.98 “MPI Independent Activities” means Independent Activities undertaken by MPI pursuant
to
Section 4.7(b).
1.99 “MPI Know How” means MPI Collaboration Know How and MPI Non-Collaboration Know How,
collectively.
1.100 “MPI Non-Collaboration Know How” means all Information Controlled by MPI as of the Effective
Date or during the Term [***], other than the MPI Collaboration Know How.
1.101 “MPI Non-Collaboration Patent Rights” means all Patents (other than Joint Patents and MPI
Collaboration Patent Rights) Controlled by MPI as of the Effective Date or at any time during the Term (a) that
claim a [***], the manufacture or use thereof or any other process or method to the extent that such process or
method is used by MPI or its Affiliates to [***], or (b) [***].
1.102 “MPI Patent Rights” means MPI Collaboration Patent Rights and MPI Non-Collaboration Patent
Rights, collectively.
1.103 “MPI Technology” means the MPI Patent Rights, the MPI Know How, and MPI’s interest in any
Joint Inventions and Joint Patents.
1.104 “NDA” means a New Drug Application or Biologics License Application in the United States, as
defined in the FD&C Act or United States Public Health Service Act, as applicable, and applicable regulations
promulgated thereunder by the FDA, or any successor application thereto.
1.105 “Net Sales” means the [***] of Licensed Products (including [***], subject to the remainder of this
Section 1.105) sold or otherwise disposed of for consideration by MPI, its Affiliates, or their respective
sublicensees, to independent Third Parties [***]: (a) [***]; (b) [***]; (c) [***]; (d) [***]; and (e) [***]. For the
avoidance of doubt, if a single item falls into more than one of the categories set forth in clauses (a) – (e) above,
such item shall [***]. For the sake of clarity, a Distributor shall [***].
If MPI, its Affiliates, or their respective sublicensees [***]. For clarity, [***]. In addition, [***]; provided,
however that, [***].
If the Licensed Product is sold as part of a [***], the Net Sales from the [***], for the purposes of
determining sales milestones and royalties, shall be determined by [***]. If such average sale price cannot be
determined for all other [***]. If such average sale price cannot be determined [***]. [***].
1.106 “Non-Commercial Quality Agreement” has the meaning set forth in Section 7.3.
1.107 “Non-Commercial Supply Agreement” has the meaning set forth in Section 7.3.
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
-8-
1.108 “Patents” means (a) pending patent applications (including provisional applications) and patents
issuing therefrom, issued patents, utility models and designs; and (b) reissues, substitutions, confirmations,
registrations, validations,
re-examinations, additions, continuations, continued prosecution applications,
continuations-in-part, or divisions of or to any patents, patent applications, utility models or designs, in each case
applied for or being enforceable within any country in the Territory.
1.109 “Patent Term Extension” means any term extensions, supplementary protection certificates,
Regulatory Exclusivity and equivalents thereof offering patent or patent-like protection beyond the initial term
with respect to any issued Patents.
1.110 “Person” means a person, corporation, partnership, or other entity.
1.111 “PFMP” has the meaning set forth in Section 7.6(a).
1.112 “Pharmacovigilance Agreement” has the meaning set forth in Section 5.5.
1.113 “Phase 3 Clinical Trial” means one or more clinical trials on sufficient numbers of patients, which
trial(s) are designed to (a) establish that a drug is safe and efficacious for its intended use; (b) define warnings,
precautions and adverse reactions that are associated with the drug in the dosage range to be prescribed; and
(c) support approval of an application to a Regulatory Authority for the commercial sale of such drug.
1.114 “Phase 4 Clinical Trial” means a product support clinical trial of a product that is conducted after
receipt of Regulatory Approval of an MAA or NDA in the country where such trial is conducted. A Phase 4
Clinical Trial may include epidemiological studies, modeling and pharmacoeconomic studies and post-marketing
surveillance trials.
1.115 “Pricing Approval” means the approval, agreement, determination or governmental decision
establishing the price or level of reimbursement for the Licensed Product, as required in a given jurisdiction prior
to sale of such Licensed Product in such jurisdiction.
1.116 “Product Complaint” means any written, verbal or electronic expression of dissatisfaction regarding
the Licensed Product, including reports of actual or suspected product tampering, contamination, mislabeling or
inclusion of improper ingredients.
1.117 “Proof of Activity Study” has the meaning set forth in Section 2.6(d).
1.118 “Regulatory Approvals” means all approvals (including supplements and amendments, [***],
licenses, registrations or authorizations of any national, supra-national, regional, state or local regulatory agency,
department, bureau, commission, council or other governmental entity, necessary for the Development or
Commercialization of a Licensed Product, which may include the approval of a NDA or MAA, and satisfaction
of all applicable regulatory and notification requirements.
1.119 “Regulatory Authority” means, in a particular country or jurisdiction, any applicable Governmental
Authority involved in granting Regulatory Approval in such country or jurisdiction, including the FDA, the
EMEA, and the MHLW.
1.120 “Regulatory Exclusivity” means any exclusive marketing rights or data exclusivity rights conferred
by any Governmental Authority with respect to the Licensed Product, but excluding the rights conferred by a
Patent.
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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1.121 “Regulatory Materials” means regulatory applications, submissions, notifications, communications,
correspondence, registrations, Regulatory Approvals, Pricing Approvals and/or other submissions made to,
received from or otherwise conducted with a Regulatory Authority that are necessary or reasonably desirable in
order to Develop, Manufacture, market, sell or otherwise Commercialize Licensed Products in a particular
country, territory or possession. Regulatory Materials include INDs, MAAs, NDAs and applications for Pricing
Approvals.
1.122 “Royalty Term” has the meaning set forth in Section 8.5(f).
1.123 “SEC” has the meaning set forth in Section 12.3(c).
1.124 “[***]” means any product that contains an Antibody that [***], including such an Antibody that is
[***], excluding the Licensed Product. For purposes of [***], one [***] shall be distinct from another (a) [***],
or (b) [***]. A particular [***] includes [***].
1.125 “Second Opt-In Costs” has the meaning set forth in Section 2.6(d).
1.126 “Second Opt-In Point” has the meaning set forth in Section 2.6(d).
1.127 “Second Opt-In Right” has the meaning set forth in Section 2.6(d).
1.128 “SGI Bankruptcy Event” means (a) the entry of an order for relief under the U.S. Bankruptcy Code
(or any other bankruptcy, insolvency, reorganization or other similar act or law of any jurisdiction now or
hereafter in effect) by SGI; (b) the commencement of an involuntary proceeding under the U.S. Bankruptcy Code
or any other bankruptcy, insolvency, reorganization or other similar act or law of any jurisdiction now or
hereafter in effect against SGI,
if not dismissed, bonded or stayed within ninety (90) days after such
commencement; (c) the making by SGI of a general assignment for the benefit of creditors; or (d) the
appointment of or taking possession by a receiver, liquidator, assignee, custodian, or trustee of all or substantially
all of the business or property of SGI.
1.129 “SGI Indemnitees” has the meaning set forth in Section 11.2.
1.130 “SGI Independent Activities” means Independent Activities undertaken by SGI pursuant
to
Section 4.7(b).
1.131 “SGI Know How” means all Information Controlled by SGI as of the Effective Date or during the
Term that [***]. For clarity, SGI Know-How includes all Information that is [***] (a) [***] (b) a [***] (a) or (b),
[***].
1.132 “SGI Linker-Conjugate Technology” means (a) cytotoxic or cytostatic compounds Controlled by
SGI, including the composition and methods of making and using such cytotoxic or cytostatic compounds, such
as [***], (b) compositions and methods useful for attaching the cytotoxic or cytostatic compounds described in
clause (a) to Antibodies, and (c) [***].
1.133 “SGI Manufacturing Period” has the meaning set forth in Section 7.2(a).
1.134 “SGI Patent Rights” means SGI Platform Patent Rights and SGI Product Patent Rights, collectively.
The SGI Patent Rights existing as of the Effective Date are listed in Exhibit A.
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1.135 “SGI Platform Know How” means all Information (other than Joint Inventions) that relates
primarily to the SGI Linker-Conjugate Technology.
1.136 “SGI Platform Patent Rights” means all Patents (other than Joint Patents and SGI Third Party
Patent Rights) that are Controlled by SGI as of the Effective Date or at any time during the Term that claim SGI
Platform Know How or the manufacture or use thereof and that are necessary or useful for the Development,
Manufacture, or Commercialization of Licensed Products. SGI Platform Patent Rights includes all Patents that
are licensed to SGI or its Affiliates pursuant to a [***]. [***].
1.137 “SGI Product Know How” means all SGI Know How other than SGI Platform Know How.
1.138 “SGI [***]” means all Patents (other than Joint Patents, SGI Platform Patent Rights and SGI Third
Party Patent Rights) Controlled by SGI as of the Effective Date or at any time during the Term (a) that claim a
[***] or any other process or method to the extent that such process or method is or was used by SGI or its
Affiliates [***], or (b) that [***] if not for the licenses granted hereunder, or in the case of pending patent
applications, that, if issued, [***] if not for the licenses granted hereunder. SGI [***] includes all Patents that are
licensed to SGI or its Affiliates pursuant to a Future Third Party Agreement entered into by SGI or its Affiliates
solely to the extent that such Patents satisfy the first sentence of this definition of SGI [***].[***].
1.139 “SGI Territory” means the U.S., Canada and their respective territories and possessions.
1.140 “SGI Third Party Patent Rights” means those Patents licensed to SGI pursuant to the Existing
Third Party Agreements (a) that claim a Licensed Product or the manufacture or use thereof or any other process
or method to the extent that such process or method is or was used by SGI or its Affiliates to Manufacture,
Develop or Commercialize a Licensed Product, or (b) that would be infringed by the manufacture, use, import,
offer for sale or sale of a Licensed Product if not for the licenses granted hereunder would be infringed by the
manufacture, use, import, offer for sale or sale of a Licensed Product if not for the licenses granted hereunder. or
in the case of pending patent applications, that, if issued, would be infringed by the manufacture, use, import,
offer for sale or sale of a Licensed Product if not for the licenses granted hereunder. The SGI Third Party Patent
Rights existing as of the Effective Date are listed in Exhibit A.
1.141 “Sole Inventions” has the meaning set forth in Section 9.1.
1.142 “SOPs” has the meaning set forth in Section 5.7(b).
1.143 “Standstill Provisions” has the meaning set forth in Section 15.6(c).
1.144 “Supply Negotiation Trigger Date” has the meaning set forth in Section 7.6(a).
1.145 “Supply Price” means, with respect to a unit of Licensed Product, the sum of (a) [***], and (b) [***].
1.146 “Taxes” means taxes (other than income taxes), duties, tariffs or other governmental charges levied
on the sale of Products, including consumption and value added taxes.
1.147 “Term” has the meaning set forth in Section 13.1.
1.148 “Terminated Country” means with respect to a termination of this Agreement, the country(ies)
subject to such termination, to the extent applicable to terminations by SGI as provided in Section 13.3, or with
respect to termination of this Agreement in its entirety, all countries in the Licensed Territory.
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1.149 “Territory” means the entire world.
1.150 “Third Party” means any Person other than SGI or MPI or an Affiliate of either of them.
1.151 “Trigger Event” has the meaning set forth in Section 15.6(e).
1.152 “U.S.” means the United States of America and its territories and possessions.
1.153 “Voting Stock” has the meaning set forth in Section 15.6(d).
1.154 “Working Group” has the meaning set forth in Section 3.18.
ARTICLE 2
LICENSES
2.1 Licenses to MPI.
(a) Co-Development Activities. Subject to the terms and conditions of this Agreement, SGI hereby
grants MPI and its Affiliates a co-exclusive (with SGI), royalty-free, non-transferable (except in accordance
with Section 15.5) license, under the Licensed Technology to Develop, import, and use Licensed Products in
the Field solely in accordance with MPI’s rights and responsibilities under the Global Product Development
Plan. MPI and its Affiliates shall be permitted to sublicense the license granted under this Section 2.1(a)
[***].
(b) Independent Development Activities. Subject to the terms and conditions of this Agreement, SGI
hereby grants MPI and its Affiliates an exclusive, royalty-free, non-transferable (except in accordance with
Section 15.5) license, with the right to grant sublicenses as provided below, under the Licensed Technology,
to undertake, with respect to Licensed Products in the Field, [***] in the Licensed Territory and in the SGI
Territory, [***]. MPI and its Affiliates shall be permitted to sublicense the license granted under this
Section 2.1(b) to Third Parties.
(c) Commercialization in Licensed Territory. Subject to the terms and conditions of this Agreement,
SGI hereby grants MPI and its Affiliates an exclusive, royalty-bearing, non-transferable (except
in
accordance with Section 15.5) license, with the right to grant sublicenses as provided below, under the
Licensed Technology, to distribute, import, sell, offer for sale and otherwise Commercialize Licensed
Products in the Field, solely in the Licensed Territory. MPI and its Affiliates shall be permitted to sublicense
the license granted under
to
Section 2.5(b).
to Third Parties (including Distributors), subject
this Section 2.1(c)
(d) Manufacturing. Subject to the terms and conditions of this Agreement, SGI hereby grants MPI and
its Affiliates a co-exclusive (with SGI), non-transferable (except in accordance with Section 15.5) license,
with the right to grant sublicenses solely to MPI’s Third Party contract manufacturers or MPI’s sublicensees
pursuant to Sections 2.1(b) or 2.1(c), under the Licensed Technology to make, have made, and otherwise
Manufacture Licensed Products in the Territory solely (i) for use by MPI and its Affiliates and their
respective sublicensees for Development as permitted under this Agreement or for Commercialization in the
Licensed Territory, or (ii) for any other obligations of MPI under Article 7.
(e) Exhibit A. SGI shall update Exhibit A from time to time to reflect the then-current list of SGI
Patent Rights and shall use reasonable efforts to update Exhibit A from time to time to reflect the then-
current list of SGI Third Party Patent Rights; provided, however, that any Patent that otherwise is an SGI
Patent Right or an SGI Third Party Patent Right remains so even if it is not listed on Exhibit A.
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(f) Sublicensed Rights.
(i) The licenses granted under this Section 2.1 are subject to and limited by the licenses granted,
and other obligations owed, by SGI to a Third Party pursuant to the Existing Third Party Agreements
and the Future Third Party Agreements. MPI agrees to comply with all applicable terms and conditions
of the Existing Third Party Agreements and the Future Third Party Agreements entered into by SGI,
[***]. Subject to Section 2.1(f)(iii), SGI agrees to comply with all applicable terms and conditions of
the Future Third Party Agreements entered into by MPI. SGI shall notify MPI promptly if SGI
breaches an Existing Third Party Agreement or upon receiving any written notice from a counterparty
under an Existing Third Party Agreement that alleges that SGI has breached such agreement.
(ii) MPI shall be responsible for paying (A) (i) [***], (ii) [***], and (iii) [***], and (B) [***].
(iii) If a Party identifies any Third Party Information or Patents that may be necessary or useful to
Develop, Manufacture or Commercialize the Licensed Product in the Territory, such Party shall
promptly notify the other Party thereof and the Parties shall discuss the need for a license to such
Information or Patents, taking into consideration any commercial advantages associated with the
timing of licensing such Information or Patents, the usefulness or necessity of such Information or
Patents to the success of the Development, Manufacture or Commercialization of the Licensed Product
and any other factors the Parties deem relevant. If the Parties agree about whether to seek a license to
any Third Party Information or Patent, then the Parties shall determine which Party shall have primary
responsibility for negotiating any agreement to obtain a license to such Information or Patents. Such
responsible Party shall keep the other Party reasonably informed regarding such negotiation, shall
allow such other Party to review and comment on any draft received from or provided to the relevant
Third Party and shall not enter into any agreement to obtain a license to such Information or Patents,
except with such other Party’s prior written consent, which shall not be unreasonably withheld,
following which such agreement shall be a Future Third Party Agreement hereunder. In addition, the
Parties shall reasonably allocate responsibility for paying upfront and maintenance fees, milestones,
and other compensation owed to Third Parties pursuant to such Future Third Party Agreements (other
than (A) royalties to the extent due as a result of Development, use, manufacture, importation, sale or
offering for sale of the Licensed Product in the Licensed Territory by [***], and (B) royalties to the
extent due as a result of Development, use, manufacture, importation, sale or offering for sale of the
Licensed Product in the SGI Territory by SGI, its Affiliates or their respective (sub)licensees, [***].
Such allocation shall take into account the relative value that the intellectual property licensed under
the applicable Future Third Party Agreement [***]. The Parties shall cooperate and provide such
exchange of information as reasonably necessary with respect thereto. Each Future Third Party
Agreement entered into by a Party shall include the obligation for the counterparty thereto to provide
the other Party with written notice of any alleged breach by the contracting Party of any provisions
thereunder and the right for the other Party, in such other Party’s sole discretion, to cure such breach,
provided that the contracting Party shall have the first opportunity to cure such breach and such other
Party provides the contracting Party with [***] written notice that it intends to cure such breach, or
such shorter written notice period that may be necessary under the circumstances to avoid any material
loss of rights. Each Party shall use commercially reasonable efforts to maintain any Future Third Party
Agreement entered into by such Party or its Affiliate in full force and effect during the Term and will
not amend any such agreement in a manner that would materially adversely affect the rights and
obligations of the other Party under this Agreement, except with such other Party’s prior written
consent.
(iv) If the Parties disagree about whether to seek a license to any Third Party Information or Patent
and are unable to resolve these differences after reasonable attempts to do so, then such dispute shall be
resolved in accordance with Article 14; [***].
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(1) If the decision of such [***] is that such Third Party Information or Patent [***], the
Parties shall be [***] and any license agreement with respect to such Third Party Information or
Patent shall [***].
(2) If the decision of such [***] is that such Third Party Information or Patent [***], either
Party [***] (A) [***] (B) [***] and the agreement with respect to such Third Party Information or
Patent shall [***].
(3) The Parties acknowledge and agree that such [***] may determine that such Third Party
Information or Patent is [***]. As a result, the Parties agree that clauses (1) and (2) above shall be
applied in an [***] consistent with such determination, including, if necessary, by applying
clauses (1) and (2) to [***].
(v) Subject to the next-to-last sentence of Section 2.1(f)(iii), [***].
(g) Certain Understandings Regarding Future IP Rights. Both Parties have agreed that the licenses
granted by SGI to MPI and its Affiliates under any SGI Know How, SGI Patent Rights, Joint Inventions, or
Joint Patents that are developed after the Effective Date (collectively, “Future Intellectual Property”) are not
intended to, and shall not, create (i) future performance obligations of SGI to develop any such Future
Intellectual Property or (ii) a right of MPI to cause any of the consideration otherwise paid or to be paid by
MPI to SGI to be refunded or diminished if no Future Intellectual Property is so developed. Notwithstanding
the preceding sentence, this Section 2.1(g) shall in no way diminish those obligations of SGI that are
otherwise explicitly provided for in this Agreement, including SGI’s Development obligations under the
Global Product Development Plan, as provided for in Article 4, and SGI’s Manufacturing obligations during
the SGI Manufacturing Period, as provided for in Article 7.
2.2 Licenses to SGI.
(a) Co-Development Activities. Subject to the terms and conditions of this Agreement, MPI hereby
grants SGI and its Affiliates a co-exclusive (with MPI), royalty-free, non-transferable (except in accordance
with Section 15.5) license, under the MPI Collaboration Technology, to Develop, import, and use Licensed
Products in the Field solely in accordance with SGI’s responsibilities under
the Global Product
Development Plan. SGI and its Affiliates shall be permitted to sublicense the license granted under this
Section 2.2(a) solely to those Third Party contractors (i) that are [***] (ii) that are approved [***].
(b) Independent Development Activities. Subject to the terms and conditions of this Agreement, MPI
hereby grants SGI and its Affiliates an exclusive, royalty-free, non-transferable (except in accordance with
Section 15.5) license, with the right to grant sublicenses as provided below, under the MPI Collaboration
Technology, to undertake, with respect to Licensed Products in the Field, [***] in the SGI Territory and in
the Licensed Territory, [***] SGI and its Affiliates shall be permitted to sublicense the license granted
under this Section 2.2(b) to Third Parties, subject to Section 2.5(a).
(c) Commercialization in SGI Territory. Subject to the terms and conditions of this Agreement, MPI
hereby grants SGI and its Affiliates a non-exclusive, royalty-free, non-transferable (except in accordance
with Section 15.5) license, with the right
to grant sublicenses as provided below, under the MPI
Collaboration Technology to distribute, import, sell, offer for sale and otherwise Commercialize Licensed
Products in the Field, solely in the SGI Territory. SGI and its Affiliates shall be permitted to sublicense the
license granted under this Section 2.2(c) to Third Parties (including Distributors), subject to Section 2.5(a).
(d) Manufacturing. Subject to the terms and conditions of this Agreement, MPI hereby grants SGI and
its Affiliates a co-exclusive (with MPI), non-transferable (except in accordance with Section 15.5) license,
with the right to grant sublicenses solely to SGI’s Third Party contract manufacturers or SGI’s sublicensees
pursuant to Sections 2.2(b) or 2.2(c) (subject to Section 2.5(a)), under the MPI Collaboration Technology to
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make, have made, and otherwise Manufacture Licensed Products in the Territory solely (i) for use by SGI
and its Affiliates and their respective sublicensees for Development as permitted under this Agreement or
for Commercialization in the SGI Territory; or (ii) for any other obligations of SGI under Article 7.
responsibilities under
(e) Covenant Not to Sue. MPI hereby covenants, on behalf of itself and its Affiliates, not to sue or
otherwise bring a claim against SGI or its Affiliates, or the other Persons specified in the following
sentence, during the Term, to the extent that their conducting of the following activities infringes any MPI
Non-Collaboration Technology: (i) Development, importation, and use of Licensed Products in the Field
solely in accordance with SGI’s
the Global Product Development Plan,
(ii) undertaking, with respect to Licensed Products in the Field, [***] and in the [***], (iii) distribution,
importation, sale, offer for sale and other Commercialization of Licensed Products in the Field, solely in the
SGI Territory, (iv) making, having made, and otherwise Manufacturing Licensed Products in the Territory
solely (A) for Development and Commercialization in the SGI Territory; or (B) for any other obligations of
SGI under Article 7. In addition to SGI and its Affiliates, such covenant shall extend as follows: clause
(i) shall extend solely to those Third Party contractors (y) [***] or (z) [***]; clause (ii) shall extend to Third
Parties to whom SGI has granted sublicenses pursuant to Section 2.2(b), subject to Section 2.5(a); clause
(iii) shall extend to Third Parties to whom SGI or its Affiliates has granted sublicenses pursuant to
Section 2.2(c), including Distributors, in each case subject to Section 2.5(a), and to any customers who
purchase or otherwise receive Licensed Product from SGI, its Affiliates, or any such Third Parties; and
clause (iv) shall extend solely to SGI’s Third Party contract manufacturers and SGI’s sublicensees pursuant
to Sections 2.2(b) or 2.2(c) (subject to Section 2.5(a)) with respect to the Licensed Product.
2.3 No Implied License; Negative Covenant. Except as expressly provided herein, no rights, express or
implied, to any intellectual property of a Party are granted to the other Party. In addition, neither Party shall use
or practice any of the other Party’s intellectual property rights licensed to it under this Article 2 (or that are the
subject of a covenant not to sue granted under this Agreement) except for the purposes expressly permitted in this
Agreement.
2.4 Territorial Limitations. Each Party hereby covenants and agrees that it and its Affiliates shall not,
either directly or indirectly, Commercialize Licensed Products except in accordance with this Agreement.
Specifically and without limitation, MPI shall not deliver or tender (or cause to be delivered or tendered) any
Licensed Product outside of the Licensed Territory or offer for sale any Licensed Product that could reasonably
be expected to be reimported into the SGI Territory. SGI shall not deliver or tender (or cause to be delivered or
tendered) any Licensed Product outside of the SGI Territory or offer for sale any Licensed Product that could
reasonably be expected to be reimported into the Licensed Territory.
2.5 [***].
(a) If SGI determines to, directly or indirectly, [***] to the Licensed Product not licensed to MPI under
this Agreement, including [***], to any Third Party [***], then SGI shall promptly provide MPI with
written notice of such determination. Provided that MPI notifies SGI in writing, no later than [***] after
receiving such notice from SGI, [***] from SGI’s receipt of such notice from MPI. During such period, the
Parties will [***]. If (i) MPI fails to notify SGI of its [***], or (ii) MPI notifies SGI [***], or (iii) no [***]
of such rights [***] provided above, then SGI will [***] following the expiration of the above-mentioned
[***] negotiation period. If SGI does not [***] period, then SGI shall be [***]. For clarity, the [***] granted
to MPI under this Section 2.5(a) shall not apply to any [***].
(b) If MPI determines to, directly or indirectly, [***] the Licensed Product in a [***], to any Third
Party [***] then MPI shall promptly provide SGI with written notice of such determination. Provided that
SGI notifies MPI in writing, no later than [***] after receiving such notice from MPI, indicating that [***]
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from MPI’s receipt of such notice from SGI. During such period, the Parties will [***].If (i) SGI fails to
notify MPI of [***], or (iii) [***] period following the expiration of the above-mentioned [***]. If MPI
does not [***] period, then MPI shall [***]. For clarity, the granted to SGI under this Section 2.5(b) shall
not apply to [***].
2.6 [***].
license to a Third Party the right
(a) If a Party or one of its Affiliates plans to conduct, in-license or otherwise acquire rights with respect
to, or
IND-enabling research, development or
to conduct,
commercialization of a [***] in the Field, it shall provide written notice thereof to the other Party (which
notice shall include a summary [***] (as applicable to the stage of the [***]) prepared in good faith) and the
Parties shall discuss the [***].
(b) Upon request of the non-proposing Party, the non-proposing Party may conduct due diligence on
the applicable [***] for up to [***] after its receipt of the summary described in Section 2.6(a), and the
proposing Party shall reasonably cooperate with the non-proposing Party with respect to such [***]
activities. Upon further request of the non-proposing Party, the Parties shall [***] in the Field, subject to
Section 2.6(c); provided, however, that such terms shall include the following:
(i) the Parties will [***] (and not pursuant to Section 2.6(d)(ii) or 2.6(d)(iii)), the non-proposing
Party will [***]. For the sake of clarity, [***];
(ii) [***];
(iii) if a Licensed Product is then being Commercialized in the SGI Territory or Licensed Territory
under this Agreement, [***];
(iv) for any indications and/or territories not covered by clause (iii) above, the commercial
responsibilities of the Parties will be allocated by the Parties [***];
(v) [***]; and
(vi) the Parties shall have audit rights comparable to those in this Agreement with respect to [***].
(c) If, within [***] after the non-proposing Party’s receipt of the summary described in Section 2.6(a),
the non-proposing Party requests in writing a negotiation of the terms under which the Parties would
collaborate on the research, development, and/or commercialization of the [***] in the Field, as
contemplated by Section 2.6(b), then the Parties shall negotiate a definitive written agreement on the terms
set forth in Section 2.6(b)(i) through (vi) and other terms to be negotiated by the Parties in good faith. If,
[***] after the non-proposing Party’s receipt of the summary described in Section 2.6(a) [***], the Parties
do not enter into such a [***].
(d) If, [***] after the non-proposing Party’s receipt of the summary described in Section 2.6(a), the
non-proposing Party fails to request in writing a negotiation of the terms under which the Parties would
collaborate on the [***] in the Field, as contemplated by Section 2.6(b), then the proposing Party (the
“Developing Party”) shall be free to [***]:
(i) The other Party shall grant to the Developing Party licenses and/or covenants not to sue
comparable to those set forth in Section 2.1 or 2.2, as applicable, adjusted as necessary to reflect any
distinctions with respect to such [***] and the worldwide nature of such license, and, to the extent that
the [***] by such other Party or its Affiliates, the other Party shall provide reasonable assistance to the
Developing Party with respect to the development and manufacture of such [***], in accordance with a
transition plan to be agreed upon by the Parties in good faith, with the Developing Party [***].
(ii) At the time [***] with respect to such [***], the non-Developing Party shall have the [***],
subject to the terms set forth below. At the [***], the Developing Party shall provide to the other Party
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a summary [***], and shall reasonably answer the non-Developing Party’s questions with respect
thereto, including, if applicable, providing additional information if reasonably necessary for the
non-Developing Party to decide whether to [***]. If, within [***], the non-Developing Party notifies
the Developing Party of its decision to [***], the Developing Party shall promptly disclose to the
non-Developing Party, in reasonable detail, [***]. Thereafter, the Parties [***] on the terms set forth in
Section 2.6(b)(i) through (vi) and other terms to be negotiated by the Parties in good faith, [***] of the
[***]. The “[***]” means, with respect to the relevant [***]. If, within [***] after the non-Developing
Party’s exercise of its [***], the Parties do [***] setting forth the terms under which the Parties will
[***], then the terms of such definitive written agreement shall be determined by arbitration in
accordance with Section 2.6(e).
(iii) If the non-Developing Party does not exercise its [***] provided above, or if the applicable
[***] was, at the time the Developing Party acquired rights to the [***], beyond the [***], then at the
time of [***], the non-Developing Party shall have the right to elect to participate in the further
development, manufacture and commercialization of such [***], subject to the terms set forth below.
At the Second Opt-In Point, the Developing Party shall provide to the other Party a summary of all
clinical data with respect to such [***], as applicable, and shall reasonably answer the non-Developing
Party’s questions with respect thereto, including, if applicable, providing additional information if
reasonably necessary for the non-Developing Party to decide whether to exercise its [***]. If, within
[***] after Completion [***], the non-Developing Party notifies the Developing Party of its decision to
exercise its [***], the Developing Party shall promptly disclose to the non-Developing Party, in
reasonable detail, the total amounts then-expended by the Developing Party in connection with the
research and development of such [***] (for the sake of clarity, [***]. Thereafter, the Parties shall
negotiate in good faith the terms of a [***] and other terms to be negotiated by the Parties in good
faith, [***]. [***]. The Parties agree that the [***] include the activities covered by the [***], but the
amounts included in the [***] for those activities included in the written notice provided to the
non-Developing Party by the Developing Party pursuant to Section 2.6(d)(ii) shall not [***]. [***].
[***] after the non-Developing Party’s exercise of its [***] do not enter into a [***].
(iv) If the non-Developing Party does not exercise its [***] within the [***] provided above, or if
the applicable [***] was, at the time the Developing Party acquired rights to the [***], beyond the
[***], then (provided that Developing Party has fully complied with the terms of Sections 2.6(a) and
(b) (and Sections 2.6(c) and (d), if applicable)) [***].
(e) Any arbitration proceedings required by Section 2.6(c), 2.6(d)(ii), or 2.6(d)(iii) shall be conducted
through [***]. Each Party would present the arbitrator with [***] (and to the extent applicable, the [***]
and a written summary of its rationale for any key terms (such summary not to exceed five (5) pages), and
the arbitrator shall have the [***]. The foregoing [***] shall not take longer than [***] from the date of
submission of the positions to the arbitrator. Each Party shall [***].
ARTICLE 3
OVERVIEW; MANAGEMENT
3.1 Joint Steering Committee. Within [***] after the Effective Date, the Parties shall establish a Joint
Steering Committee (or “JSC”) for the overall coordination and oversight of the Parties’ activities under this
Agreement. The JSC shall have an initial term of [***] and [***] unless one of the Parties provides written
notice to the other Party at least [***]. The JSC shall have only the powers assigned expressly to it in this
Section 3.1 and elsewhere in this Agreement, and the JSC shall not have any power to amend, modify or waive
compliance with this Agreement. The JSC shall conduct its discussions in good faith with a view to operating to
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the mutual benefit of the Parties and in furtherance of the successful Development and Commercialization of
Licensed Products. The role of the JSC shall be:
(a) to oversee the collaborative activities of the Parties under this Agreement;
(b) to discuss and establish, with input from the JDC, the overall strategy for the Development of
Licensed Products in the Field and the content of the core global label for Licensed Products;
(c) to discuss and establish, with input from the JCC, the overall strategy for the branding and
Commercialization of Licensed Products in the Field;
(d) to review and approve updates or amendments to the Initial Global Product Development Plan and
any subsequent versions of the Global Product Development Plan;
(e) to review and approve updates or amendments to the Global Regulatory Plan and any subsequent
versions of the Global Regulatory Plan;
(f) to review and coordinate the Parties’ respective activities for the Development, Manufacture and
Commercialization of Licensed Products within the Licensed Territory and the SGI Territory, including
Independent Activities;
(g) to oversee, and attempt
to resolve disputes arising on,
the JDC, JCC, JMC or any other
subcommittee;
(h) to appoint other subcommittees as the JSC deems appropriate, which subcommittees shall consist
of equal numbers of appropriately qualified representatives appointed by the respective Parties, and to
oversee, and attempt to resolve disputes arising on, such subcommittees; and
(i) to perform such other functions as appropriate to further the purposes of this Agreement, as
mutually determined by the Parties.
3.2 Joint Steering Committee Membership. Each Party shall initially appoint [***] to the JSC, each of
whom will be an officer or employee of such Party and will have sufficient seniority within the applicable Party
to make decisions arising within the scope of the JSC’s responsibilities and will have appropriate expertise in
clinical development, regulatory, and/or commercial/business matters. The JSC may change its size from time to
time by mutual consent of its members. Each Party may replace its JSC representatives at any time upon written
notice to the other Party. The JSC may invite non-members (including consultants and advisors of a Party) who
are under an obligation of confidentiality consistent with this Agreement to participate in the discussions and
meetings of the JSC, provided that such participants shall have no voting authority at the JSC. The JSC shall have
a chairperson. Each Party shall have the right, on an [***] basis, to select from among its JSC representatives
[***]. Such Party shall have the right during [***]. The [***]. The role of the chairperson shall be to convene
and preside at meetings of the JSC, to prepare agendas (with due input from the other Party’s representatives),
circulate agendas and to ensure the preparation of meeting minutes, but the chairperson shall have no additional
powers or rights beyond those held by the other JSC representatives.
3.3 Joint Steering Committee Meetings. The JSC shall meet as frequently as required, but in no event less
than [***]. The meetings of the JSC may be held in person or by audio or video conference, with in person
meetings taking place at least [***] and alternating between the Parties’ business locations or as otherwise
decided by the JSC. Meetings of the JSC shall be effective only if at least [***] of each Party are present or
participating. Each Party shall [***] of its respective members’ participation in JSC meetings. The chairperson of
the JSC shall be responsible for preparing and issuing minutes of each such meeting within fifteen (15) days
thereafter. Such minutes shall not be finalized until each Party reviews and confirms the accuracy of such
minutes in writing; provided that any minutes shall be deemed approved unless a member of the JSC objects to
the accuracy of such minutes within thirty (30) days after the circulation of the minutes by the chairperson of the
JSC.
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3.4 Joint Steering Committee Decisions. Actions to be taken by the JSC shall be taken only following
[***] vote, with each Party having [***]. If the Joint Steering Committee fails to reach [***] on a matter before
it for decision for a period in excess of [***], the JSC shall submit the respective positions of the Parties with
respect to such matter for discussion in good faith by the Parties’ respective Executive Officers in accordance
with Section 14.2. If such individuals are not able to mutually agree upon the resolution to such matter within the
timeframe set forth in such Section 14.2, then instead of resolution in accordance with Section 14.3:
(a) [***] with regard to matters relating primarily to the Development, Regulatory Approval, Pricing
Approval or Commercialization of Licensed Products in the Field in the [***];
(b) [***] with regard to matters relating primarily to the Development, Regulatory Approval, Pricing
Approval or Commercialization of Licensed Products in the Field in the [***]; and
(c) Matters not subject to Sections 3.4(a) or 3.4(b) ([***]) shall be subject to the dispute resolution
procedure set forth in Article 14, beginning with the referral of such matters to the mediation as set forth in
Section 14.3.
Notwithstanding the foregoing, neither Party may exercise its final decision-making authority to unilaterally:
(i) increase the other Party’s obligations or reduce the other Party’s rights under this Agreement,
including any obligation to devote personnel or financial resources to a specific activity or project;
(ii) [***];
(iii) increase the Joint Development Costs for the other Party except as expressly provided herein;
(iv) determine that the events required for payments have occurred;
(v) determine that it has fulfilled any obligations under this Agreement or that the other Party has
breached any obligation under this Agreement;
(vi) unilaterally make a decision that is expressly stated under this Agreement to require the
mutual agreement of the Parties; or
(vii) otherwise expand such Party’s rights or reduce such Party’s obligations under this
Agreement.
3.5 Joint Development Committee. Within [***] after the Effective Date, the Parties shall establish a Joint
Development Committee (or “JDC”) as a subcommittee of the JSC. The JDC shall have an initial term of [***]
and [***] terms unless one of the Parties provides written notice to the other Party at least [***]. The JDC shall
have only the powers assigned expressly to it in this Section 3.5 and elsewhere in this Agreement, and the JDC
shall not have any power to amend, modify or waive compliance with this Agreement. The JDC shall conduct its
discussions in good faith with a view to operating to the mutual benefit of the Parties and in furtherance of the
successful Development of Licensed Products. The role of the JDC shall be to:
(a) discuss, prepare and approve for submission to the JSC all updates or amendments to the Global
Product Development Plan;
(b) oversee the conduct of the Joint Development under this Agreement;
(c) create, implement and review the overall strategy for Development and the design of all clinical
trials conducted under the Global Product Development Plan;
(d) oversee the conduct of all clinical trials conducted under the Global Product Development Plan;
(e) coordinate the use of clinical trial sites by the Parties for clinical trials for Licensed Product,
whether conducted under the Global Product Development Plan or as Independent Activities;
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(f) facilitate the flow of information between the Parties with respect to the Development of the
Licensed Product;
(g) discuss the requirements for Regulatory Approval in the Territory and review the regulatory
strategy with respect to the Licensed Product;
(h) facilitate the flow of information between the Parties with respect obtaining Regulatory Approval
for the Licensed Product; and
(i) perform such other functions as appropriate to further the purposes of this Agreement, as mutually
determined by the Parties.
3.6 Joint Development Committee Membership. Each Party shall initially appoint [***] representatives to
the JDC, each of whom will be an officer or employee of such Party and will have sufficient seniority within the
applicable Party to make decisions arising within the scope of the JDC’s responsibilities and will have
appropriate expertise in clinical development or regulatory matters. The JDC may change its size from [***] by
[***] of its members. Each Party may replace its JDC representatives at any time upon written notice to the other
Party. The JDC may invite non-members (including consultants and advisors of a Party) who are under an
obligation of confidentiality consistent with this Agreement to participate in the discussions and meetings of the
JDC, provided that such participants shall have no voting authority at the JDC. The JDC shall have a chairperson.
Each Party shall have the right, on an [***] basis, to select from among its JDC representatives a [***]. Such
Party shall have the right during such [***]. [***]. The role of the chairperson shall be to convene and preside at
meetings of the JDC, to prepare agendas (with due input from the other Party’s representatives), circulate
agendas and to ensure the preparation of meeting minutes, but the chairperson shall have no additional powers or
rights beyond those held by the other JDC representatives.
3.7 Joint Development Committee Meetings. The JDC shall meet as frequently as required, but in no
event less than [***] every [***]. The meetings of the JDC may be held in person or by audio or video
conference, with in person meetings taking place at least once per [***] and alternating between the Parties’
business locations or as otherwise decided by the JDC. Meetings of the JDC shall be effective only if at least
[***] representatives of each Party are present or participating. Each Party shall [***] of its respective members’
participation in JDC meetings. The chairperson of the JDC shall be responsible for preparing and issuing minutes
of each such meeting within fifteen (15) days thereafter. Such minutes shall not be finalized until each Party
reviews and confirms the accuracy of such minutes in writing; provided that any minutes shall be deemed
approved unless a member of the JDC objects to the accuracy of such minutes within thirty (30) days after the
circulation of the minutes by the chairperson of the JDC.
3.8 Joint Development Committee Decisions. Actions to be taken by the JDC shall be taken only
following [***], with each Party having [***] vote. If the JDC fails to reach [***] on a matter before it for
decision for a period in excess of [***], the JDC shall submit the respective positions of the Parties with respect
to such matter for resolution by the JSC.
3.9 Joint Commercialization Committee. Within [***] after the Effective Date, the Parties shall establish
a Joint Commercialization Committee (or “JCC”) as a subcommittee of the JSC. The JCC shall have an initial
term of [***] and shall [***] for successive [***]. The JCC shall have only the powers assigned expressly to it in
this Section 3.9 and elsewhere in this Agreement, and the JCC shall not have any power to amend, modify or
waive compliance with this Agreement. The JCC shall conduct its discussions in good faith with a view to
operating to the mutual benefit of the Parties and in furtherance of the successful Commercialization of Licensed
Products. The role of the JCC shall be to:
(a) review, discuss and coordinate the Commercialization activities of the Parties with respect to the
Licensed Products in the Parties’ respective territories;
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(b) develop, update and annually approve a global plan for Commercializing the Licensed Product,
which plan shall include the strategy for the Commercialization of the Licensed Product on a worldwide
basis, certain shared global Commercialization activities (i.e., [***]), and, subject
to mutual written
agreement of the Parties, the appropriate allocation of responsibilities and, if applicable, [***] for such
activities;
(c) oversee the implementation of the global plans for the branding and Commercialization of the
Licensed Product and ensure consistency with the global plan for Commercialization of the Licensed
Product;
(d) review and discuss [***] and developments with regards to the Licensed Product, as described in
Section 6.5, and establish a strategy for obtaining Pricing Approvals for the Licensed Product;
(e)
facilitate the sharing of
Commercialization of the Licensed Product; and
information between the Parties as necessary to support
the
(f) perform such other functions as appropriate to further the purposes of this Agreement, as mutually
determined by the Parties.
initially appoint
3.10 Joint Commercialization Committee Membership. Each Party shall
[***]
representatives to the JCC, each of whom will be an officer or employee of such Party and will have sufficient
seniority within the applicable Party to make decisions arising within the scope of the JCC’s responsibilities and
will have appropriate expertise in clinical development, regulatory, and/or commercial/business matters. The
JCC may change its size from [***] by [***] of its members. Each Party may replace its JCC representatives at
any time upon written notice to the other Party. The JCC may invite non-members (including consultants and
advisors of a Party) who are under an obligation of confidentiality consistent with this Agreement to participate
in the discussions and meetings of the JCC, provided that such participants shall have no voting authority at the
JCC. The JCC shall have a chairperson. Each Party shall have the right, on an [***] basis, to select from among
its JCC representatives [***]. Such Party shall have the right during such [***]. [***]. The role of the
chairperson shall be to convene and preside at meetings of the JCC, to prepare agendas (with due input from the
other Party’s representatives), circulate agendas and to ensure the preparation of meeting minutes, but the
chairperson shall have no additional powers or rights beyond those held by the other JCC representatives.
3.11 Joint Commercialization Committee Meetings. The JCC shall meet as frequently as required, but in
no event less than [***] meeting every [***]. The meetings of the JCC may be held in person or by audio or
video conference, with in person meetings taking place at least [***] per [***] and alternating between the
Parties’ business locations or as otherwise decided by the JCC. Meetings of the JCC shall be effective only if at
least [***] representatives of each Party are present or participating. Each Party shall [***] of its respective
members’ participation in JCC meetings. The chairperson of the JCC shall be responsible for preparing and
issuing minutes of each such meeting within fifteen (15) days thereafter. Such minutes shall not be finalized until
each Party reviews and confirms the accuracy of such minutes in writing; provided that any minutes shall be
deemed approved unless a member of the JCC objects to the accuracy of such minutes within thirty (30) days
after the circulation of the minutes by the chairperson of the JCC.
3.12 Joint Commercialization Committee Decisions. Actions to be taken by the JCC shall be taken only
following [***], with each Party having [***] vote. If the JCC fails to reach [***] on a matter before it for
decision for a period in excess of [***], the JCC shall submit the respective positions of the Parties with respect
to such matter for resolution by the JSC.
3.13 Joint Manufacturing Committee. Within [***] after the Effective Date, the Parties shall establish a
Joint Manufacturing Committee (or “JMC”) as a subcommittee of the JSC. The JMC shall have an initial term
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of [***] and shall [***] for successive [***]. The JMC shall have only the powers assigned expressly to it in this
Section 3.13 and elsewhere in this Agreement, and the JMC shall not have any power to amend, modify or waive
compliance with this Agreement. The JMC shall conduct its discussions in good faith with a view to operating to
the mutual benefit of the Parties and in furtherance of the successful Manufacture, Development and
Commercialization of Licensed Products. The role of the JMC shall be to:
(a) oversee the conduct of the Manufacturing of the Licensed Product by or on behalf of SGI and MPI
under this Agreement, the Non-Commercial Supply Agreement and the Commercial Supply Agreement;
(b) develop, update and annually approve a global plan for Manufacturing the Licensed Product, which
plan shall include the strategy for the Manufacturing of the Licensed Product on a worldwide basis, and may
include certain shared global Manufacturing activities (i.e., activities that benefit the Licensed Product in
both the SGI Territory and the Licensed Territory, including such activities that relate to further process
development, quality control release testing and quality assurance disposition, and inventory management,
and, subject to mutual written agreement of the Parties, the appropriate allocation of responsibilities and, if
applicable, [***]);
(c) facilitate the sharing of information between the Parties as necessary to support the Manufacturing
of the Licensed Product;
(d) oversee the implementation of the global plans for the Manufacturing of the Licensed Product and
the introduction of second sourcing and/or Manufacturing process improvements for the Licensed Product;
and
(e) perform such other functions as appropriate to further the purposes of this Agreement, as mutually
determined by the Parties.
initially appoint
3.14 Joint Manufacturing Committee Membership. Each Party shall
[***]
representatives to the JMC, each of whom will be an officer or employee of such Party and will have sufficient
seniority within the applicable Party to make decisions arising within the scope of the JMC’s responsibilities and
will have appropriate expertise in manufacturing matters. The JMC may change its size from [***] by [***] of
its members. Each Party may replace its JMC representatives at any time upon written notice to the other Party.
The JMC may invite non-members (including consultants and advisors of a Party) who are under an obligation of
confidentiality consistent with this Agreement to participate in the discussions and meetings of the JMC,
provided that such participants shall have no voting authority at the JMC. The JMC shall have a chairperson.
Each Party shall have the right, on an alternating [***]. Such Party shall have the right during such [***]. [***].
The role of the chairperson shall be to convene and preside at meetings of the JMC, to prepare agendas (with due
input from the other Party’s representatives), circulate agendas and to ensure the preparation of meeting minutes,
but the chairperson shall have no additional powers or rights beyond those held by the other JMC representatives.
3.15 Joint Manufacturing Committee Meetings. The JMC shall meet as frequently as required, but in no
event less than [***] meeting every [***]. The meetings of the JMC may be held in person or by audio or video
conference, with in person meetings taking place at least [***] per [***] and alternating between the Parties’
business locations or as otherwise decided by the JMC. Meetings of the JMC shall be effective only if at least
[***] representatives of each Party are present or participating.
Each Party shall [***] of its respective members’ participation in JMC meetings. The chairperson of the JMC
shall be responsible for preparing and issuing minutes of each such meeting within [***] thereafter. Such
minutes shall not be finalized until each Party reviews and confirms the accuracy of such minutes in writing;
provided that any minutes shall be deemed approved unless a member of the JMC objects to the accuracy of such
minutes within [***] after the circulation of the minutes by the chairperson of the JMC.
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Commission. Confidential treatment has been requested with respect to the omitted portions.
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3.16 Joint Manufacturing Committee Decisions. Actions to be taken by the JMC shall be taken only
following [***], with each Party having [***] vote. If the JMC fails to reach [***] on a matter before it for
decision for a period in excess of [***], the JMC shall submit the respective positions of the Parties with respect
to such matter for resolution by the JSC.
3.17 [***].
3.18 Working Groups. From time to time, the JDC, JCC and JMC may establish working groups (each, a
“Working Group”) to oversee particular projects or activities, and each such Working Group shall be
constituted and shall operate as the JDC, JCC or JMC, respectively, determines, including with respect to the
number and qualification of representatives, frequency of meetings and reporting obligations. Each Working
Group shall make decisions only following [***], with each Party having [***] vote. If a Working Group fails to
reach [***] on a matter before it for decision for a period in excess of [***], it shall submit the respective
positions of the Parties with respect to such matter for resolution by the JDC, JCC or JMC, as applicable. The
Parties anticipate that the JDC shall form a Working Group(s) to coordinate clinical and regulatory activities
under this Agreement and that the JCC shall form a Working Group to coordinate global branding and
commercialization activities under this Agreement
3.19 Alliance Managers. Promptly following the Effective Date, each Party shall designate an individual to
facilitate communication and coordination of the Parties’ activities under this Agreement relating to Licensed
Products and to provide support and guidance to the JSC (each, an “Alliance Manager”). Each Alliance
Manager may also serve as a representative of its respective Party on the JSC.
3.20 Collaboration Guidelines. Subject to the terms of this Agreement, the activities and resources of each
Party shall be managed by such Party, acting independently and in its individual capacity. The relationship
between SGI and MPI is that of independent contractors and neither Party shall have the power to bind or
obligate the other Party in any manner, other than as may be expressly set forth in this Agreement.
ARTICLE 4
DEVELOPMENT
4.1 Overview; Objectives. The Parties desire and intend to collaborate with respect to the Development of
Licensed Products for Regulatory Approval in the Territory, as and to the extent set forth in this Agreement. It is
understood and acknowledged by each Party that such Party will participate in the Development of the Licensed
Product as set forth in the Global Product Development Plan, and share equally (50/50) the Joint Development
Costs incurred in connection therewith, as set forth in, and in accordance with, Section 8.2. The Parties agree at
all times to act in good faith and in a cooperative manner to conduct Development, to share (to the extent
required under this Agreement) all Information reasonably necessary to facilitate each Party’s performance of its
Development obligations hereunder, and to use reasonable efforts to cause its representatives on the JSC to reach
consensus on decisions regarding Development. Each Party shall provide the JSC with regular reports detailing
its respective Development activities under the Global Product Development Plan and the results thereof. Each
Party and its Affiliates shall only conduct Development activities with respect to the Licensed Product (a) in
accordance with the Global Product Development Plan or (b) as Independent Activities.
4.2 Global Product Development Plan and Development Budget.
(a) General. The Parties shall conduct Joint Development of the Licensed Product pursuant to a
comprehensive development plan (the “Global Product Development Plan”). Such Global Product
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Development Plan shall include a detailed budget for all Joint Development activities set forth in the Global
Product Development Plan (the “Development Budget”), including the resource allocations by the Parties.
The Development Budget shall include, with respect to Joint Development activities:
(i) [***];
(ii) [***]; and
(iii) [***].
(b) Allocation of Joint Development Activities between the Parties. The Global Product
Development Plan shall set forth the specific Joint Development activities to be conducted by each Party
and the timelines therefor. Except as otherwise agreed by the Parties, the Parties shall, in preparing the
Global Product Development Plan (including any updates or amendments thereto), (i) endeavor to take
advantage of the respective resources, capabilities and expertise of SGI and MPI; (ii) endeavor to
(A) maintain, to the extent reasonably practical and appropriate, continuity in functions and commitments of
personnel and physical resources of the Parties, (B) avoid duplication of efforts by the Parties and (C) foster
efficient use by the Parties of resources and personnel, consistent with this Agreement and the Global
Product Development Plan and Development Budget; and (iii) act in the best interests of the collaboration.
The Global Product Development Plan shall specify, for each Development activity (including clinical
studies), which Party shall have the lead responsibility for the conduct of such Development activity (such
Party, the “Lead Development Party”), provided that [***], and [***]. For the sake of clarity, MPI shall
be responsible for the conduct and costs of all Japan Development Activities. The Parties will discuss global
Phase 3 Clinical Trials of the Licensed Product in good faith and consider [***] into such clinical trials, and,
if they mutually agree to do so, MPI shall be responsible for operational control of such [***] and shall
[***] exclusively attributable to the conduct of such [***].
(c) Initial Global Product Development Plan and Development Budget. The Parties have agreed
upon an initial Global Product Development Plan covering the initial Development activities under this
Agreement (the “Initial Global Product Development Plan”), including an associated Development
Budget, which, along with the MPI Independent Activities mutually agreed upon as of the Effective Date,
sets forth (i) those non-clinical, clinical, manufacturing and other Developmental activities that the Parties
believe, as of the Effective Date, to be necessary for submission and obtaining approval of an NDA for the
Licensed Product in the U.S. and an MAA for the Licensed Product in the EU and the Key Countries (other
than Japan, except as provided in Section 4.2(b)). The Parties agree that, with respect to those [***]
mutually agreed upon as of the Effective Date, and any other [***] for which the Parties mutually agree that
[***] shall provide services to [***], [***] shall, at [***] reasonable request, assist [***] performance of
those [***], for which [***]. Within a reasonable period of time following the end of each [***] during
which [***] has provided such assistance, [***] will prepare and deliver to [***] a [***], in a mutually
agreed upon format, [***]. [***] shall have [***] after its receipt of [***] report to request additional
information related to the [***]. [***] shall make such payment in Dollars to [***] within [***] after its
receipt of such report. [***] shall have the right to audit the records of [***] with respect to any such costs
in accordance with Section 8.11 of this Agreement.
(d) Updates. On a [***] basis (no later than [***] and [***] of each [***], commencing in [***]), or
more often as the Parties deem appropriate, the JSC shall update and amend, as appropriate, the then-current
Global Product Development Plan and Development Budget. Such updates and amendments shall reflect
any agreed changes, re-prioritization of, or additions to the agreed upon Development activities. Once
approved by the JSC, each updated or amended Global Product Development Plan and Development Budget
shall become effective and supersede the previous Global Product Development Plan and Development
Budget as of the date of such approval or at such other time as decided by the JSC.
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4.3 Development Decision-Making. All matters regarding the Joint Development of the Licensed Product
under the Global Product Development Plan shall be decided [***] by the JSC, subject to the provisions of
Section 3.4.
4.4 Standards of Performance. Each Party shall use Commercially Reasonable Efforts to carry out the
tasks assigned to it under the Global Product Development Plan. Should either Party not timely perform activities
it is responsible for pursuant to the Global Product Development Plan, the other Party would have the right, if the
responsible Party has not begun, or presented to the other Party a reasonable plan to conduct, such activity within
[***] after written notice from such other Party, to perform such activities, with the [***] as [***]. Each Party
shall provide financial and other support for the Development of the Licensed Product as necessary to achieve the
objectives of this Agreement in accordance with the Global Product Development Plan and the Development
Budget. Each Party shall conduct its activities and perform all its obligations under this Agreement and under the
Global Product Development Plan in good scientific manner and in compliance in all material respects with all
applicable Laws.
4.5 Development Costs. Subject to Section 5.2, the Parties will share Joint Development Costs equally in
accordance with the reimbursement procedures set forth in Section 8.2. Except as set forth in Section 8.2, each
Party shall be responsible for all costs and expenses (internal and external) incurred by it or its Affiliates in the
course of performing Development activities with respect to Licensed Product under this Agreement. For the
avoidance of doubt, any costs or expenses exclusively attributable to the performance of Japan Development
Activities shall be borne solely by MPI, except to the extent expressly agreed by the Parties.
4.6 Joint Results. All data and results (the “Joint Results”) generated by or resulting from the Global
Product Development Plan, whether generated by one or both Parties, shall be owned jointly by the Parties and
deemed the Confidential Information of both Parties, and subject to the restrictions on use and disclosure set
forth in Article 12, with each Party deemed to be the receiving Party of such Confidential Information for
purposes of Article 12.
4.7 Incremental Activities; Independent Activities.
(a) In the event that either MPI or SGI wishes to conduct any [***], in each case with respect to the
Licensed Product, that are not included in the then-current Global Product Development Plan [***] (each,
an “Incremental Activity”), the proposing Party shall present the proposed design and associated costs of
such Incremental Activity to the JSC. If the JSC agrees (including the actual consent of the non-proposing
Party) within [***] after the submission of such proposal, the Parties shall amend the Global Product
Development Plan to include such Incremental Activity as a [***] activity under the Global Product
Development Plan, such Incremental Activity shall be considered Joint Development and the [***].
(b) If the non-proposing Party, through the JSC, [***] as part of the Global Product Development Plan,
then the proposing Party shall be [***], subject to Section 4.7(c). The proposing Party shall be [***]
responsible for the [***] and the non-proposing Party shall have [***]. Notwithstanding the foregoing, the
non-proposing Party will [***]. [***]. The proposing Party shall promptly disclose to the non-proposing
Party a summary of such data and a description, in reasonable detail, of the total amounts then-expended by
the proposing Party in connection with such Independent Activity, and shall reasonably answer the
non-proposing Party’s questions with respect
if applicable, providing additional
thereto,
information if reasonably necessary for the non-proposing Party to decide whether to [***].
including,
(c) If the non-proposing Party reasonably and in good faith objects to the conduct of a proposed
Incremental Activity on the grounds that (i) [***] or (ii) [***], then the JSC shall discuss the non-proposing
Party’s concerns in good faith, and for so long as the non-proposing Party continues to object in good faith
on such grounds, the proposing Party shall [***].
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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4.8 Records, Reports and Information. Each Party shall maintain complete, current and accurate records
of all work conducted by it under the Global Product Development Plan, and all data and other Information
resulting from such work. Such records shall fully and properly reflect all work done and results achieved in the
performance of the Development activities in good scientific manner appropriate for regulatory and patent
purposes. Each Party shall document all preclinical studies and clinical trials in formal written study reports
according to applicable national and international (e.g., ICH, GCP, GLP, and GMP) guidelines. Each Party shall
have the right to review such records maintained by the other Party at reasonable times, upon written request,
which shall not exceed [***]. During the Term, on a regular basis, each Party shall present reports at JSC
meetings on its Joint Development activities, including without limitation any significant formal or informal
meetings between such Party and the applicable Regulatory Authorities, at a level of detail to be agreed upon by
the JSC; provided, however, that any such presentation shall include at least a summary of the resulting data for
all studies conducted by a Party with the Licensed Product under the Global Product Development Plan, and
provided further, upon request from the other Party, such Party conducting the studies shall provide the other
Party with a copy of written study reports and access to data underlying any such study report, for use consistent
with Articles 4 and 5.
4.9 Exchange of Information. Within [***] after the Effective Date, the Parties shall agree upon a written
plan for SGI to provide MPI with all SGI Know How necessary or useful for MPI to undertake its activities
under the Global Product Development Plan or Develop, Manufacture or Commercialize the Licensed Product
for the Licensed Territory, including any final data and study reports and all raw data. Such plan shall thereafter
be approved by the JDC. The Parties shall then implement such plan. In addition, SGI shall promptly provide
MPI with a hard-copy of or electronic access to all such SGI Know How reasonably requested by MPI at any
time after the Effective Date. From time to time throughout the Term, each Party shall provide to the other Party
a hard-copy of or electronic access to all Joint Results, including any final data and study reports and all raw
data.
ARTICLE 5
REGULATORY MATTERS
5.1 Regulatory Submissions and Regulatory Approvals.
(a) Global Regulatory Plan. The JDC shall develop a global regulatory plan for the Licensed Product
that describes the regulatory actions to be taken by each Party under the Global Product Development Plan
and how such activities shall be coordinated if necessary (the “Global Regulatory Plan”). On an
approximately [***] basis, or more often as the Parties deem appropriate, the JDC shall update and amend,
as appropriate, the then-current Global Regulatory Plan. Such updates and amendments shall reflect any
agreed changes, re-prioritization of, or additions to the agreed upon regulatory activities for the Licensed
Product. The initial and any updated or amended Global Regulatory Plan shall be subject to approval by the
JSC. Once approved by the JSC, each updated or amended Global Regulatory Plan shall become effective
and supersede the previous Global Regulatory Plan as of the date of such approval or at such other time as
decided by the JSC.
(b) Responsibilities.
(i) Except as otherwise expressly provided in the Global Product Development Plan, the Lead
Development Party for a particular clinical trial under the Global Product Development Plan shall
(A) be responsible for preparing and submitting all Regulatory Materials with respect to such clinical
trial and interactions with the relevant Regulatory Authorities and institutional review boards with
respect thereto, (B) be responsible for the preparation of the final reports of such clinical trial, and
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(C) provide to the other Party copies of such reports in a format reasonably acceptable to the other
Party, and other information relating to such clinical trial reasonably necessary for such other Party to
seek Regulatory Approval or Pricing Approval for the Licensed Product in such other Party’s territory.
(ii) The Party conducting an Independent Activity shall be responsible for preparing and submitting
all Regulatory Materials with respect to such activities and interactions with the relevant Regulatory
Authorities and institutional review boards with respect thereto.
(iii) In addition, each Party shall assist the other Party in preparing Regulatory Materials for such
other Party’s territory (to the extent based on such Party’s Regulatory Materials, such Party’s or its
contractors’ activities with respect to the Licensed Product, or Joint Results, to the extent the relevant
information is in such Party’s possession). [***]. To the extent that the Regulatory Materials being
prepared by a Party will form the basis for the Regulatory Materials to be submitted by the other Party
to Regulatory Authorities in such other Party’s territory (which may include non-clinical information
and CMC information), the Party preparing such Regulatory Materials shall permit the other Party the
right to review and comment, in a timely manner, on such Regulatory Materials and the Parties shall
use reasonable efforts to ensure that such Regulatory Materials are sufficient for submission in each
Party’s territory.
(iv) Except as provided in Sections 5.1(b)(i), (ii) or (iii) or Section 5.6(c) or as otherwise agreed by
the Parties:
(1) MPI shall be solely responsible for preparing any and all Regulatory Materials to seek
Regulatory Approval or Pricing Approval for the Licensed Product in the Licensed Territory and
for submitting, and shall own, such Regulatory Materials in the Licensed Territory, consistent
with the Global Regulatory Plan or pursuant to the MPI Independent Activities, and shall be solely
responsible for interactions with the relevant Regulatory Authorities with respect thereto. SGI
shall not submit any Regulatory Materials or seek Regulatory Approvals or Pricing Approvals for
the Licensed Product in the Field in the Licensed Territory without the prior written consent of
MPI.
(2) SGI shall be solely responsible for preparing any and all Regulatory Materials to seek
Regulatory Approval or Pricing Approval for the Licensed Product in the SGI Territory and for
submitting, and shall own, such Regulatory Materials in the SGI Territory, consistent with the
Global Regulatory Plan or pursuant to the SGI Independent Activities, and shall be solely
responsible for interactions with the relevant Regulatory Authorities with respect thereto. MPI
shall not submit any Regulatory Materials or seek Regulatory Approvals or Pricing Approvals for
the Licensed Product in the Field in the SGI Territory without the prior written consent of SGI.
(c) Rights of Reference. Each Party hereby grants to the other Party a right of reference to all
Regulatory Materials submitted by such Party in its respective territory for the Licensed Product, subject to
the following limitations. The right of reference granted to SGI herein shall be solely for the purpose of SGI,
its Affiliates or any Third Party sublicensees of SGI (i) obtaining Regulatory Approvals or Pricing
Approvals in the SGI Territory for the Licensed Product, (ii) conducting activities (including conducting
clinical trials) assigned to SGI under the Global Product Development Plan or (iii) conducting SGI
Independent Activity. The right of reference granted to MPI herein shall be solely for the purpose of MPI,
its Affiliates or any Third Party sublicensees of MPI (A) obtaining Regulatory Approvals or Pricing
Approvals in the Licensed Territory for the Licensed Product, (B) conducting activities (including
conducting clinical trials) assigned to MPI under the Global Product Development Plan or (C) conducting
MPI Independent Activity. The rights of reference granted to a Party hereunder shall not include any portion
of the other Party’s Regulatory Materials that is supported by Independent Activities that [***]. Upon
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request, each Party will furnish the other with an electronic copy or electronic access to and a hard copy of
its Regulatory Materials for such purposes.
(d) Reporting and Review. Each Party shall keep the other Party reasonably and regularly informed of
the preparation of all Regulatory Materials, Regulatory Authority review of Regulatory Materials, meetings
with Regulatory Authorities, and Regulatory Approvals and Pricing Approvals for the Licensed Products, in
each case in such Party’s territory, pursuant to procedures to be developed by the JSC.
5.2 Regulatory Costs. Each Party shall be responsible for all costs and expenses of preparing, maintaining,
formatting, and submitting Regulatory Materials for Licensed Products in its respective territory and for all other
costs and expenses in connection with seeking and maintaining Regulatory Approval and Pricing Approval for
Licensed Products in its respective territory, except for those regulatory items (A) specifically set forth in the
Global Product Development Plan and included in the Development Budget as to which the other Party explicitly
agrees to share the costs or (B) conducted by the other Party through its Independent Activities.
5.3 MPI’s Performance. MPI shall use Commercially Reasonable Efforts to prepare and submit the
appropriate Regulatory Materials for Licensed Products in the Licensed Territory, as determined on a
country-by-country basis, and to seek to obtain Regulatory Approvals (and, if applicable, Pricing Approvals) for
Licensed Products in the Licensed Territory, as determined on a country-by-country basis. [***]:
(a) [***], and thereafter use Commercially Reasonable Efforts to [***] unless (i) [***] or (ii) [***]
(a),[***];
(b) [***];
(c) [***] and [***]; and
(d) [***].
5.4 Communications. Except as may be required by applicable Laws, SGI shall not communicate regarding
any Licensed Product with any Regulatory Authority having jurisdiction in the Licensed Territory unless
necessary to fulfill its obligations pursuant to the Global Product Development Plan as set forth in Section 5.1(b)
above or explicitly requested or permitted in writing to do so by MPI or as necessary to perform SGI Independent
Activities, or unless so ordered by such Regulatory Authority in the Licensed Territory, in which case SGI shall
provide promptly to MPI notice of such order. Except as may be required by applicable Laws, MPI shall not
communicate regarding any Licensed Product with any Regulatory Authority having jurisdiction in the SGI
Territory unless necessary to fulfill its obligations pursuant to the Global Product Development Plan as set forth
in Section 5.1(b) above or explicitly requested or permitted in writing to do so by SGI or as necessary to perform
MPI Independent Activities, or unless so ordered by such Regulatory Authority, in which case MPI shall provide
promptly to SGI notice of such order.
5.5 Pharmacovigilance Agreement. Details regarding the management of information of adverse events
related to the clinical development and the use of the Licensed Product in the Licensed Territory and the SGI
Territory will be delineated in a separate pharmacovigilance agreement that shall be agreed to by the Parties prior
to the earlier of (a) Commercialization of the Licensed Product in any country in the Territory or (b) the
preparation of any Regulatory Materials by MPI (the “Pharmacovigilance Agreement”). Each Party will be
primarily responsible for submission of all required reports with respect to adverse events where such Party is
obligated to do so under applicable Law. As of the Effective Date, the Parties acknowledge SGI maintains the
global safety database for the Licensed Product. The Parties shall discuss which Party should maintains the
database and, if the Parties mutually agree that such database shall be maintained by MPI, the Parties shall
cooperate to transition such database to MPI. The maintaining [***] included in such database.
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5.6 Regulatory Authority Communications Received by a Party.
(a) General. Each Party shall keep the other Party informed, in a timely manner of notification, of any
action by, or notification or other information which it receives (directly or indirectly) from, any Regulatory
Authority in such Party’s territory (whether before or after receipt of MAA or NDA approval) which:
(i) raises any material concerns regarding the safety or efficacy of the Licensed Product; (ii) indicates or
suggests a potential material liability of either Party to Third Parties in connection with the Licensed
Product; (iii) is reasonably likely to lead to (A) a delay of planned MAA or NDA approval, (B) the
imposition of Regulatory Approval requirements beyond those planned, or (C) recall or market withdrawal
of the Licensed Product; or (iv) relates to expedited and periodic reports of adverse events with respect to
the Licensed Product, or Product Complaints, and which may have a material impact on Regulatory
Approval or the Commercialization of the Licensed Product. The other Party will fully cooperate with and
assist such Party in complying with regulatory obligations and communications, including by providing to
such Party, within [***] after a request (unless sooner required by the relevant Regulatory Authority), such
information and documentation in the other Party’s possession as may be necessary or helpful for the Party
to prepare a response to an inquiry from a Regulatory Authority. If a Party is required to respond to any
Regulatory Authority in the other Party’s territory, such Party shall use Commercially Reasonable Efforts to
seek the input and approval of the other Party before responding. Each Party shall also provide the other
Party in a timely manner with a copy of all correspondence received from a Regulatory Authority
specifically regarding the matters referred to above.
(b) Prior Review. Each Party shall provide to the other, a reasonable time prior to submission or
promptly after receipt, any material Regulatory Materials. The Party submitting any such material
Regulatory Materials shall consider in good faith any timely comments provided by such other party. The
JDC or one of its working groups shall determine appropriate timeframes and mechanisms for such
coordination and review.
(c) Interaction with Regulatory Authorities. Each Party shall be responsible for the scheduling,
conduct and preparation of materials for meetings,
interactions or communications with Regulatory
Authorities in its territory, subject to Section 5.1(b)(i). Each Party shall [***] notify the other Party of any
meeting (whether in person or by conference call) requested or scheduled with, and shall promptly provide
to the other any communications sent to or from, the FDA, EMEA, Health Canada or such other Regulatory
Authorities reasonably requested by a Party. The other Party may, on reasonable prior notice to the first
Party, have no more than [***] representatives participate in any such meeting. In addition, the other Party
shall send relevant subject matter experts to any such meeting if requested by the first Party. In addition,
each Party shall assist such other Party in answering any questions or issues from, and shall provide any data
requested by or required for Regulatory Materials to be prepared and submitted by such other Party with
Regulatory Authorities or other Governmental Authorities in such other Party’s territory, including, as
applicable, such questions or issues regarding Manufacturing.
(d) Regulatory Non-Compliance. In addition to its obligations under Section 5.5 and 5.6(a), each
Party shall disclose to the other Party any information pertaining to notices from Regulatory Authorities in
the Territory of non-compliance with applicable Laws in connection with the Licensed Product including,
limitation, receipt of a warning letter or other notice of alleged non-compliance from any
without
Regulatory Authority relating to the Licensed Product.
5.7 Regulatory Actions.
(a) Audit. If a Regulatory Authority desires to conduct an inspection or audit of a Party’s facility or a
facility under contract with such Party with regard to the Licensed Product or any data relating to the
Licensed Product obtained by or on behalf of a Party, such Party (i) shall promptly notify the other Party of
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such inspection or audit, (ii) shall cooperate and cause the contract facility to cooperate with such
Regulatory Authority during such inspection or audit, (iii) shall immediately update the other Party during
(in the case of multi-day inspections or audits) and following such inspection or audit of any information
relevant to the Licensed Product, (iv) shall immediately provide to the other Party the inspection or audit
observations of such Regulatory Authority relevant to the Licensed Product, (v) shall prepare the response
to any such observations, (vi) shall provide a copy of such planned response to the other Party, and
(vii) shall conform its activities under this Agreement to any commitments made in such a response, except
to the extent it believes in good faith that such commitments violate applicable Laws. Both Parties agree to
use Commercially Reasonable Efforts to cause their Third Party sublicensees to accept an audit mechanism
substantially similar to the mechanism described above in this Section 5.7(a).
(b) Recalls and Voluntary Withdrawals. The Parties shall exchange their internal standard operating
procedures (“SOPs”) for conducting product recalls reasonably in advance of the First Commercial Sale of
any Licensed Product in the Territory, and shall discuss and resolve in writing any conflicts between such
SOPs and issues relating thereto promptly after such exchange. If either Party becomes aware of information
relating to any Licensed Product that indicates that a unit or batch of such Licensed Product may not
conform to the specifications therefor, or that potential adulteration, misbranding, and/or other issues have
arisen that relate to the safety or efficacy of Licensed Products, it shall promptly so notify the other Party.
The Party having the right to control such recall pursuant to this Section 5.7(b) may, at its sole discretion,
take appropriate courses of action, which shall be consistent with the internal SOP of such Party; provided
however that such controlling Party shall promptly notify the other Party of any recall action being
considered, and where practicable, consider the views of the non-controlling Party prior to taking any recall
action. MPI shall have the right, [***] to control any recalls, field corrections, field alerts or withdrawals of
any Licensed Product in the Licensed Territory. SGI shall have the right, [***], to control all recalls, field
corrections, field alerts and withdrawals of any Licensed Product in the SGI Territory. MPI and SGI shall
maintain complete and accurate records of any recall of Licensed Product according to its then current SOPs
for such periods as may be required by applicable Laws, but in no event for less than [***].
ARTICLE 6
COMMERCIALIZATION
6.1 Commercialization in the Licensed Territory. As between the Parties, MPI shall have sole
responsibility for Commercializing all Licensed Products in the Licensed Territory, as provided in this Article 6,
and MPI shall bear all of the costs and expenses incurred in connection with all such Commercialization
activities, unless otherwise expressly agreed by the Parties.
6.2 Commercialization in the SGI Territory. As between the Parties, SGI shall have sole responsibility
for Commercializing all Licensed Products in the SGI Territory, as provided in this Article 6, and SGI shall bear
all of the costs and expenses incurred in connection with all such Commercialization activities, unless otherwise
expressly agreed by the Parties.
6.3 MPI’s Performance.
(a) MPI shall use Commercially Reasonable Efforts to Commercialize the Licensed Product in the
Licensed Territory, as determined on a country-by-country basis, for each indication for which it receives
is not reasonably
Regulatory Approval of an MAA and,
practicable prior to receipt of Pricing Approval, Pricing Approval. Without limiting the generality of the
if Commercialization of Licensed Product
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foregoing but subject to Section 6.3(b), during each of the [***], MPI, itself or through its Affiliates,
sublicensees and Distributors, [***]:
(i) [***];
(ii) [***]; and
(iii) [***].
As used herein, “[***] of (i) [***], or (ii) [***]. As used herein, “[***].
(b) The Parties will enter into good faith negotiations to [***]. [***].
(c) At least once per [***], in addition to MPI’s obligations under Section 6.4 and the [***] JCC
meetings arranged between the Parties, MPI will reasonably inform the JSC or the JCC regarding the
Commercialization of the Licensed Product throughout the Licensed Territory by MPI, its Affiliates and
sublicensees. Such reports submitted by MPI to the JSC or JCC shall cover subject matter at a level of detail
reasonably sufficient to enable SGI to determine MPI’s compliance with its diligence obligations pursuant
to this Section 6.3.
6.4 Reports. Each Party shall provide to the JCC quarterly sales reports, including, without limitation,
specific marketing efforts and planning and sales execution. The JCC shall update the JSC at each meeting
regarding significant Commercialization activities for Licensed Products in the Territory, including a [***] for
the following [***] sales of such Licensed Products.
6.5 Coordination of Marketing Activities. The JCC and/or the JSC, as appropriate, shall be responsible for
coordinating the Commercialization of Licensed Product throughout the Territory (i.e., by MPI for the Licensed
Territory and by SGI for the SGI Territory) and for approving any Commercialization activities that relate to, or
require activities in, or would reasonably be expected to materially impact, the other Party’s territory. Unless
prohibited by Law, the Parties agree to [***]. Notwithstanding the agreement to [***].
6.6 Compliance. Each Party shall comply in all material
Commercializing Licensed Products in the Territory under this Agreement.
respects with all applicable Laws in
6.7 Use of Distributors. Subject to Section 2.5(a), each Party shall have the right to engage Distributors to
distribute Licensed Products in particular countries within its territory in accordance, on a country-by-country
basis, with such Party’s standard practices for selecting Distributors for its other products having market potential
comparable to that of Licensed Products in such country.
ARTICLE 7
MANUFACTURE AND SUPPLY
7.1 Coordination. The provisions of this Article 7 shall apply unless otherwise mutually agreed by the
Parties.
7.2 Non-Commercial Supply of Licensed Product.
(a) For Joint Development. From the Effective Date and continuing until at least [***] following
[***] in a first country in the Licensed Territory (the “SGI Manufacturing Period” and, the [***] of such
First Commercial Sale, the (“[***]”), SGI shall, itself or through one or more Third Party contract
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manufacturers, supply in a timely fashion all quantities of the Licensed Product as required by the Parties to
carry out all Development activities (including pre-clinical and clinical) for the Licensed Product pursuant
to the Global Product Development Plan, on the terms set forth in the Non-Commercial Supply Agreement.
Such quantities of the Licensed Product and the schedule of such supply shall be confirmed by the JSC and
consistent with the Initial Global Product Development Plan and subsequent Global Product Development
Plans. The Cost of Goods Sold of such Licensed Product shall be shared by the Parties as a Joint
Development Cost; provided, however, that MPI shall pay for any such preclinical or clinical supply of
Licensed Product it uses for Japan Development Activities [***]. [***] prior written notice to MPI,
provided that [***].
(b) For Independent Development. During the SGI Manufacturing Period, SGI shall, itself or through
one or more Third Party contract manufacturers, supply to MPI quantities of the Licensed Product
reasonably required by MPI to carry out MPI Independent Activities, on the terms set forth in the
Non-Commercial Supply Agreement. [***].
7.3 Non-Commercial Supply Agreement. Forecasting and ordering procedures, Licensed Product
specifications, and other operational matters relating to the supply of Licensed Product under Sections 7.2(a) and
7.2(b) shall be set forth in a manufacturing and supply agreement mutually agreed upon by the Parties not later
than ninety (90) days after the Effective Date (the “Non-Commercial Supply Agreement”) and shall include the
provisions set forth in Exhibit C and such other customary terms, including lead times, delivery, rolling forecasts
and purchase orders. In connection with such Non-Commercial Supply Agreement, the Parties shall enter into a
quality agreement governing the agreed upon specifications and other technical aspects of supply of the Licensed
Product for non-Commercial activities by the Parties (the “Non-Commercial Quality Agreement”).
7.4 Commercial Supply of Licensed Product. [***], the Parties shall negotiate in good faith and enter into
a manufacturing and supply agreement (the “Commercial Supply Agreement”) under which SGI will agree to
supply during the SGI Manufacturing Period, itself or through one or more Third Party contract manufacturers,
Licensed Product to MPI for Commercialization in the Licensed Territory. Such Commercial Supply Agreement
shall contain the provisions set forth in Exhibit C and such other customary terms governing such manufacturing
and supply relationships, and shall provide that such Licensed Product [***]. Included as part of such
Commercial Supply Agreement, the Parties shall enter into a quality agreement governing the agreed upon
specifications and other technical aspects of supply of the Licensed Product for Commercialization by the Parties
(the “Commercial Quality Agreement”). For the sake of clarity, [***].
7.5 SGI Supply Agreements. As of the Effective Date, SGI has made arrangements for the Manufacture of
the Licensed Product for the Licensed Territory through Third Party contract manufacturer(s) and/or SGI’s
Affiliates. Within a reasonable period of time prior to entering into any material future supply agreement during
the SGI Manufacturing Period with a Third Party contract manufacturer relating to the Licensed Product, [***].
In addition, during the [***], it being understood that SGI shall be the [***]. During the SGI Manufacturing
Period, [***].
7.6 Manufacture of Licensed Products by MPI.
(a) Following the end of the SGI Manufacturing Period, [***] (i) for use by the MPI for its Joint
Development activities and (ii) for use by MPI and its Affiliates, and their respective sublicensees, for MPI
Independent Activities and for Commercialization in the Licensed Territory; provided that SGI [***].
Subject to any limitations set forth in the Commercial Supply Agreement or any existing supply agreements
between SGI and Third Parties for the supply of Licensed Product for Commercial purposes under
Section 7.4 above, MPI may, upon not less than [***] prior written notice to SGI during the SGI
Manufacturing Period, manufacture Licensed Product (or certain portions thereof) for Commercialization in
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the Licensed Territory or for MPI Independent Activities or for MPI’s Joint Development activities (or have
such Licensed Product manufactured for such purpose by a Third Party manufacturer(s) identified by MPI)
at the end of such notice period. Commencing on the earliest of (i) [***], (ii) [***] or (iii) [***].
[***].[***].
(b) Upon request by MPI, SGI shall transfer, or use commercially reasonable efforts to cause its Third
Party manufacturer(s) to transfer, to MPI (or MPI Affiliate(s) or Third Party manufacturer(s) identified by
MPI) the technology and other information in SGI’s possession or control reasonably necessary to
Manufacture Licensed Product, subject to reimbursement of SGI’s and/or its Third Party manufacturers’
reasonable costs therefor.
(c) Following any transfer of Manufacturing rights and responsibilities to MPI hereunder, MPI shall
consider in good faith any request by SGI to provide SGI with a back-up supply of Licensed Product for the
SGI Territory if requested by SGI. All supplies of Licensed Product by MPI shall be sold to SGI at [***],
but SGI shall [***] of any changes to the specifications for the SGI Territory.
(d) Following any transfer of Manufacturing rights and responsibilities to MPI hereunder, SGI shall
consider in good faith any request by MPI to provide MPI with a back-up supply of Licensed Product for the
Licensed Territory if requested by MPI. All such supplies of Licensed Product by SGI shall be sold to MPI
at [***], but MPI shall [***] of any changes to the specifications for the Licensed Territory.
7.7 Second or Additional Source. Each Party has the right at any time (notwithstanding any implications to
the contrary hereunder) to establish a second or additional source (i.e., in addition to SGI’s Third Party
manufacturers existing as of the Effective Date) for the supply of Licensed Product or any component thereof at
such Party’s expense. To the extent that the Parties agree to jointly establish a second or additional source to one
or more of SGI’s Third Party manufacturers existing as of the Effective Date, the relevant activities with respect
to establishing such second or additional source shall be included in the Global Product Development Plan and
[***].
7.8 Records; Audit Rights. Each Party will maintain complete and accurate records in sufficient detail to
permit the other Party to confirm the accuracy of the calculation of Cost of Goods Sold or Supply Price under
this Agreement. Upon reasonable prior notice, such records shall be available during regular business hours for a
period of [***] from the creation of individual records for examination at the [***], and not more often than once
each [***], by an independent certified public accountant selected by the auditing Party and reasonably
acceptable to the other Party subject to the inspection, for the sole purpose of verifying the accuracy of the Cost
of Goods Sold or Supply Price for any Licensed Product supplied pursuant to this Agreement. Any such auditor
shall not disclose the audited Party’s Confidential Information, except to the extent such disclosure is necessary
to verify the accuracy of the calculation of Cost of Goods Sold or Supply Price. Any amounts shown to have
been overpaid by a Party shall be [***] within [***] from the accountant’s report, or shall be [***] to such Party
for Licensed Product. The auditing Party shall [***] of such audit unless such audit [***] of more than [***], in
which case the audited Party [***].
ARTICLE 8
COMPENSATION
8.1 Upfront Payment. [***], MPI shall pay to SGI a non-refundable, non-creditable upfront payment of
$60 million by wire transfer of immediately available funds into an account designated by SGI.
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8.2 Reimbursement of Shared Joint Development Costs.
(a) Within [***] following the end of each [***] beginning from the Effective Date, each Party will
prepare and deliver to the other Party a [***] report, in a mutually agreed upon format, detailing its Joint
Development Costs incurred during such period (or estimates thereof, to the extent necessary). Each Party
shall have [***] after its receipt of the other Party’s quarterly report to request additional information related
to the Joint Development Costs included in such quarterly report.
(b) Within [***] after the end of the applicable [***], SGI will prepare a composite report that:
(i) summarizes the Joint Development Costs incurred by each Party for such Calendar Quarter,
(ii) calculates the costs for which each Party is responsible (the “Cost Allocation”), which shall amount to
fifty percent (50%) of the total Joint Development Costs incurred by the Parties for such [***], subject to
Section 8.2(d); and (iii) computes the amount in Dollars due to MPI or SGI, as the case may be, for such
[***] based upon the Parties’ respective Cost Allocations. If a Party owes any amount to the other Party for
a particular [***], then such Party shall make such payment in Dollars to the other Party within [***] after
its receipt or provision of the applicable composite report, as the case may be. Each Party shall have the
right to audit the records of the other Party with respect to any purported Joint Development Costs included
in such reports, in accordance with Section 8.11 of this Agreement.
(c) To the extent that any such Joint Development Costs reported pursuant to Section 8.2(a) were
estimated, the relevant Party shall provide actual cost information with the next [***] report, and the
provisions of Section 8.2(b) shall apply to properly allocate between the Parties any amount by which such
actual costs exceeded or were less than the estimated costs.
(d) For any [***] period described in Section 4.2(d), SGI and MPI shall each be permitted to recover
Joint Development Costs with respect to such Party’s Development activities for such [***] period up to a
maximum of [***] of the amounts allocated to such Development activities in the Development Budget.
Notwithstanding the foregoing, either Party shall be entitled to recover any [***], which approval may be
granted either in advance of such costs being incurred or retroactively.
8.3 Development Milestone Payments. MPI shall make the following milestone payments to SGI within
[***] after the achievement of each of the following milestone events by MPI or, with respect to the [***], SGI,
or, as applicable, their respective Affiliates or sublicensees. Each such milestone payment shall be made by wire
transfer of immediately available funds into an account designated by SGI. Each such milestone payment shall be
[***].
(a) [***]. The milestone payments listed in the table below shall be payable to SGI for the [***] to
achieve the designated milestone event with respect to [***].
Milestone Event
Milestone Payment
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***]
[***]
[***]
[***]
(b) [***]. The milestone payments listed in the table below shall be payable to SGI for the [***] to
achieve the designated milestone event with respect to [***].
Milestone Event
Milestone Payment
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***]
[***]
[***]
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Commission. Confidential treatment has been requested with respect to the omitted portions.
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(c) [***]. The milestone payments listed in the table below shall be payable to SGI for the first
Licensed Product to achieve the designated milestone event with respect to [***].
Milestone Event
Milestone Payment
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***]
[***]
[***]
(d) [***]. The milestone payments listed in the table below shall be payable to SGI for the [***] to
achieve the designated milestone event with respect to [***]. Notwithstanding the foregoing, with respect to
each such milestone payment, in the event that MPI reasonably determines in good faith, and shares its
determination with SGI at least [***] before the reasonably anticipated achievement of the relevant
milestone event, [***]. If SGI disputes such [***]. If SGI does not provide such notice and [***].
Milestone Event
Milestone Payment
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***]
[***]
[***]
[***]
(e) [***]. The milestone payments listed in the table below shall be payable to SGI for the [***] to
achieve the designated milestone event with respect to the [***]. Notwithstanding the foregoing, with
respect to each such milestone payment, in the event that [***]. If SGI disputes such [***]. If SGI does not
provide such notice and [***].
Milestone Event
Milestone Payment
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***]
[***]
[***]
[***]
[***]
(f) Clarifications. For clarity, in the event that MPI, or its Affiliates or sublicensees submits an MAA
for a Licensed Product with EMEA for a [***] or a [***], and at such time, [***]. [***]. For further clarity,
for purpose of this Section 8.3, [***] of (i) [***] and (ii) [***]. For further clarity, each milestone payment
specified in Sections 8.3(a) through (e) shall be [***].
8.4 Sales Milestone Payments. MPI shall make the following [***], [***] sales milestone payments to SGI
within [***] after the end of the Calendar Year in which aggregated annual Net Sales of the Licensed Product in
such Calendar Year in all countries in the Licensed Territory reach the following thresholds for the first time:
Annual Net Sales Threshold
Sales Milestone Payment
[***]
[***]
[***]
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***]
[***]
[***]
[***]. [***].
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
-35-
8.5 Royalties.
(a) Royalty Rates. During the Royalty Term, MPI shall pay to SGI a royalty at the following royalty
rates, on aggregate Net Sales of the Licensed Product in a Calendar Year by MPI, its Affiliates and its
sublicensees in the Licensed Territory:
Calendar Year Net Sales of Licensed Product in the Licensed
Territory
Royalty Rate for
Net Sales
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[***]
[***]
[***]
[***]
(b) Clarifications. For the avoidance of doubt, the incremental royalty percentage rates set forth in
Section 8.5(a) shall [***]. The obligation to pay royalties shall be imposed [***].
(c) Adjustments Related to Generic Products If, on a country-by-country basis, sales in the Field on
a [***] basis of Generic Products in such country [***] of all Generic Products and Licensed Products in
such country as measured at the end of a [***], then any royalties due under Section 8.5(a) shall be [***],
starting with the [***], by:
(i) [***]; and
(ii) [***];
provided, however, that in no event shall the royalties due under Section 8.5(a) be [***].
Sales levels for Generic Products shall be based on information provided by a qualified market research firm
selected by mutual agreement of the Parties (collectively, the “Generic Market Data”). Notwithstanding
anything to the contrary, where Generic Market Data is not available on a country-by-country basis for a country
but Generic Market Data (x) is available on a regional basis for the geographic region containing such country,
such available regional sales data across all countries in the applicable geographical region (e.g., Europe, South
America, Africa, Asia) shall be used in the determination of the volume of sales of Generic Products in such
country or (y) is available for the major market country(ies) in such geographical region accounting for at least
[***] of the total market for Generic Products across such geographic region, the Generic Market Data for the
applicable major market countries will be used to determine the volume of sales for all countries within the
applicable geographical region. Where no Generic Market Data is available for a particular geographical region,
the Parties will determine the level of sales of Generic Products in such region in good faith based on the totality
of the information then available for global sales of Licensed Products and Generic Products.
(d) Third Party Royalties. To the extent that MPI pays, pursuant to Section 8.6, amounts due under an
Existing Third Party Agreement or Future Third Party Agreement, MPI shall be entitled to [***]; provided
that such [***]. MPI may [***].
(e) Limitation on [***]. Notwithstanding Sections 8.5(c) and 8.5(d) above, in no event shall the [***]
of the amounts set forth in Section 8.5(a). For example, if, [***]. [***].
(f) Royalty Term. Royalties payable under this Section 8.5 with respect to a particular Licensed
Product in a particular country in the Licensed Territory, will commence on the Effective Date and will
continue for so long as such Licensed Product is sold in such country (such period, the “Royalty Term”).
(g) Royalty Payments and Reports. MPI shall calculate all royalty amounts payable to SGI pursuant
to this Section 8.5 with respect to Net Sales at the end of each Calendar Quarter, which amounts shall be
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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converted to Dollars at such time in accordance with Section 8.9. MPI shall provide such calculation to SGI
within twenty (20) Business Days after the end of each Calendar Quarter. Each such calculation shall
include a statement of the amount of gross sales of the Licensed Products in the Licensed Territory during
the applicable Calendar Quarter, an itemized calculation of Net Sales in the Licensed Territory showing
deductions, to the extent practicable, provided for in the definition of “Net Sales” during such Calendar
Quarter, and a calculation of the amount of royalty payment due on such sales for such Calendar Quarter.
MPI shall require its sublicensees to account for their Net Sales and to provide such reports with respect
thereto as if such sales were made by MPI. SGI shall promptly invoice MPI after receipt of such report and
MPI shall pay such invoice within twenty (20) Business Days after receipt of such invoice.
8.6 Third Party Royalties. Subject to Section 8.5(d), [***], and all [***], in each case to the extent due as
a result of Development, use, manufacture, importation, sale, or offering for sale of the Licensed Product in the
Licensed Territory by MPI, its Affiliates, or their respective sublicensees. For purposes of the calculation of
[***], MPI shall reasonably estimate the amount of such payments pursuant to any such agreement to which MPI
is not a party, shall report such calculation in the report it provides pursuant to Section 8.5(g), [***]. SGI shall
promptly confirm or update such calculation, along with reasonable detail to support any update thereof, and
(a) [***], and (b) [***]. With respect to any tiered royalties based on sales of Licensed Product in the Licensed
Territory and the SGI Territory, each Party shall pay [***].
8.7 Taxes.
(a) Cooperation and Coordination. The Parties acknowledge and agree that it is their mutual
objective and intent to appropriately minimize, to the extent feasible and legal, the Taxes payable with
respect
to their collaborative efforts under this Agreement and that they shall use all commercially
reasonable efforts to cooperate and coordinate with each other to achieve such objective.
(b) Payment of Taxes. A Party receiving a payment pursuant to this Article 8 shall pay any and all
Taxes levied on such payment. If applicable Laws require that Taxes be deducted and withheld from a
payment made pursuant to this Article 8, the remitting Party shall (i) deduct those Taxes from the payment;
(ii) pay the Taxes to the proper taxing authority; and (iii) send evidence of the obligation together with proof
of payment to the other Party within [***] following that payment.
(c) Assessment. Either Party may, at its own expense, protest any assessment, proposed assessment, or
other claim by any Governmental Authority for any additional amount of Taxes, interest or penalties or seek
a refund of such amounts paid if permitted to do so by applicable Law. The Parties shall cooperate with each
other in any protest by providing records and such additional information as may reasonably be necessary
for a Party to pursue such protest.
8.8 Blocked Currency. In each country where the local currency is blocked and cannot be removed from
the country, royalties accrued on Net Sales in that country shall be paid to SGI in the equivalent amount in
Dollars unless the Parties otherwise agree.
8.9 Foreign Exchange. The rate of exchange to be used in converting a foreign currency into Dollars for the
purpose of computing any payments hereunder shall be the average month end rates of exchange for the
applicable foreign currency published in [***].
8.10 Late Payments. If a Party does not receive payment of any sum due to it on or before the due date,
[***] shall thereafter accrue on the sum due to such Party until the date of payment at the per annum rate of [***]
over the then-current prime rate quoted by Citibank in New York City or the maximum rate allowable by
applicable Law, whichever is lower.
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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8.11 Records; Audits. MPI will maintain complete and accurate records in sufficient detail to permit SGI to
confirm the accuracy of the calculation of royalty payments under this Agreement. Each Party will maintain
complete and accurate records in sufficient detail to permit the other Party to confirm the accuracy of all Joint
Development Costs and, except as provided in Section 7.8, any other costs shared by the Parties or other
payments made by one Party to the other under this Agreement. Upon reasonable prior notice, such records shall
be available during regular business hours for a period of [***] from the creation of individual records for
examination [***] the Party requesting the audit (the “Auditing Party”), and not more often than [***], by an
independent certified public accountant selected by the Auditing Party and reasonably acceptable to the Party
being audited (the “Audited Party”), for the sole purpose of verifying the accuracy of the financial reports
furnished by the Audited Party pursuant to this Agreement. Any such auditor shall not disclose the Audited
Party’s Confidential Information, except to the extent such disclosure is necessary to verify the accuracy of the
financial reports furnished by that Party or the amount of payments due by MPI or SGI under this Agreement.
Any amounts shown to be [***] within thirty (30) days from the accountant’s report, plus interest (as set forth in
Section 8.9) from the original due date. Any amounts shown to have been [***] within sixty (60) days from the
accountant’s report. The Auditing Party shall bear the full cost of such audit unless such audit discloses an
underpayment of the amount actually owed during the applicable [***] of more than [***], in which case the
Audited Party shall [***].
8.12 Calendar Days. Any payment which becomes due on any day which is not a Business Day shall
instead be due on the next Business Day.
ARTICLE 9
INTELLECTUAL PROPERTY MATTERS
9.1 Ownership of Inventions. Each Party shall own any inventions made solely by its or its Affiliates’
employees, agents, or independent contractors in the course of conducting its activities under this Agreement,
together with all intellectual property rights therein (“Sole Inventions”). The Parties shall jointly own any
inventions that are made jointly by employees, agents, or independent contractors of SGI or its Affiliates, on the
one hand, and MPI or its Affiliates, on the other hand, in the course of performing activities under this
Agreement, together with all intellectual property rights therein (“Joint Inventions”). Notwithstanding the
above, if any Sole Invention made by [***] or Joint Invention relates primarily to or is derived directly from the
[***] (but not derived from the Licensed Product more generally) (a “[***]”), (i) [***] shall, and hereby does,
assign to [***] its interest in such [***] (which shall thereafter be [***]), (ii) subject to Section 9.3, [***] shall
have the sole right and authority to prepare, file, prosecute and maintain Patents claiming such assigned
inventions and they shall be considered [***]. Inventorship shall be determined in accordance with U.S. patent
laws. Sole Inventions owned by MPI and MPI’s interest in Joint Inventions shall be included in the MPI
Technology, as applicable. Sole Inventions owned by SGI and SGI’s interest in Joint Inventions shall be included
in the Licensed Technology, as applicable.
9.2 Disclosure of Inventions. Each Party shall promptly disclose to the other any invention disclosures, or
other similar documents, submitted to it by its or its Affiliates’ employees, agents or independent contractors
describing inventions that are Joint Inventions or Sole Inventions, and all Information relating to such Joint
Inventions or Sole Inventions.
9.3 Prosecution of Patents.
(a) SGI Patent Rights. SGI shall use reasonable efforts to prepare, file, prosecute and maintain the
SGI Patent Rights in coordination with MPI, as set forth below.
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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(i) SGI Platform Patent Rights. Except as otherwise provided in this Section 9.3(a)(i), SGI shall
have the sole right and authority to prepare, file, prosecute and maintain the SGI Platform Patent Rights
on a worldwide basis. [***] of such filing, prosecution and maintenance shall be [***]. SGI shall
provide MPI reasonable opportunity to review and comment on such efforts regarding such SGI
Platform Patent Rights in the Licensed Territory applicable to the Licensed Product, including by
providing MPI with a copy of material communications from any patent authority in the Licensed
Territory regarding such SGI Platform Patent Rights, and by providing at least one draft of any material
filings or responses substantially in the form to be filed with such patent authorities in advance of
submitting such filings or responses. SGI shall consider MPI’s comments in good faith.
(ii) SGI Product Patent Rights. Except as otherwise provided in this Section 9.3(a)(ii), SGI shall
have the sole right and authority to prepare, file, prosecute and maintain the SGI Product Patent Rights
on a worldwide basis. [***] of such filing, prosecution and maintenance shall [***]; provided,
however, that if MPI elects not to [***] with respect to an SGI Product Patent Right in a country(ies) in
the Licensed Territory, it shall notify SGI, [***]. SGI shall provide MPI reasonable opportunity to
review and comment on such efforts regarding such SGI Product Patent Rights in the Licensed
Territory, including by providing MPI with a copy of material communications from any patent
authority in the Licensed Territory regarding such SGI Product Patent Rights, and by providing drafts
of any material filings or responses to be made to such patent authorities in advance of submitting such
filings or responses. SGI shall consider MPI’s comments in good faith. If SGI determines in its sole
discretion to abandon or not maintain any SGI Product Patent Right in any country in the Licensed
Territory (other than any SGI Product Patent Right to which [***]), then SGI shall provide MPI with
written notice of such determination within a period of time reasonably necessary to allow MPI to
assume responsibility for the filing, prosecution and maintenance of such SGI Product Patent Right in
such country. In the event MPI provides written notice to SGI expressing its interest in such SGI
Product Patent Right
the filing,
prosecution and maintenance of such SGI Product Patent Right in such country on SGI’s behalf, and
[***]. Notwithstanding the foregoing, if SGI determines that continued prosecution of any SGI Product
Patent Right in any country in the Licensed Territory will unreasonably affect SGI’s ability to
prosecute and obtain patent protection for any SGI Platform Patent Right in the country in the Licensed
Territory, SGI shall have the right, after reasonable consultation with MPI, to [***]. For the avoidance
of doubt, SGI shall have the unilateral right, [***], to [***].
in such country, MPI shall
thereafter have the right
to direct
(b) MPI Patent Rights. Except as otherwise provided in this Section 9.3(b), MPI shall have the sole
right and authority to prepare, file, prosecute and maintain the MPI Patent Rights (other than Joint Patents)
on a worldwide basis. The [***], with SGI responsible for such [***], and MPI responsible for such [***];
provided, however, that if SGI elects not to [***], it shall notify MPI and such [***]. MPI shall provide SGI
reasonable opportunity to review and comment on such efforts regarding the MPI Collaboration Patent
Rights in the SGI Territory, including by providing SGI with a copy of material communications from any
patent authority regarding such MPI Collaboration Patent Rights, and by providing drafts of any material
filings or responses to be made to such patent authorities in advance of submitting such filings or responses.
If MPI determines in its sole discretion to abandon or not maintain any MPI Collaboration Patent Rights in
any country in the SGI Territory, then MPI shall provide SGI with written notice of such determination
within a period of time reasonably necessary to allow SGI to assume responsibility for the filing,
prosecution and maintenance of such MPI Collaboration Patent Rights. In the event SGI provides written
notice to MPI expressing its interest in such MPI Collaboration Patent Rights, SGI shall thereafter have the
right to direct the filing, prosecution and maintenance of such MPI Collaboration Patent Rights on MPI’s
behalf, and the costs of such filing, prosecution and maintenance shall be borne by SGI.
(c) Joint Patents. Except as otherwise provided in this Section 9.3(c), SGI shall have the primary right
and authority to prepare, file, prosecute and maintain the Patents included in the Joint Inventions (“Joint
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
-39-
Patents”) on a worldwide basis. The [***], with SGI responsible for such [***], and MPI responsible for
such [***], unless the Parties otherwise [***]. SGI shall provide MPI with the reasonable opportunity to
review and comment on such efforts regarding such Joint Patents in the Territory, including by providing
MPI with a copy of material communications from any patent authority in such country(ies) regarding such
Joint Patents, and by providing drafts of any material filings or responses to be made to such patent
authorities in advance of submitting such filings or responses, and SGI shall give due consideration to any
reasonable comments made by MPI. If SGI determines in its sole discretion to abandon or not maintain any
Joint Patent(s) in any country(ies) of the world, then SGI shall provide MPI with written notice of such
determination within a period of time reasonably necessary to allow MPI to assume responsibility for the
filing, prosecution and maintenance of such Joint Patents. In the event MPI provides written notice to SGI
expressing its interest in such Joint Patents, MPI shall thereafter have the right to direct the filing,
prosecution and maintenance of such Joint Patents on the Parties’ behalf, and [***].
(d) Cooperation in Prosecution. Each Party shall provide the other Party all reasonable assistance and
cooperation in the Patent prosecution efforts provided above in this Section 9.3, including providing any
necessary powers of attorney and executing any other required documents or instruments for such
prosecution, as well as further actions as set forth below.
(i) The Parties shall respectively prepare, file, maintain and prosecute the SGI Patent Rights, MPI
Patent Rights and Joint Patents as set forth in this Section 9.3. As used herein, “prosecution” of such
Patents shall include, without limitation, all communication and other interaction with any patent office
or patent authority having jurisdiction over a patent application throughout the world in connection
with pre- and post-grant proceedings.
(ii) All communications between the Parties relating to the preparation, filing, prosecution or
maintenance of the SGI Patent Rights, MPI Patent Rights and Joint Patents, including copies of any
draft or final documents or any communications received from or sent to patent offices or patenting
authorities with respect to such Patents, shall be considered Confidential Information of both Parties
(provided, however,
to MPI Patent Rights shall be
considered Confidential Information of MPI) and subject to the confidentiality provisions of Article 12.
that communications (if any) with respect
(iii) Assignments in the Patents claiming Sole Inventions or Joint Inventions shall be effected as
follows:
(1) employees or agents of MPI or its Affiliates that are properly named as inventors on any
Patents claiming a Sole Invention or Joint Invention shall assign their interest in such Patents to
MPI; and
(2) employees or agents of SGI or its Affiliates that are properly named as inventors on any
Patents claiming a Sole Invention or Joint Invention shall assign their interest in such Patents to
SGI.
9.4 Patent Term Extensions. The JSC will discuss and recommend for which, if any, of the Patents within
the SGI Patent Rights, MPI Collaboration Patent Rights and Joint Patents in the Licensed Territory the Parties
should seek Patent Term Extensions in the Licensed Territory. [***]. [***]. All filings for such extensions shall
be made by the Party Controlling such Patent or, in the case of Joint Patents, by the Party responsible for filing,
prosecuting and maintaining such Joint Patents in accordance with Section 9.3(c). The Party that does not apply
for an extension hereunder will cooperate fully with the other Party in making such filings or actions, for
example and without limitation, making available all required regulatory data and information and executing any
required authorizations to apply for such Patent Term Extension. [***].
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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9.5 Infringement of Patents by Third Parties.
(a) Notification. Each Party shall promptly notify the other Party in writing of any existing or
threatened infringement of the SGI Patent Rights, MPI Collaboration Patent Rights or Joint Patents of which
it becomes aware, shall provide all evidence in such Party’s possession demonstrating such infringement,
and share with the other Party all information available to it regarding such alleged infringement.
(b) Infringement of SGI Patent Rights.
(i) SGI shall have the first right, but not the obligation, to initiate a suit or take other appropriate
action that it believes is reasonably required to protect (i.e., prevent or abate actual or threatened
infringement or misappropriation of) or otherwise enforce SGI Platform Patent Rights anywhere in the
world or SGI Product Patent Rights in the SGI Territory, [***].
(ii) With respect to any alleged infringement of SGI Platform Patent Rights in the Licensed
Territory based on the making, using, selling, offering for sale or importing a product targeting CD30
(“CD30 Product Activities”), SGI shall have a period of [***] after the first notice under
Section 9.5(a) to elect to enforce SGI Platform Patent Rights against such infringement in the Licensed
Territory. In the event SGI does not so elect in the Licensed Territory, SGI shall so notify MPI in
writing of its decision and its reasons for not electing to file suit, and in such notice, notify MPI
whether MPI is permitted to initiate a suit or take other appropriate action to enforce such SGI Platform
Patent Rights in the Licensed Territory against such infringement, in which case MPI may, in its
discretion, initiate a suit or take other appropriate action to enforce such SGI Platform Patent Rights in
the Licensed Territory at [***]. In this case, SGI shall take appropriate actions in order to enable MPI
to commence a suit or take the actions set forth in the preceding sentence. [***].
(iii) MPI shall have the first right, but not the obligation, to initiate a suit or take other appropriate
action that it believes is reasonably required to protect (i.e., prevent or abate actual or threatened
infringement or misappropriation of) or otherwise enforce SGI Product Patent Rights in the Licensed
Territory against allegedly infringing CD30 Product Activities, [***]. In this case, SGI shall take
appropriate actions in order to enable MPI to commence a suit or take the actions set forth in the
preceding sentence. MPI shall have a period of [***] after the first notice under Section 9.5(a) to elect
to enforce such SGI Product Patent Rights against such infringement in the Licensed Territory. In the
event MPI does not so elect, MPI shall so notify SGI in writing, and SGI may, in its discretion, initiate
a suit or take other appropriate action to enforce such SGI Product Patent Rights in the Licensed
Territory against such infringement [***]. In this case, MPI shall take appropriate actions in order to
enable SGI to commence a suit or take the actions set forth in the preceding sentence.
(c) Infringement of MPI Patents.
(i) MPI shall have the first right, but not the obligation, to initiate a suit or take other appropriate
action that it believes is reasonably required to protect (i.e., prevent or abate actual or threatened
infringement or misappropriation of) or otherwise enforce MPI Non-Collaboration Patent Rights
anywhere in the world or MPI Collaboration Patent Rights in the Licensed Territory at its own cost and
expense.
(ii) With respect to any alleged infringement of MPI Collaboration Patent Rights in the Licensed
Territory based on CD30 Product Activities, MPI shall have a period of [***] after the first notice
under 9.5(a) to elect to enforce such MPI Collaboration Patent Rights against such infringement in the
Licensed Territory. In the event MPI does not so elect, MPI shall so notify SGI in writing, and SGI
may, in its discretion, initiate a suit or take other appropriate action to enforce such MPI Collaboration
Patent Rights in the Licensed Territory against such CD30 Product Activities, [***]. In this case, MPI
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
-41-
shall take appropriate actions in order to enable SGI to commence a suit or take the actions set forth in
the preceding sentence.
(iii) SGI shall have the first right, but not the obligation, to initiate a suit or take other appropriate
action that it believes is reasonably required to protect (i.e., prevent or abate actual or threatened
infringement or misappropriation of) or otherwise enforce MPI Collaboration Patent Rights in the SGI
Territory against allegedly infringing CD30 Product Activities, [***]. SGI shall have a period of [***]
after the first notice under 9.5(a) to elect to enforce such MPI Collaboration Patent Rights against such
infringement in the SGI Territory. In the event SGI does not so elect, SGI shall so notify MPI in
writing, and MPI may, in its discretion, initiate a suit or take other appropriate action to enforce such
MPI Collaboration Patent Rights in the SGI Territory against such infringement [***]. In this case, SGI
shall take appropriate actions in order to enable MPI to commence a suit or take the actions set forth in
the preceding sentence.
(d) Infringement of Joint Patents. If a Third Party infringes any Joint Patents, the Parties shall
discuss such infringement and SGI and MPI shall have the joint right, but neither Party shall be obligated, to
initiate a suit or take other appropriate action that one or both Parties believe is reasonably required to
protect (i.e., prevent or abate actual or threatened infringement or misappropriation of) or otherwise enforce
such Joint Patents against such infringement. If both Parties agree to so enforce such Joint Patents, they
shall be jointly responsible for, and [***] of any suit brought by them and shall [***]. If one Party elects not
to enforce such Joint Patents against such infringement, then the other Party shall have the right, but not the
obligation, to take action to enforce such Joint Patents against such infringement [***].
(e) Cooperation. Each Party shall provide to the Party enforcing any such rights under this Section 9.5
reasonable assistance in such enforcement, at such enforcing Party’s request [***], including joining such
action as a party plaintiff if required by applicable Law to pursue such action. Except with respect to the
MPI Non-Collaboration Patent Rights, the enforcing Party shall keep the other Party regularly informed of
the status and progress of such enforcement efforts, shall reasonably consider the other Party’s comments on
any such efforts, and shall seek consent of the other Party in any important aspects of such enforcement
including, without
limitation, determination of litigation strategy, filing of important papers to the
competent court, which consent shall not be unreasonably withheld or delayed.
(f) Separate Representation. The Party not bringing an action with respect to an infringement in the
Licensed Territory under this Section 9.5 shall be entitled to separate representation in such matter by
counsel of its own choice and [***], but such Party shall at all times cooperate fully with the Party bringing
such action.
(g) Allocation of Recoveries. If either Party recovers monetary damages from any Third Party in a suit
or action brought under Section 9.5(b) or Section 9.5(c), whether such damages result from the infringement
of SGI Patent Rights or MPI Collaboration Patent Rights, such recovery shall be allocated (i) [***]; and
(ii) [***]; provided, however, that, (A) with respect to any such suit or action brought by MPI pursuant to
Section 9.5(b)(ii) or 9.5(b)(iii), the amount of such remainder shall be [***]; (B) with respect to any such
suit or action brought by SGI pursuant to Section 9.5(b)(iii), the amount of such remainder shall be [***];
and (C) with respect to any such suit or action brought by SGI pursuant to Section 9.5(b)(ii), SGI shall
[***], provided, however, that if [***].
9.6 Infringement of Third Party Rights in the Licensed Territory.
(a) Notice. If any Licensed Product manufactured, used or sold by either Party, its Affiliates, licensees
or sublicensees becomes the subject of a Third Party’s claim or assertion of infringement of a Patent granted
by a jurisdiction within the Licensed Territory or other jurisdictions where the Licensed Product is
manufactured, the Party first having notice of the claim or assertion shall promptly notify the other Party,
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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the Parties shall agree on and enter into an “identity of interest agreement” wherein such Parties agree to
their shared, mutual interest in the outcome of such potential dispute, and thereafter, the Parties shall
promptly meet to consider the claim or assertion and the appropriate course of action.
(b) Defense. Each Party shall have the first right, but not the obligation, to defend any such Third Party
claim or assertion of infringement of a Patent brought against such Party as described in subsection
(a) above, at such Party’s expense. If such Party does not commence actions to defend such claim within
[***] after it receives notice thereof (or within [***] after it should have given notice thereof to the other
Party as required by Section 9.6(a)), then to the extent allowed by applicable Laws, such other Party shall
have the right, but not the obligation, to control the defense of such claim by counsel of its choice, at such
other Party’s expense. The non-defending Party shall reasonably cooperate with the Party conducting the
defense of the claim or assertion, including, if required to conduct such defense, furnishing a power of
attorney.
(c) Settlement. Each Party shall have an equal right to participate in any settlement discussions that are
held with Third Parties described in this Section 9.6, and neither Party shall enter into any settlement of any
claim described in this Section 9.6 that materially adversely affects the other Party’s rights or interests
without such other Party’s written consent, which consent shall not be unreasonably withheld or delayed.
9.7 Patent Invalidity Claim. Each Party shall promptly notify the other Party in writing of any legal or
administrative action by any Third Party against a MPI Collaboration Patent Right, SGI Patent Right or Joint
Patent Right of which it becomes aware, including any nullity, revocation, reexamination or compulsory license
proceeding. Responsibility for defending against any such action shall be determined in the same manner as
enforcement of the relevant Patent Rights pursuant to Section 9.5.
9.8 Patent Marking. To the extent required by Law in order to protect Patent rights, (a) MPI (or its
Affiliate or sublicensee) shall mark Licensed Products marketed and sold by MPI (or its Affiliate or sublicensee)
hereunder with appropriate patent numbers or indicia of SGI Patent Rights at SGI’s request, and (b) SGI (or its
Affiliate or sublicensee) shall mark Licensed Products marketed and sold by SGI (or its Affiliate or sublicensee)
hereunder with appropriate patent numbers or indicia of MPI Patent Rights at MPI’s request.
9.9 License Registration. Wherever applicable, for each SGI Patent Right in the Licensed Territory, SGI
shall register MPI’s exclusive license to such SGI Patent Right before the applicable patent authority, [***]. In
addition, SGI shall allow MPI to file appropriate information with the Regulatory Authorities in the Licensed
Territory listing any SGI Patents or Joint Patents in the orange book equivalent, if any, as a patent relating to the
Licensed Product.
9.10 Trademarks. Both Parties shall use the same brand name and associated trademarks for Licensed
Products to create a worldwide brand for Licensed Products unless a Party has cause to use a different brand
name (such as for regulatory or Third Party infringement reasons) in its territory and informs the JSC thereof.
Neither Party shall, without the other Party’s consent, use any trademarks that include, in whole or part, any
corporate logo or name of the other Party or marks confusingly similarly thereto, in connection with such Party’s
marketing or promotion of the Licensed Product, except as otherwise agreed by the JCC or JSC or as otherwise
required by applicable Law. Except as otherwise agreed by the JCC or JSC, (a) SGI shall be responsible for the
selection, registration, maintenance and defense of all trademarks for use in connection with the sale or
marketing of the Licensed Product in the SGI Territory at [***], and SGI shall own such trademarks, and (b) MPI
shall be responsible for the selection, registration, maintenance and defense of all trademarks for use in
connection with the sale or marketing of the Licensed Product in the Licensed Territory at [***], and MPI shall
own such trademarks. Subject to applicable Laws, and to the extent agreed upon by the JDC, any development
materials used by a Party (i.e., abstracts, journal materials and listing of clinical studies) relating to the Licensed
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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Product shall include the other Party’s name and a trademark owned by and designated by such other Party, and
shall display the names and trademarks of both Parties in equal prominence. To the extent a Party reasonably
requests to use the other Party’s trademarks, including the Party’s name and trademarks (including any use of
SGI’s name and trademarks by MPI pursuant to the preceding sentence), such other Party shall provide a
non-exclusive, worldwide, royalty-free, fully-paid, license to such trademarks to the requesting Party solely for
the purpose of fulfilling its obligations under this Agreement, subject to the licensed Party complying with the
licensing Party’s trademark guidelines and quality control provisions. Such license shall be sublicensable only to
such Party’s Affiliates, and its permitted Distributors and commercial sublicensees necessary to Commercialize a
Licensed Product or otherwise fulfill its obligations hereunder.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
10.1 Mutual Representations and Warranties. Each Party hereby represents, warrants, and covenants (as
applicable) to the other Party as follows:
(a) Corporate Existence and Power. It is a company or corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction in which it is incorporated, and has full corporate
power and authority and the legal right to own and operate its property and assets and to carry on its
business as it is now being conducted and as contemplated in this Agreement, including, without limitation,
the right to grant the licenses granted by it hereunder.
(b) Authority and Binding Agreement. As of the Effective Date, (i) it has the corporate power and
authority and the legal right to enter into this Agreement and perform its obligations hereunder; (ii) it has
taken all necessary corporate action on its part required to authorize the execution and delivery of the
Agreement and the performance of its obligations hereunder; and (iii) the Agreement has been duly
executed and delivered on behalf of such Party, and constitutes a legal, valid, and binding obligation of such
Party that is enforceable against it in accordance with its terms.
(c) No Conflict; Covenant. It is not a party to any agreement that would materially prevent it from
granting the rights granted to the other Party under this Agreement or performing its obligations under the
Agreement.
(d) No Debarment. In the course of the Development of Licensed Products, such Party has not used,
prior to the Effective Date, and shall not use, during the Term, any employee or consultant who has been
debarred by any Regulatory Authority, or, to the best of such Party’s knowledge, is the subject of debarment
proceedings by a Regulatory Authority.
10.2 Additional Representations, Warranties and Covenants of SGI. SGI represents, warrants and
covenants to MPI as follows:
(a) Non-Infringement of SGI Patent Rights by Third Parties. As of the Effective Date, to SGI’s
Best Knowledge, there are no activities by Third Parties that would [***].
(b) No Claims of Third Party Rights. To SGI’s Best Knowledge as of the Effective Date, (i) (A) the
Development, use and Manufacture of the Licensed Product in the Territory [***], and (B) [***], and
(ii) [***].
(c) Ownership. As of the Effective Date, SGI owns or has rights to the Licensed Technology,
[***].SGI shall [***]).
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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(d) Validity and Enforceability. To SGI’s Best Knowledge, the issued patents included in the SGI
Patent Rights and SGI Third Party Patent Rights as of the Effective Date are valid and enforceable. To
SGI’s Best Knowledge as of the Effective Date, [***]. [***]. To SGI’s Best Knowledge, [***].
(e) No Action or Claim. As of the Effective Date, there are no actual, pending or, to SGI’s Best
Knowledge, [***].
(f) Completeness. Exhibit A includes a complete and correct list, in all material respects, of all SGI
Patent Rights existing as of the Effective Date and to SGI’s Best Knowledge, all SGI Third Party Patent
Rights existing as of the Effective Date.
(g) IP Disclosure. SGI has provided MPI with access to (i) [***] and (ii) [***].
(h) Third Party Agreements. Exhibit E sets forth a true and complete list of (i) all Existing Third
Party Agreements (including all royalties and milestones to be paid thereunder) and (ii) all material
agreements in effect as of the Effective Date between SGI or its Affiliates, on the one hand, and any Third
Party manufacturer with respect to the antibody, drug-linker, conjugation and fill/finish of the Licensed
Product (or any component thereof, other than raw materials), on the other hand. SGI has, prior to the
Effective Date, provided MPI with access to true and complete copies of each of the agreements listed in
Exhibit E and any prior agreements for the manufacture of the License Product where [***]. As of the
Effective Date, to SGI’s Best Knowledge, [***]. As of the Effective Date, [***]. As of the Effective Date,
the agreements listed in Exhibit E are in full force and effect. SGI shall use commercially reasonable efforts
to maintain and perform its obligations under the Existing Third Party Agreements and the other agreements
listed in Exhibit E in full force and effect during the Term and [***].
(i) Manufacturing Agreements. Except as has been specifically disclosed to MPI or included in Third
Party manufacturing agreements provided to MPI prior to the Effective Date, [***]. SGI shall not amend
any such agreement in a manner that would [***]. As of the Effective Date, the Manufacturing process for
the Licensed Product [***].
(j) Compliance with Laws. The Development, use and Manufacture of Licensed Products in the
Territory on or prior to the Effective Date has been conducted by SGI and its Affiliates and its and their
subcontractors, in compliance (in all material respects) with all applicable Laws ([***]). To SGI’s Best
Knowledge, neither SGI nor any of its Affiliates, nor any of their respective officers, employees or agents,
[***].
(k) Product Disclosure. As of the Effective Date, SGI has provided MPI with all material information
in SGI’s or its Affiliates’ possession or control [***].
10.3 Disclaimer. MPI understands that the Licensed Products are the subject of ongoing Development by
SGI and that SGI cannot assure the safety, usefulness or commercial potential of Licensed Products. In addition,
SGI makes no warranties except as expressly set forth in this Article 10 concerning the Licensed Products and
Licensed Technology.
10.4 No Other Representations or Warranties. EXCEPT AS EXPRESSLY STATED IN THIS ARTICLE
10, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY
RIGHTS, IS MADE OR GIVEN BY OR ON BEHALF OF A PARTY. ALL IMPLIED REPRESENTATIONS
AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY
EXPRESSLY EXCLUDED.
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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ARTICLE 11
INDEMNIFICATION
11.1 Indemnification by SGI. SGI shall defend, indemnify, and hold MPI and its Affiliates and MPI’s and
its Affiliates’ officers, directors, employees, and agents (collectively, the “MPI Indemnitees”) harmless from
and against any and all Third Party claims, suits, proceedings, damages, expenses (including court costs and
reasonable attorneys’ fees and expenses), and recoveries (collectively, “Claims”) to the extent that such Claims
arise out of, are based on, or result from (a) the Commercialization of Licensed Products by or on behalf of SGI
or its Affiliates, or their respective Distributors or licensees in the SGI Territory; (b) any SGI Independent
Activities; (c) a breach of any of SGI’s representations, warranties, or obligations under the Agreement; (d) the
willful misconduct or negligent acts of SGI, its Affiliates, or the officers, directors, employees, or agents of SGI
or its Affiliates under this Agreement; or (e) the development, manufacture, use or commercialization of any
[***] by or on behalf of SGI or its Affiliates, or their respective Distributors or licensees (except as otherwise
provided in any written agreement between the Parties). The foregoing indemnity obligation shall not apply to
the extent that the MPI Indemnitees fail to comply with the indemnification procedures set forth in Section 11.3
and SGI’s defense of the relevant Claims is prejudiced by such failure, or to the extent that any Claim arises
from, is based on, or results from (i) a breach of any of MPI’s representations, warranties, or obligations under
the Agreement; or (ii) the willful misconduct or negligent acts of MPI or its Affiliates, or the officers, directors,
employees, or agents of MPI or its Affiliates.
11.2 Indemnification by MPI. MPI shall defend, indemnify, and hold SGI and its Affiliates and SGI’s and
its Affiliates’ officers, directors, employees, and agents (collectively, the “SGI Indemnitees”) harmless from
and against any and all Claims to the extent that such Claims arise out of, are based on, or result from (a) the
Commercialization of the Licensed Products by or on behalf of MPI or its Affiliates, or their respective
Distributors or sublicensees in the Licensed Territory; (b) any MPI Independent Activities, (c) a breach of any of
MPI’s representations, warranties, or obligations under the Agreement; (d) the willful misconduct or negligent
acts of MPI or its Affiliates, or the officers, directors, employees, or agents of MPI or its Affiliates under this
Agreement; or (e) the development, manufacture, use or commercialization of any [***] by or on behalf of MPI
or its Affiliates, or their respective Distributors or licensees (except as otherwise provided in any written
agreement between the Parties). The foregoing indemnity obligation shall not apply to the extent that the SGI
Indemnitees fail to comply with the indemnification procedures set forth in Section 11.3 and MPI’s defense of
the relevant Claims is prejudiced by such failure, or to the extent that any Claim arises from, is based on, or
results from (i) a breach of any of SGI’s representations, warranties, or obligations under the Agreement; or
(ii) the willful misconduct or negligent acts of SGI or its Affiliates, or the officers, directors, employees, or
agents of SGI or its Affiliates.
11.3 Indemnification Procedures. A Party claiming indemnity under this Article 11 (the “Indemnified
Party”) shall give written notice to the Party from whom indemnity is being sought (the “Indemnifying Party”)
promptly after learning of such Claim. The Indemnified Party shall provide the Indemnifying Party with
reasonable assistance, at the Indemnifying Party’s expense, in connection with the defense of the claim for which
indemnity is being sought. The Indemnifying Party shall have the right to assume and conduct the defense of the
claim with counsel of its choice; provided the Indemnified Party may participate in and monitor such defense
with counsel of its own choosing [***]; provided further, that the Indemnifying Party shall obtain the prior
written consent (such consent to not be unreasonably withheld, delayed or conditioned) of any such Indemnified
Party as to any settlement which would materially diminish or materially adversely affect the scope, exclusivity
or duration of any Patents licensed under this Agreement, would require any payment by such Indemnified Party,
would require an admission of legal wrongdoing in any way on the part of an Indemnified Party, would effect an
amendment of this Agreement or would otherwise materially adversely affect the Indemnified Party. So long as
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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the Indemnifying Party is actively defending the claim in good faith, the Indemnified Party shall not settle any
such claim without the prior written consent of the Indemnifying Party. If the Indemnifying Party does not
assume and conduct the defense of the claim as provided above, (a) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with respect to the claim in any manner the
Indemnified Party may deem reasonably appropriate (and the Indemnified Party need not consult with, or obtain
any consent from, the Indemnifying Party in connection therewith), and (b) the Indemnifying Party will remain
responsible to indemnify the Indemnified Party as provided in this Article 11.
11.4 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY
SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES ARISING FROM OR
RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE
POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS
SECTION 11.4 IS INTENDED TO OR SHALL LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS
OR OBLIGATIONS OF ANY PARTY UNDER SECTION 11.1 OR 11.2, OR DAMAGES AVAILABLE FOR
A PARTY’S BREACH OF (A) CONFIDENTIALITY OBLIGATIONS IN ARTICLE 12,
(B) THE
EXCLUSIVE OR CO-EXCLUSIVE LICENSES GRANTED TO THE OTHER PARTY PURSUANT TO
SECTION 2.1, OR (C) SECTION 2.5.
11.5 Insurance. Each Party shall secure and maintain in full force and effect throughout the term of this
Agreement (and for at least [***] thereafter for claims made coverage), insurance with coverage and minimum
policy limits set forth as follows:
(a) [***];
(b) [***];
(c) [***]; and
(d) [***].
Notwithstanding the foregoing, MPI may elect to self-insure all or a portion of its insurance obligations set forth
herein. During the period that this Section 11.5 requires a Party to secure and maintain insurance in full force and
effect, such Party shall furnish to the other Party, upon request, a certificate from an insurance carrier (having a
[***]) demonstrating the insurance requirements set forth above, naming the other Party as an additional insured
(except on the policy for Workers’ Compensation), or in the event of MPI’s self-insurance, MPI shall provide
written evidence of such self-insurance.
During the period that this Section 11.5 requires a Party to secure and maintain insurance in full force and effect,
such Party shall provide that [***] advance written notice will be given to the other Party of any material change
or cancellation in coverage or limits.
ARTICLE 12
CONFIDENTIALITY
12.1 Confidentiality. Except to the extent expressly authorized by this Agreement or otherwise agreed in
writing by the Parties, during the Term and for a period of [***] thereafter ([***]), each Party agrees that it shall
keep confidential and shall not publish or otherwise disclose and shall not use for any purpose other than as
provided for in this Agreement any of the other Party’s Confidential Information except for that portion of such
information or materials that the receiving Party can demonstrate by competent written proof:
(a) was already known to the receiving Party or its Affiliate, other than under an obligation of
confidentiality, at the time of disclosure by the other Party;
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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(b) was generally available to the public or otherwise part of the public domain at the time of its
disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of the public domain after its disclosure
and other than through any act or omission of the receiving Party in breach of this Agreement;
(d) was disclosed, other than under an obligation of confidentiality, to the receiving Party or its
Affiliate by a Third Party who has a legal right to make such disclosure; or
(e) was independently discovered or developed by the receiving Party or its Affiliate without the aid,
application, or use of the disclosing Party’s Confidential Information.
12.2 Authorized Disclosure. Each Party may disclose Confidential Information belonging to the other Party
to the extent such disclosure is reasonably necessary in the following situations:
(a) regulatory submissions and other filings with Governmental Authorities, including filings with the
Securities and Exchange Commission or other relevant exchange on which such Party is listed;
(b) prosecuting or defending litigation;
(c) filing, prosecuting, maintaining or enforcing Patents to the extent expressly provided in this
Agreement;
(d) complying with applicable Laws, including regulations promulgated by securities agencies, court
order, and administrative subpoena or order;
(e) disclosure to its employees, agents, consultants, other persons, and any bona fide Third Party
sublicensees and Distributors only on a need-to-know basis and solely as necessary in connection with the
performance of or as otherwise contemplated by this Agreement, provided that in each case the recipient of
such Confidential Information must agree to be bound by similar obligations of confidentiality and non-use
at least as equivalent in scope as those set forth in this Article 12 prior to any such disclosure and with
respect to any Confidential Information received from a Third Party, subject to any specific provisions in an
agreement with such Third Party governing disclosure of such information, provided that the receiving Party
has first been notified of such provisions and agreed to be bound by them; and
(f) disclosure of the material financial terms of this Agreement to any actual or bona fide potential
investor, investment banker, acquiror, merger partner, licensee, sublicensee or other potential financial or
collaborative partner; provided, that in connection with such disclosure, the disclosing Party shall use all
reasonable efforts to inform each disclosee of the confidential nature of such Confidential Information and
obtain from each recipient of such Confidential Information an agreement similar in scope to the restrictions
set forth herein regarding Confidential
Information and to treat such Confidential Information as
confidential.
Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party’s
it will, except where
Confidential Information pursuant
impracticable, give reasonable advance notice to the other Party of such disclosure and use best efforts to secure
confidential treatment of such information. In any event, each Party agrees to take all reasonable action to avoid
disclosure of the other Party’s Confidential Information hereunder.
to clause (a) through (c) of this Section 12.2,
12.3 Publicity; Terms of Agreement.
(a) The Parties agree that the material terms of this Agreement are included within the Confidential
Information of both Parties, subject to the special authorized disclosure provisions set forth below in this
Section 12.3 or in Section 12.2. The Parties shall issue a joint press release regarding the execution of this
Agreement in the form set forth on Exhibit B and on the date mutually agreed by the Parties, which date
shall not be later than [***] after the Effective Date.
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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(b) After release of such press release, if either Party desires to make a public announcement
concerning the material terms of this Agreement or either Party’s activities under the Global Product
Development Plan, such Party shall give reasonable prior advance notice of the proposed text of such
announcement to the other Party for its prior review and approval (except as otherwise provided herein),
such approval not to be unreasonably withheld or delayed. A Party commenting on such a proposed public
announcement shall provide its comments, if any, within [***] after receiving the public announcement for
review. To the extent required by law or by the regulations of the applicable securities exchange upon which
a Party may be listed, such Party shall have the right to make a public announcement concerning the
material terms of this Agreement or either Party’s activities under the Global Product Development Plan,
including public announcements of the achievement of milestones under this Agreement as they are
achieved, and the achievements of MAA or NDA approvals in the Licensed Territory as they occur, as well
as any financial information necessary for its required financial disclosures, including, as applicable, the
amount of milestone payment, royalty revenue and upfront payments, subject only to the review procedure
set forth in the preceding sentences. In relation to the other Party’s review of such an announcement, such
other Party may make specific, reasonable comments on such proposed press release within the prescribed
time for commentary, but shall not withhold its consent to disclosure of the information that the relevant
milestone has been achieved and triggered a payment hereunder, that MAA or NDA approval has occurred
or that such revenue or payments have been earned or received. Notwithstanding the foregoing, except as
disclosed in the joint press release in the form attached as Exhibit B, SGI acknowledges that the Parties
intend to preserve as confidential the royalty rates and royalty tiers under this Agreement, to the extent
disclosure thereof is not required by law or by the regulations of the applicable securities exchange upon
which a Party may be listed, and SGI shall not disclose MPI’s Net Sales without MPI’s prior written
consent. Neither Party shall be required to seek the permission of the other Party to repeat any information
regarding the terms of this Agreement or either Party’s activities under the Global Product Development
Plan that has already been publicly disclosed by such Party, or by the other Party, in accordance with this
Section 12.3.
(c) The Parties acknowledge that each Party may in the future be obligated to file a copy of this
Agreement with the U.S. Securities and Exchange Commission or other applicable entity having regulatory
authority over such Party’s securities (the “SEC”). Such Party shall be entitled to make such a required
filing, provided that it requests confidential treatment of certain commercial terms and technical terms
hereof to the extent such confidential treatment is reasonably available to such Party. In the event of any
such filing, such Party will provide the other Party, a reasonable time prior to filing, with a copy of the
Agreement marked to show provisions for which the filing Party intends to seek confidential treatment and
shall reasonably consider and incorporate the other Party’s comments thereon to the extent consistent with
the legal requirements governing redaction of information from material agreements that must be publicly
filed. Such other Party will as promptly as practical provide any such comments. Each Party recognizes that
applicable Laws and SEC policies and regulations to which the filing Party is and may become subject to
may require such filing Party to publicly disclose certain terms of this Agreement that the other Party may
prefer not be disclosed, and that the filing Party is entitled hereunder to make such required disclosures to
the minimum extent necessary to comply with such Laws and SEC policies and regulations.
12.4 Publications. The JDC shall prepare and approve [***] with respect to the Licensed Product and
results of studies carried out under this Agreement. Neither Party may publish manuscripts (whether peer-
reviewed or not), or give other forms of public disclosure such as abstracts and presentations, of results of studies
carried out under this Agreement, without the opportunity for prior review by the other Party or [***]. A Party
seeking publication shall provide the other Party and the JDC the opportunity to review and comment on any
proposed manuscripts, abstracts, scientific presentations or other similar public disclosures which relate to any
Licensed Product at least [***] prior to their intended submission for publication or presentation. The other Party
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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shall provide the Party seeking publication with its comments in writing, if any, within [***] after receipt of such
proposed manuscripts or presentations. The Party seeking publication shall consider such comments of the other
Party and shall remove any and all of the other Party’s Confidential Information (other than the Joint Results) at
the request of such other Party. In addition, the Party seeking publication shall delay the submission for a period
up to [***] in the event that the other Party can demonstrate reasonable need for such delay, including without
limitation, the preparation and filing of a patent application. If such Party fails to provide its comments to the
Party seeking publication within such [***], such other Party shall be deemed to not have any comments, and the
Party seeking publication shall be free to publish in accordance with this Section 12.4 after the [***] has elapsed.
The Party seeking publication shall provide the other Party a copy of the manuscript at the time of the
submission. The Party seeking publication shall not have the right to publish or present the other Party’s
Confidential Information without prior written consent of the other Party, except as expressly permitted in this
Agreement. With respect to any proposed abstracts, manuscripts or summaries of presentations by investigators
or other Third Parties, such materials shall be subject to review under this Section 12.4 to the extent that SGI or
MPI, as the case may be, has the right and ability (after using reasonable efforts) to do so.
ARTICLE 13
TERM AND TERMINATION
13.1 Term. This Agreement shall become effective on the Effective Date and shall remain in effect until
terminated in accordance with Sections 13.2, 13.3 or 13.4, or by mutual written agreement, or until the expiration
of all payment obligations under Article 8 (the “Term”).
13.2 Unilateral Termination by MPI. MPI shall have the right to terminate this Agreement in its entirety
[***] prior written notice to SGI.
13.3 Termination for Breach. Subject to Section 13.6, each Party shall have the right to terminate this
Agreement upon written notice to the other Party if the other Party materially breaches an obligation under this
Agreement, and, after receiving written notice from the non-breaching Party identifying such material breach in
reasonable detail, fails to cure such material breach (including failure to pay any amounts due hereunder) within
[***] from the date of such notice (which may be extended for an additional [***] if such breach cannot be cured
within such initial [***] period, provided the breaching Party (a) has begun to cure such breach within such
initial [***] period, (b) provides the non-breaching Party with a reasonable plan to cure such breach, and (c) uses
reasonable efforts to implement such plan during such additional [***] period). Notwithstanding anything to the
contrary herein, [***]. If the alleged breaching Party disputes in good faith the existence or materiality of a
breach specified in a notice provided by the other Party, then the non-breaching Party shall not have the right to
terminate this Agreement under this Section 13.3 unless and until an arbitrator or court, in accordance with
Article 14, has determined that the alleged breaching Party has materially breached this Agreement and such
Party fails to cure such breach within [***] following such decision of such arbitrator or court (except to the
extent such breach involves the failure to make a payment when due, which breach must be cured within [***]
following such decision of such arbitrator or court). It is understood and agreed that during the pendency of such
dispute, all of the terms and conditions of this Agreement shall remain in effect and the Parties shall continue to
perform all of their respective obligations hereunder.
13.4 [***]. [***].
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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13.5 Effect of Early Termination of the Agreement. Upon the early termination of this Agreement by
MPI under Section 13.2, or by SGI under Section 13.3 due to MPI’s material uncured breach (whether this
Agreement is terminated in its entirety or with respect to a country(ies)), or Section 13.4, the following shall
apply (in addition to any other rights and obligations under Sections 13.2, 13.3, or 13.4 or otherwise under this
Agreement with respect to such termination or material breach of this Agreement):
(a) Regulatory Materials. To the extent permitted by applicable Laws, [***].
(b) Trademarks. [***].
(c) MPI License. MPI hereby grants to SGI, effective only in event of such termination, an [***]
(i) [***] and (ii) [***]. In addition, for clarity, [***].
(d) Transition Assistance.
(i) MPI shall provide reasonable assistance, [***], as may be reasonably necessary for SGI to
commence or continue Developing, manufacturing and Commercializing the Licensed Products in the
Terminated Countries to the extent MPI is then performing or having performed such activities,
including without
limitation upon request of SGI, using reasonable efforts to (A) transfer any
agreements or arrangements with Distributors, suppliers or vendors which apply solely to the sale or
supply of Licensed Products in the Terminated Countries, and (B) amend any agreement or
arrangements with Distributors, suppliers or vendors which apply to some extent to the sale or supply of
Licensed Products in the Terminated Countries to transfer to SGI the rights solely with respect to
Licensed Products in the Terminated Countries, in each case without requiring the payment of additional
consideration to such Distributor, supplier or vendor.
(ii) In addition, [***], [***] to complete any ongoing clinical studies included in such Global
Product Development Plan, in each case [***] for the Development of the Licensed Product for the
Terminated Countries on or before the later of (A) the [***] of the effective date of such termination of
this Agreement and (B) [***] of the [***] in which this Agreement is so terminated.
(iii) To the extent that MPI or its Affiliate is then Manufacturing Licensed Products for the
Terminated Countries, MPI shall continue to Manufacture, and shall supply to SGI, [***], such Licensed
Products for SGI’s use in the Terminated Countries [***] in order to permit SGI to establish sufficient
manufacturing capacity for Licensed Product
in addition to the
manufacturing capacity that SGI had in place for its use in the SGI Territory. Such period shall be no
more than [***] unless otherwise agreed by the Parties.
in the Terminated Countries,
(e) Remaining Inventories. SGI shall have the right to purchase from MPI, [***], all or part of the
inventory of the Licensed Product held by MPI for the Terminated Countries as of the effective date of such
termination of this Agreement. SGI shall notify [***] after receiving notice from MPI reporting such
inventory as of the date of such termination of this Agreement. If SGI does not exercise such right, then
subject to Article 8 hereof, [***].
13.6 Effects of Material Adverse Breach by SGI.
(a) If MPI has the right to terminate this Agreement pursuant to Section 13.3 due to a Material Adverse
SGI Breach, then MPI may, by written notice to SGI, elect to waive its right to terminate this Agreement
due to the relevant occurrence of such Material Adverse SGI Breach (but shall retain its rights under
Section 13.3 to terminate this Agreement with respect to any other material uncured breach of this
Agreement by SGI) and continue the Agreement, in which case, effective as of the date MPI would have
had the right to terminate this Agreement, [***], and, for the sake of clarity, all other provisions of this
Agreement shall remain in full force and effect without change.
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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(b) “Material Adverse SGI Breach” means (i) [***], (ii) [***], (iii) [***], (iv) [***], (v) [***],
(vi) [***], or (vii) [***].
(c) In the event MPI [***] (i) [***]; or (ii) [***].
13.7 Rights in Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by SGI and
MPI are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code or
any comparable provision of any Law in any other jurisdiction, licenses of right to “intellectual property” as
defined under Section 101 of the U.S. Bankruptcy Code or any comparable provision of any Law in any other
jurisdiction. The Parties agree that each Party, as licensee of such rights under this Agreement, shall retain and
may fully exercise all of its rights and elections under the U.S. Bankruptcy Code or any comparable Law in any
other jurisdiction. The Parties further agree that, in the event of the commencement of a bankruptcy proceeding
by or against a Party under the U.S. Bankruptcy Code or any comparable Law in any other jurisdiction, the other
Party shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual
property and all embodiments of such intellectual property, which,
if not already in such other Party’s
possession, shall be promptly delivered to such other Party (a) upon any such commencement of a bankruptcy
proceeding upon such other Party’s written request therefor, unless such Party elects to continue to perform all of
its obligations under this Agreement, or (b) if not delivered under clause (a), following the rejection of this
Agreement by such Party upon written request therefor by such other Party.
13.8 Survival. The following provisions shall survive any expiration or termination of this Agreement for
the period of time specified (or indefinitely, as applicable): [***]. For the sake of clarity and notwithstanding
anything to the contrary in this Agreement, termination of this Agreement shall be in addition to, and shall not
prejudice, the Parties’ remedies at law or in equity, including the Parties’ ability to receive legal damages and/or
equitable relief with respect to any breach of this Agreement, regardless of whether or not such breach was the
reason for the termination.
ARTICLE 14
DISPUTE RESOLUTION
14.1 Disputes. The Parties recognize that disputes as to certain matters may from time to time arise during
the Term which relate to either Party’s rights and/or obligations hereunder. It is the objective of the Parties to
establish procedures to facilitate the resolution of disputes arising under this Agreement in an expedient manner
by mutual cooperation and without resort to litigation. To accomplish this objective, the Parties agree to follow
the procedures set forth in this Article 14 (except where a different procedure is otherwise specified in this
Agreement) to resolve any controversy or claim arising out of, relating to or in connection with any provision of
this Agreement, if and when a dispute arises under this Agreement.
14.2 Referral to Executive Officers. With respect to disputes arising from or not resolved by the JSC, or
any other disagreement, dispute or claim arising between the Parties, relating to, but not limited to, the
Development of the Licensed Products or otherwise, either Party may, by written notice to the other Party, have
such dispute referred to the Executive Officers for each Party for attempted resolution by good faith efforts,
which efforts shall include at least one in person meeting within [***] after such notice is received. If the
Executive Officers designated by the Parties are not able to resolve such dispute within [***] after such matter is
referred to them, then, except as otherwise specified in this Agreement, the Parties shall try to resolve such
dispute through mediation pursuant to Section 14.3, which mediation may be initiated by either Party at any time
after the conclusion of such [***] period.
14.3 Mediation. Mediation shall be administered by JAMS or another independent mediator as may be
mutually selected by the Parties. The mediation shall take place in [***]. The Parties shall use good faith efforts
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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to resolve any disputes referred to mediation as expeditiously as practicable. If the Parties fail to resolve any such
dispute through mediation within [***] after the initiation thereof, the dispute shall be resolved by binding
arbitration pursuant to Section 14.4.
14.4 Binding Arbitration. Disputes not resolved by mediation pursuant to Section 14.3 shall be resolved
through binding arbitration administered by JAMS, which arbitration may be initiated by either Party at any time
after the conclusion of such period, on the following basis:
(a) The place of arbitration shall be [***].
(b) The arbitration shall be conducted by [***] arbitrators with not less than [***] of relevant
experience in the subject matter of the dispute, one selected by each of the Parties and the third mutually
agreed upon by the respective individuals selected by the Parties.
(c) The arbitration shall be made in accordance with the Comprehensive Arbitration Rules and
Procedures of JAMS then in effect.
(d) The award shall be made in writing, shall be binding on the Parties and may be entered as a
judgment by any court or forum having jurisdiction.
(e) Either Party may apply to the arbitrators for interim injunctive relief until the arbitration award is
rendered or the controversy is otherwise resolved. Further, either Party also may, without waiving any
remedy under this Agreement, seek from any court having jurisdiction any injunctive or provisional relief
necessary to protect the rights or property of such Party pending the arbitration award.
(f) The arbitrators shall have no authority to award punitive or any other type of damages not measured
by a Party’s compensatory damages, except as provided in Section 11.4.
(g) Each Party shall [***] of arbitration.
(h) Except to the extent necessary to confirm an award, as may be required by Law or as may be
required to be disclosed to a Party’s auditors, neither Party nor any arbitrator may disclose the existence,
content, or results of an arbitration without the prior written consent of both Parties.
(i) In no event shall an arbitration be initiated after the date when commencement of a legal or
equitable proceeding based on the dispute, controversy or claim would be barred by the applicable statute of
limitations.
14.5 Patent and Trademark Dispute Resolution. Notwithstanding Sections 14.2, 14.3 and 14.4, any
dispute, controversy or claim relating to the scope, validity, enforceability or infringement of any Patent covering
the Manufacture, use or sale of any Licensed Product or of any trademark rights relating to any Licensed Product
shall be submitted to a court of competent jurisdiction in the Territory in which such Patent or trademark rights
were granted or arose.
14.6 Injunctive Relief. Nothing herein may prevent either Party from seeking preliminary injunction or
temporary restraint order in order to prevent any Confidential Information from being disclosed without
appropriate authorization under this Agreement.
ARTICLE 15
MISCELLANEOUS
15.1 Entire Agreement; Amendment. This Agreement, including the Exhibits hereto, sets forth the
complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations,
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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to the subject matter hereof and
conditions and understandings between the Parties hereto with respect
supersedes, as of the Effective Date, all prior agreements and understandings between the Parties with respect to
the subject matter hereof, including, without limitation, the CDAs (provided, however, that each Party shall
remain subject
to the [***]. There are no covenants, promises, agreements, warranties, representations,
conditions or understandings, either oral or written, between the Parties other than as are set forth herein and
therein. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the
Parties unless reduced to writing and signed by an authorized officer of each Party.
15.2 Force Majeure. Both Parties shall be excused from the performance of their obligations under this
Agreement to the extent that such performance is prevented by Force Majeure and the nonperforming Party
promptly provides notice of the prevention to the other Party. Such excuse shall be continued so long as the
condition constituting Force Majeure continues and the nonperforming Party takes reasonable efforts to remove
the condition. For purposes of this Agreement, “Force Majeure” shall mean conditions beyond the reasonable
control of a Party, including without limitation, an act of God, war, civil commotion, terrorist act, labor strike or
lock-out, epidemic, failure or default of public utilities or common carriers, destruction of production facilities or
materials by fire, earthquake, storm or like catastrophe, and failure of plant or machinery (provided that such
failure could not have been prevented by the exercise of skill, diligence, and prudence that would be reasonably
and ordinarily expected from a skilled and experienced person engaged in the same type of undertaking under the
same or similar circumstances). Notwithstanding the foregoing, a Party shall not be excused from making
payments owed hereunder because of a Force Majeure affecting such Party.
15.3 Notices. Any notice required or permitted to be given under this Agreement shall be in writing, shall
specifically refer to this Agreement, and shall be addressed to the appropriate Party at the address specified
below or such other address as may be specified by such Party in writing in accordance with this Section 15.3,
and shall be deemed to have been given for all purposes (a) when received, if hand-delivered or sent by a
reputable international courier service, or (b) five (5) Business Days after mailing, if mailed by first class
certified or registered airmail, postage prepaid, return receipt requested.
If to SGI:
If to MPI:
Seattle Genetics, Inc.
21823 30th Drive SE
Bothell, WA 98021
Attn: Chief Executive Officer
cc: General Counsel
Millennium Pharmaceuticals, Inc.
40 Landsdowne Street
Cambridge, MA 02139
Attn: Chief Medical Officer and EVP-Commercial
cc: General Counsel
15.4 No Strict Construction; Headings; Interpretation. This Agreement has been prepared jointly and
shall not be strictly construed against either Party. Ambiguities, if any, in this Agreement shall not be construed
against any Party, irrespective of which Party may be deemed to have authored the ambiguous provision. The
headings of each Article and Section in this Agreement have been inserted for convenience of reference only and
are not intended to limit or expand on the meaning of the language contained in the particular Article or Section.
In construing this Agreement, unless expressly specified otherwise, (a) references to Sections and Exhibits are to
sections of, and exhibits to, this Agreement; (b) except where the context otherwise requires, use of either gender
includes the other gender, and use of the singular includes the plural and vice versa; (c) any list or examples
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
-54-
following the word “including” or “include” shall be interpreted without limitation to the generality of the
preceding words; and (d) except where the context otherwise requires, the word “or” is used in the inclusive
sense.
15.5 Assignment.
(a) Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without
the prior written consent of the other, except that a Party may make such an assignment without the other
Party’s consent to (1) an Affiliate(s) of the assigning Party, or (2) a successor to substantially all of the
business of such Party to which this Agreement relates, whether in a merger, sale of stock, sale of assets or
other transaction. Notwithstanding the foregoing, (i) in no event shall either Party assign this Agreement to a
Third Party [***], (ii) in no event shall either Party assign the Licensed Technology or MPI Collaboration
Technology (as applicable) to any Affiliate or Third Party [***], and (iii) in no event shall either Party
assign [***]; provided, however, that, for the sake of clarity, the provisions of clauses (i) through (iii) shall
not apply to a Party’s assignment of only its right to receive payments under this Agreement.
(b) Any successor to or permitted assignee of rights and/or obligations hereunder shall, in writing to
the other Party, expressly assume performance of such rights and/or obligations.
(c) The Licensed Technology, in the case of SGI as assignor or transferor, or the MPI Technology, in
the case of MPI as assignor or transferor, shall exclude any intellectual property which the permitted
assignee or transferee which was a Third Party immediately prior to such assignment owned or otherwise
controlled prior to the effective date of such assignment or transfer of this Agreement to such assignee or
transferee which was not developed in connection with the Licensed Product.
(d) This Agreement shall be binding on the successors to or any permitted assignee of the assigning
Party. Any assignment or attempted assignment by either Party in violation of the terms of this Section 15.5
shall be null, void and of no legal effect.
15.6 [***].
(a) MPI agrees that upon the Effective Date and for a period lasting until the earlier of the [***] of the
Effective Date or the expiration or termination of this Agreement, [***]:
(i) [***];
(ii) [***];
(iii) [***];
(iv) [***];
(v) [***]; or
(vi) [***].
(b) Nothing in this Section 15.6 shall [***].
(c) The prohibitions set forth in the foregoing Section 15.6(a) ([***]) shall not apply to (i) [***]; or
(ii) [***], or (iii) [***].
(d) [***].
(e) For purposes of this Agreement, a [***]:
(i) [***];
(ii) [***];
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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(iii) [***]; or
(iv) [***].
15.7 Change of Control.
(a) Upon a Change of Control of a Party (the “Acquired Party”) (including, for the sake of clarity,
such Party’s assignment of this Agreement pursuant to Section 15.5(a)(1)), (a) the Acquired Party shall
maintain the same level of diligence in performing its obligation under the Global Product Development
Plan after the Change of Control as had been applied prior to the Change of Control, unless otherwise
agreed by the Parties; and (b), [***]. Any option pursuant to clauses (b)(i) or (b)(ii), if applicable, must be
exercised by such other Party by written notice to the Acquired Party no later than [***]. Any option
pursuant to clause b(iii), if applicable, must be exercised by such other Party by written notice to the
Acquired Party no later than [***].
(b) Until the earliest of the [***] of the Effective Date, the expiration or termination of this Agreement
or MPI’s receipt of written notice from SGI that [***], SGI shall notify MPI [***]. [***]. Notwithstanding
anything to the contrary in this Section 15.7(b) above, SGI’s notice under this Section 15.7(b) shall only be
required to include [***]. [***].
15.8 Performance by Affiliates. Each Party may discharge any obligations and exercise any right
hereunder through any of its Affiliates. Each Party hereby guarantees the performance by its Affiliates of such
Party’s obligations under this Agreement, and shall cause its Affiliates to comply with the provisions of this
Agreement in connection with such performance. Any breach by a Party’s Affiliate of any of such Party’s
obligations under this Agreement shall be deemed a breach by such Party, and the other Party may proceed
directly against such Party without any obligation to first proceed against such Party’s Affiliate.
15.9 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and
to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
15.10 Severability. If any one or more of the provisions of this Agreement is held to be invalid or
unenforceable by any court of competent jurisdiction from which no appeal can be or is taken or by the
arbitrators pursuant to an arbitration provided hereunder, the provision shall be considered severed from this
Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good faith
effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives
contemplated by the Parties when entering this Agreement may be realized.
15.11 No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a
particular default or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of
its rights under this Agreement, except with respect to an express written and signed waiver relating to a
particular matter for a particular period of time.
15.12 Independent Contractors. Each Party shall act solely as an independent contractor, and nothing in
this Agreement shall be construed to give either Party the power or authority to act for, bind, or commit the other
Party in any way. Nothing herein shall be construed to create the relationship of partners, principal and agent, or
joint-venture partners between the Parties.
15.13 English Language; Governing Law. This Agreement was prepared in the English language, which
language shall govern the interpretation of, and any dispute regarding, the terms of this Agreement. This
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
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Agreement and all disputes arising out of or related to this Agreement or any breach hereof shall be governed by
and construed under the laws of the State of New York, without giving effect to any choice of law principles that
would require the application of the laws of a different jurisdiction.
15.14 Counterparts. This Agreement may be executed in one (1) or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT IN DUPLICATE ORIGINALS BY
THEIR DULY AUTHORIZED OFFICERS TO BE EFFECTIVE AS OF THE EFFECTIVE DATE.
MILLENNIUM PHARMACEUTICALS, INC.
SEATTLE GENETICS, INC.
By:
/s/ Deborah Dunsire
Name: Deborah Dunsire, M.D.
Title: President and CEO
/s/ Clay B. Siegall
By:
Name: Clay B. Siegall
Title: President and CEO
-Execution Page-
EXHIBIT A
SGI PATENT RIGHTS
[***]
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
EXHIBIT B
PRESS RELEASE
For release: Tuesday, December 15, 2009
12:00 a.m. Pacific Time
SEATTLE GENETICS AND MILLENNIUM: THE TAKEDA ONCOLOGY COMPANY
ANNOUNCE STRATEGIC COLLABORATION FOR NOVEL LATE STAGE
LYMPHOMA PROGRAM BRENTUXIMAB VEDOTIN (SGN-35)
—Seattle Genetics to receive $60 million upfront payment and retain full commercialization rights to
brentuximab vedotin in US and Canada; Takeda Group to commercialize in the rest of the world—
—Seattle Genetics to host conference call December 15, 2009 at 8:30 a.m. Eastern Time—
BOTHELL, Wash., CAMBRIDGE, Mass., and OSAKA, Japan, December 15, 2009 – Seattle Genetics, Inc.
(Nasdaq: SGEN) and Millennium: The Takeda Oncology Company with its parent company Takeda
Pharmaceutical Company Limited (TSE: 4502) today jointly announced that Seattle Genetics and Millennium
have entered into an agreement
to globally develop and commercialize brentuximab vedotin (SGN-35).
Brentuximab vedotin is an antibody-drug conjugate (ADC) targeting CD30 that is in late-stage clinical trials for
the treatment of relapsed and refractory Hodgkin lymphoma (HL) and systemic anaplastic large cell lymphoma
(ALCL).
Data from a pivotal phase II trial of brentuximab vedotin in relapsed or refractory HL, which is fully enrolled, are
expected in the second half of 2010. The trial is being conducted under a special protocol assessment with the
U.S. Food and Drug Administration (FDA) and is designed to provide the basis for regulatory submissions in the
United States and Europe in 2011.
Under the collaboration, Seattle Genetics will receive an upfront payment of $60 million and retains full
commercialization rights for brentuximab vedotin in the United States and Canada. The Takeda Group will have
exclusive rights to commercialize the product candidate in all countries other than the United States and Canada.
Seattle Genetics is entitled to receive progress- and sales-dependent milestone payments in addition to tiered
double-digit royalties based on net sales of brentuximab vedotin within the Takeda Group’s licensed territories.
Milestone payments to Seattle Genetics could total more than $230 million. Seattle Genetics and the Takeda
Group will jointly fund worldwide development costs on a 50:50 basis. Development funding by the Takeda
Group over the first three years of the collaboration is expected to be at least $75 million. In Japan, the Takeda
Group will be solely responsible for development costs.
“This collaboration aligns with our goal of rapidly bringing brentuximab vedotin to patients worldwide. Takeda
is an ideal collaborator given its global presence, demonstrated commitment to oncology, and experience in the
sales and marketing of first-in-class, targeted therapies for unmet medical needs,” said Clay B. Siegall, Ph.D.,
President and Chief Executive Officer, Seattle Genetics. “Our retention of full commercial rights in the U.S. and
Canada along with the financial terms from this agreement gives us a strong basis to begin building a commercial
infrastructure for the planned launch of brentuximab vedotin. We expect to utilize this infrastructure in the future
for other product candidates in our pipeline.
“The addition of the late-stage product candidate brentuximab vedotin to our oncology development pipeline
supports our mission to develop innovative new medicines where there is a high unmet need for patients,” said
Deborah Dunsire, M.D., President and CEO, Millennium. “This collaboration closely aligns with our growth
strategy, which includes both internal and external opportunities. We are very excited to bring forward a novel
medicine which will help us increase our reach in oncology throughout Europe and the rest of the world.”
ADCs are monoclonal antibodies that carry potent, cell-killing drugs targeted precisely to tumor cells. Seattle
Genetics has developed proprietary technology employing synthetic, highly potent drugs that can be attached to
antibodies through stable linker systems. The linkers are designed to be stable in the bloodstream and release the
drugs under specific conditions once inside targeted cells. This approach is intended to spare non-targeted cells
and thus reduce many of the toxic side effects of traditional chemotherapy. Earlier this year, Millennium obtained
an exclusive license to Seattle Genetics’ ADC technology for an antigen expressed on solid tumors, as well as
options for two other licenses.
About Brentuximab Vedotin
Brentuximab vedotin is an ADC targeting CD30 utilizing Seattle Genetics’ proprietary technology. Brentuximab
vedotin is currently being investigated in patients with relapsed or refractory HL or systemic ALCL.
Brentuximab vedotin has received orphan drug designation from the FDA and the European Medicines Agency
for both HL and ALCL and has received Fast Track designation by the FDA for HL. In two separate phase I
clinical trials, brentuximab vedotin achieved objective responses in greater than 50 percent of patients treated at
higher dose levels, including greater than 30 percent with complete remissions. Brentuximab vedotin was
generally well tolerated. The majority of adverse events were Grade 1 and 2, with the most clinically important
events being fatigue, fever, peripheral neuropathy, diarrhea, nausea and neutropenia.
Conference Call Details
to discuss the collaboration on
Seattle Genetics’ management will host a conference call and webcast
December 15, 2009 at 5:30 a.m. Pacific Time (PT); 8:30 a.m. Eastern Time (ET). The live event will be available
from Seattle Genetics’ website at www.seattlegenetics.com, under the Investors and News section, or by calling
(877) 941-8632 (domestic) or (480) 629-9821 (international). The access code is 4193888. A replay of the
discussion will be available beginning at approximately 7:30 a.m. PT on December 15, 2009 from Seattle
Genetics’ website or by calling (800) 406-7325 (domestic) or (303) 590-3030 (international), using access code
4193888. The telephone replay will be available until approximately 8:00 a.m. PT on December 17, 2009.
About Seattle Genetics
Seattle Genetics is a clinical stage biotechnology company focused on the development and commercialization of
monoclonal antibody-based therapies for the treatment of cancer and autoimmune disease. The company’s lead
product candidate, brentuximab vedotin, is in a pivotal trial under a special protocol assessment with the FDA. In
addition, Seattle Genetics has four other product candidates in ongoing clinical trials: lintuzumab (SGN-33),
dacetuzumab (SGN-40), SGN-70 and SGN-75. Seattle Genetics has collaborations for its ADC technology with a
number of leading biotechnology and pharmaceutical companies, including Genentech, Bayer, CuraGen, a
subsidiary of Celldex Therapeutics, Progenics, Daiichi Sankyo, MedImmune, a subsidiary of AstraZeneca, and
Millennium: The Takeda Oncology Company, as well as an ADC co-development agreement with Agensys, an
affiliate of Astellas. More information can be found at www.seattlegenetics.com.
About Takeda Pharmaceutical Company Limited
Located in Osaka, Japan, Takeda is a research-based global company with its main focus on pharmaceuticals. As
the largest pharmaceutical company in Japan and one of the global leaders of the industry, Takeda is committed
to striving toward better health for individuals and progress in medicine by developing superior pharmaceutical
products. Additional information about Takeda is available through its corporate website, www.takeda.com
About Millennium
Millennium: The Takeda Oncology Company, a leading biopharmaceutical company based in Cambridge, Mass.,
markets a first-in-class proteasome inhibitor, and has a robust clinical development pipeline of product
candidates. Millennium Pharmaceuticals, Inc. was acquired by Takeda Pharmaceutical Company Ltd. in May,
2008. The Company’s research, development and commercialization activities are focused in oncology.
Additional information about Millennium is available through its website, www.millennium.com
Forward-Looking Statements
Certain of the statements made in this press release are forward looking, such as those, among others, relating to
the therapeutic potential and future clinical progress, regulatory approval and commercial launch of products
utilizing Seattle Genetics’ ADC technology, including brentuximab vedotin. Actual results or developments may
differ materially from those projected or implied in these forward-looking statements, including the milestones or
royalties to be received by Seattle Genetics as a result of this collaboration. Factors that may cause such a
difference include risks related to adverse clinical results as our brentuximab vedotin or our collaborators’
product candidates move into and advance in clinical trials, risks inherent in the regulatory approval process for
pharmaceutical products and the risk that Seattle Genetics is not able to maintain the collaboration with the
Takeda Group. More information about the risks and uncertainties faced by Seattle Genetics is contained in the
Company’s Form 10-Q for the quarter ended September 30, 2009 filed with the Securities and Exchange
Commission. Seattle Genetics disclaims any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
# # #
Editors’ Note: This press release is also available under the Media section of Millennium’s website at
www.millennium.com, and under
section of Seattle Genetics’ website at
www.seattlegenetics.com.
the Investors and News
Contacts:
Seattle Genetics
Peggy Pinkston
+1 425-527-4160
ppinkston@seagen.com
Takeda
Seizo Masuda
+81 33 278 2037
Masuda_Seizo@takeda.co.jp
Millennium
Lauren Musto
+1 617-551-7848
Lauren.Musto@mpi.com
[***]
EXHIBIT C
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
EXHIBIT D
LICENSED PRODUCT
SGN-35 as described in the USAN published “Statement on a Nonproprietary Name Adopted by the USAN
Council” for Brentuximab Vedotin and related information in the USAN application for Brentuximab Vedotin
[***]
EXHIBIT E
[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the omitted portions.
Exhibit 10.5
CONFORMED COPY
$30,850,000,000
364-DAY BRIDGE CREDIT AGREEMENT
Dated as of May 8, 2018
among
TAKEDA PHARMACEUTICAL COMPANY LIMITED,
as Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as Lenders,
and
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
JPMORGAN CHASE BANK, N.A., SUMITOMO MITSUI BANKING CORPORATION and MUFG
BANK, LTD.,
as Lead Arrangers and Bookrunners
TABLE OF CONTENTS
CONFORMED COPY
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.02 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.03 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.04 Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.05 Jersey Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.01 The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.02 Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.03 [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.04 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.05 Termination or Reduction of the Commitments; Mandatory Prepayments . . . . . . . . . .
SECTION 2.06 Repayment of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.07 Interest on Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.08 Interest Rate Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.09 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.10 Optional Prepayments of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.11 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.12 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.13 Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.15 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.16 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.17 Evidence of Debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.18 [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.19 Defaulting Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.20 Mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.01 Conditions Precedent to Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.02 Conditions Precedent to Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.03 Conditions to Advances after the Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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SECTION 3.04 Actions by Lenders During the Certain Funds Period . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.01 Representations and Warranties of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.02 Representations and Warranties of the Lenders and the Borrower
. . . . . . . . . . . . . . . .
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.01 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.02 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.03 Financial Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VI EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.01 Events of Default
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VII THE AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.01 Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.02 Administrative Agent Individually . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.03 Duties of Administrative Agent; Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.04 Reliance by Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.05 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.06 Resignation of Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.07 Non-Reliance on Administrative Agent and Other Lenders . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.08 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.09 Other Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VIII [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.01 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.02 Notices, Etc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.03 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.04 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.05 Right of Setoff
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.06 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.07 Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.08 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.09 Debt Syndication during the Certain Funds Period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.11 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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SECTION 9.12 Jurisdiction, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.13 Patriot Act Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.14 No Advisory or Fiduciary Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.15 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.16 Conversion of Currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.17 Acknowledgement and Consent to Bail-In of EEA Financial Institutions . . . . . . . . . . .
SECTION 9.18 Certain ERISA Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.19 Interest Rate Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.20 English Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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SCHEDULES
Schedule I
Schedule II
EXHIBITS
Exhibit A
Exhibit B
Exhibit C
-
-
-
-
-
Commitments
Administrative Agent’s Office; Certain Addresses for Notices
Form of Notice of Borrowing
Form of Assignment and Acceptance
Form of Compliance Certificate
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364-DAY BRIDGE CREDIT AGREEMENT
CONFORMED COPY
This 364-Day Bridge Credit Agreement (this “Agreement”) dated as of May 8, 2018 is among Takeda
Pharmaceutical Company Limited, a joint-stock company organized and existing under the laws of Japan (the
“Borrower”), the Lenders (as defined below) that are parties hereto, and JPMorgan Chase Bank, N.A., as
Administrative Agent (as defined below) for the Lenders.
RECITALS
WHEREAS, the Borrower intends to directly or indirectly acquire (the “Target Acquisition”) pursuant
to the Offer Documents or Scheme Documents, as applicable (each as defined below) all of the outstanding
shares of the Target which are subject to the Scheme or Takeover Offer (as the case may be), which acquisition
will be effected pursuant to a Scheme or a Takeover Offer (each as defined below).
WHEREAS, in connection with the Target Acquisition, the Borrower has requested that the Lenders
extend credit to the Borrower in the form of term loans in an aggregate principal amount not to exceed
$30,850,000,000 to be divided into the Tranche 1 Commitments, the Tranche 2 Commitments, the Tranche 3
Commitments and the Tranche 4 Commitments and with the proceeds to be applied towards the Certain Funds
Purposes (as defined below).
IN CONSIDERATION THEREOF the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01 Certain Defined Terms.
As used in this Agreement, the following terms shall have the following meanings (such meanings to
be equally applicable to both the singular and plural forms of the terms defined):
“Acceptance Condition” means, in respect of a Takeover Offer, the condition to the Takeover Offer
with respect to the number of acceptances to the Takeover Offer which must be secured to declare the
Takeover Offer unconditional as to acceptances (as set out in the Offer Press Announcement.
“Administrative Agent” means JPMorgan Chase Bank, N.A. (including its branches and affiliates), in
its capacity as administrative agent for the Lenders hereunder, together with any successor thereto appointed
pursuant to Article VII, the “Administrative Agent”.
“Administrative Agent’s Office” means the Administrative Agent’s address as set forth on Schedule II,
or such other address as the Administrative Agent may from time to time notify to the Borrower and the
Lenders.
“Administrative Questionnaire” means an administrative questionnaire in the form supplied by the
Administrative Agent.
“Advance” means a Tranche 1 Advance, a Tranche 2 Advance, a Tranche 3 Advance or a Tranche
4 Advance, as appropriate.
“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, controls, is
controlled by or is under common control with such Person or is a director or officer of such Person. For
purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under
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common control with”) of a Person means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of such Person, whether through the ownership of Voting
Stock, by contract or otherwise.
CONFORMED COPY
“Agent Parties” has the meaning set forth in Section 9.02(c).
“Agents” means, collectively, the Administrative Agent and the Arrangers.
“Agreement” has the meaning set forth in the introduction hereto.
“Agreement Currency” has the meaning set forth in Section 9.16.
“Agreement Value” means, with respect to any Hedge Agreement at any date of determination, the
amount, if any, that would be payable to any counterparty thereunder in respect of the “agreement value”
under such Hedge Agreement if such Hedge Agreement were terminated on such date, calculated as
provided in the International Swap Dealers Association, Inc. Code of Standard Wording, Assumptions and
Provisions for Swaps, 1986 Edition.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the
Borrower or any of its Subsidiaries from time to time concerning or relating to bribery or corruption.
“Anti-Social Conduct” means (i) a demand and conduct with force and arms; (ii) an unreasonable
demand and conduct having no legal cause; (iii) threatening or committing violent behavior relating to its
business transactions; (iv) an action to defame the reputation or interfere with the business of any Lender by
spreading rumor, using fraudulent means or resorting to force; or (v) other actions similar or analogous to
any of the foregoing in any jurisdiction.
“Anti-Social Group” means (i) an organized crime group (as defined in the Law relating to Prevention
of Unjustifiable Acts by Gang Members of Japan (Law No. 77 of 1991, as amended)); (ii) a member of an
organized crime group; (iii) a person who used to be a member of an organized crime group but has only
ceased to be a member of an organized crime group for a period of less than 5 years; (iv) quasi-member of
an organized crime group; (v) a related or associated company of an organized crime group; (vi) a corporate
racketeer or blackmailer advocating social cause or a special intelligence organized crime group; or (vii) a
member of any other criminal force similar or analogous to any of the foregoing in any jurisdiction.
“Anti-Social Relationship” means in relation a Person, (i) an Anti-Social Group controls its
management; (ii) an Anti-Social Group is substantively involved in its management; (iii) it has entered into
arrangements with an Anti-Social Group for the purpose of, or which have the effect of, unfairly benefiting
itself or a third party or prejudicing a third party; (iv) it is involved in the provision of funds or other
benefits to an Anti-Social Group; or (v) any of its directors or any other person who is substantively
involved in its management has a socially objectionable relationship with an Anti-Social Group.
“Applicable Creditor” has the meaning set forth in Section 9.16.
“Applicable Lending Office” means, with respect to any Lender, the office of such Lender specified as
its “Applicable Lending Office” or similar concept in its Administrative Questionnaire or in the Assignment
and Acceptance pursuant to which it became a Lender, or such other office, branch, Subsidiary or affiliate of
such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.
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CONFORMED COPY
“Applicable Margin” means, as of any date, a percentage per annum determined by reference to the
Public Debt Rating in effect on such date as set forth below:
Public Debt Rating S&P/Moody’s
Applicable Margin
Level 1:
Level 2:
Level 3:
Level 4:
Level 5:
Level 6:
. . . . . . . . . . . .
. . . . . . . . . . . .
. . . . . . . . . . . .
. . . . . . . . . . . .
. . . . . . . . . . . .
. . . . . . . . . . . .
A+/A1 or above
Less than Level 1 but at least A/A2
Less than Level 2 but at least A-/A3
Less than Level 3 but at least BBB+/Baa1
Less than Level 4 but at least BBB/Baa2
Less than Level 5
0.750%
0.875%
1.00%
1.125%
1.25%
1.50%
Notwithstanding anything to the contrary herein, the Applicable Margin at each of the above Levels
shall increase by 0.25% per annum on the date that is three months after the Closing Date and by an
additional 0.25% per annum at the end of each three-month period thereafter.
“Applicable Percentage” means, in the case of the commitment fee paid pursuant to Section 2.04(a), as
of any date, a percentage per annum determined by reference to the Public Debt Rating in effect on such
date as set forth below:
Public Debt Rating S&P/Moody’s
Applicable Percentage
Level 1: . . . . . . . . . .
Level 2: . . . . . . . . . .
Level 3: . . . . . . . . . .
Level 4: . . . . . . . . . .
Level 5: . . . . . . . . . .
Level 6: . . . . . . . . . .
A+/A1 or above
Less than Level 1 but at least A/A2
Less than Level 2 but at least A-/A3
Less than Level 3 but at least BBB+/Baa1
Less than Level 4 but at least BBB/Baa2
Less than Level 5
0.070%
0.080%
0.090%
0.100%
0.125%
0.175%
“Arrangers” means JPMorgan Chase Bank, N.A., Sumitomo Mitsui Banking Corporation and
MUFG Bank, Ltd.
“Asset Sale” means the sale or other disposition by a member of the Consolidated Group of assets of
the Consolidated Group (including the sale of Equity Interests of any Subsidiary of a member of the
Consolidated Group or pursuant to any casualty or condemnation proceeding).
“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an
Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit B hereto
(or such other form as is agreed upon by the Borrower and the Administrative Agent).
“Availability Period” means, with respect to each Class, the period starting on the Closing Date and
ending on the Commitment Termination Date for such Class.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable
EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of
Directive 2014/59/EU of the European Parliament and of the Council of the European Union,
the
implementing law for such EEA Member Country from time to time which is described in the EU Bail-In
Legislation Schedule.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that
is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code to which Section 4975 of
the Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or
otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee
benefit plan” or “plan”.
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CONFORMED COPY
“Board” means the Board of Governors of the Federal Reserve System of the United States of America.
“Borrowed Debt” means any Debt for money borrowed, including loans, hybrid securities, debt
convertible into Equity Interests and any Debt represented by notes, bonds, debentures or other similar
evidences of Debt for money borrowed.
“Borrower” has the meaning set forth in the recitals of this Agreement.
“Borrower Materials” has the meaning specified in Section 5.01.
“Borrowing” means a borrowing consisting of simultaneous Advances of the same Type and
Class made by each of the Lenders to the Borrower pursuant to Section 2.01.
“Borrowing Minimum” means $50,000,000.
“Borrowing Multiple” means $5,000,000.
“Bridge Facility” means the Commitments and any Advances made thereunder.
“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks
are authorized to close under the laws of, or are in fact closed in, New York City, Tokyo or London.
“CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability
Information System maintained by the U.S. Environmental Protection Agency.
“Certain Funds Default” means an Event of Default arising from any of the following (other than in
respect of any Subsidiary of the Borrower, the Target or any Subsidiary of the Target, or a breach of a
procurement obligation with respect to any Subsidiary of the Borrower, the Target or any Subsidiary of the
Target):
(i) Section 6.01(a) (in so far as it relates to payment of principal and/or interest or payment of fees
pursuant to paragraphs 1(i), (ii), (iii) and (iv) of the Fee and Syndication Letter only);
(ii) Section 6.01(b) as it relates to a Certain Funds Representation;
(iii) Section 6.01(c) as it relates to the failure to perform any of the following covenants: (A) Sections
5.01(d)(i) or (j) (other than paragraph (ix), (x) and (xii) thereof) or (B) Sections 5.02(a), (b) or (d);
(iv) Section 6.01(e) in relation to the Borrower, but excluding, in relation to involuntary proceedings
referenced therein, any Event of Default caused by a frivolous or vexatious action, proceeding or
petition in respect of which no order or decree in respect of such involuntary proceeding shall have
been entered; or
(v) Section 6.01(i).
“Certain Funds Period” means the period commencing on the Effective Date and ending on the earlier
of (i) the date on which a Mandatory Cancellation Event occurs, for the avoidance of doubt, on such date but
immediately after the relevant Mandatory Cancellation Event occurs or first exists or (ii) if the Borrower has
served written notice to the Administrative Agent in accordance with the definition of Commitment
Termination Date to extend the Commitment Termination Date to the date that is 60 days after the Closing
Date so that up to $2,100,000,000 Tranche 1 Commitments, Tranche 2 Commitments and/or Tranche
3 Commitments remain outstanding until such date, the date that is 60 days after the Closing Date.
“Certain Funds Purposes” means:
(i) where the Target Acquisition proceeds by way of a Scheme:
(a) payment (directly or indirectly) of the cash price payable by the Borrower to the holders of the
Scheme Shares in consideration of the acquisition of such Scheme Shares pursuant to the Scheme;
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(b)
financing (directly or indirectly) the consideration payable to holders of options to acquire Target
Shares pursuant to any proposal in respect of those options as required by the City Code;
(c)
financing (directly or indirectly) the fees, costs and expenses in respect of the Transactions; and
(d)
repayment of certain Existing Target Indebtedness (which the Borrower may from time to time
elect); or
(ii) where the Target Acquisition proceeds by way of a Takeover Offer:
(a) payment (directly or indirectly) of all or part of the cash price payable by the Borrower to the
holders of the Target Shares subject to the Takeover Offer in consideration of the acquisition of
such Target Shares pursuant to the Takeover Offer;
(b) payment (directly or indirectly) of the cash consideration payable to the holders of Target Shares
pursuant to the operation by Borrower of the procedures contained in Articles 117 and 121 of the
Jersey Companies Law;
(c)
financing (directly or indirectly) the consideration payable to holders of options to acquire Target
Shares pursuant to any proposal in respect of those options as required by the City Code;
(d)
financing (directly or indirectly) the fees, costs and expenses in respect of the Transactions; and
(e)
repayment of certain Existing Target Indebtedness (which the Borrower may from time to time
elect).
“Certain Funds Representations” means each of the following: (1) Sections 4.01(a), (b)(i), (b)(ii) and
(b)(iii); (2) Section 4.01(c) and (d); (3) Section 4.01(q); and (4) Section 4.01(t), (u)(ii) and (v) (but only to
the extent they relate to the then current actual method of the Target Acquisition), in each case only insofar
as it relates to the Borrower (excluding, for the avoidance of doubt, any Subsidiary of the Borrower, Target
or any Subsidiary of Target).
“Charges” has the meaning specified in Section 9.19.
“City Code” means the City Code on Takeovers and Mergers applicable, inter alia, to takeovers of
listed companies in the United Kingdom and to Jersey listed companies pursuant to the Companies
(Takeovers and Mergers Panel) (Jersey) Law 2009.
“Class” when used in reference to any Advance or Borrowing, refers to whether such Advance, or the
Advances comprising such Borrowing, are Tranche 1 Advances, Tranche 2 Advances, Tranche 3 Advances
or Tranche 4 Advances. When used in reference to any Commitment, “Class” refers to whether such
Commitment is a Tranche 1 Commitment, a Tranche 2 Commitment, Tranche 3 Commitment or a Tranche
4 Commitment.
“Clean-up Date” has the meaning set forth in Section 6.01.
“Closing Date” means the date on which each of the conditions set forth in Section 3.02 have been
satisfied (or waived in accordance with Section 9.01).
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Commitment” means,
the Tranche 1 Commitments,
the Tranche 2 Commitments,
the Tranche
3 Commitments and the Tranche 4 Commitments.
“Commitment Termination Date” means the earlier of (a) the date on which a Mandatory Cancellation
Event occurs, for the avoidance of doubt, on such date but immediately after the relevant Mandatory
Cancellation Event occurs or first exists; provided that, if the Closing Date has occurred prior to the date
described in this clause (a), up to $2,100,000,000 of Tranche 1 Commitments, Tranche 2 Commitments
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and/or Tranche 3 Commitments shall remain outstanding until the date that is 60 days after the Closing Date
if so elected by the Borrower by written notice to the Administrative Agent prior to the Closing Date and
(b) the date on which the applicable Class of Commitments is terminated in full in accordance with
Section 2.05 or, subject to Section 3.04, Section 6.01.
“Consolidated” refers to the consolidation of accounts in accordance with IFRS.
“Consolidated EBITDA” means, for any fiscal period, the Consolidated net profit of the Consolidated
Group for such period determined in accordance with IFRS plus the following, to the extent deducted in
calculating such Consolidated net profit: (a) the provision for Federal, state, local and foreign taxes based on
income, profits, revenue, business activities, capital or similar measures payable by the Consolidated Group
in each case, as set forth on the financial statements of the Consolidated Group, (b) share of loss of
investments accounted for using the equity method, (c) Consolidated Interest Expense and dividend
expense, (d) any losses (including all fees and expenses or charges relating thereto) on the retirement of
debt, (e) any extraordinary, unusual, nonrecurring or non-cash impairments, charges, expenses or losses
(including impairments, charges, fees, expenses and losses incurred in connection with the Transactions or
any issuance of Debt or equity, acquisitions, investments, restructuring activities, asset sales or divestitures
permitted hereunder, purchase accounting effects, derivatives transactions and other finance expenses and
other operating expenses), (f) non-cash stock option expenses, non-cash equity-based compensation and/or
non-cash expenses related to stock-based compensation, (g) any foreign currency exchange losses, (h) losses
(including all fees and expenses or charges relating thereto) on sales of assets outside of the ordinary course
of business and losses from discontinued operations and (i) depreciation and amortization expense and
minus, to the extent included in calculating such Consolidated net profit for such period, the sum of (i) share
of profit of investments accounted for using the equity method, (ii) interest and dividend income, (iii) any
gains (less all fees and expenses or charges relating thereto) on the retirement of debt, (iv) any
extraordinary, unusual, nonrecurring or non-cash income (including other finance income ), (v) gains (less
all fees and expenses or charges relating thereto) on the sales of assets outside of the ordinary course of
business and gains from discontinued operations (without duplication of any amounts added back in clause
(a) of this definition) and (vi) any foreign currency exchange gains, all as determined on a Consolidated
basis. Consolidated EBITDA will be calculated on a pro forma basis as if the Transactions and any related
incurrence or repayment of Debt by any member of the Consolidated Group had occurred on the first day of
the relevant period, but shall not take into account any cost savings or synergies projected to be realized as a
result of such acquisition or disposition other than cost savings or cost synergies that are factually
supportable and quantifiable pro forma cost savings or expense reductions related to operational efficiencies
(including the entry into any material contract or arrangement), strategic initiatives or purchasing
improvements and other cost savings, improvements or cost synergies, in each case, that have been realized,
or are reasonably expected to be realized, by any member of the Consolidated Group based upon actions to
be taken within 12 months after the consummation of the action as if such cost savings, expense reductions,
improvements and cost synergies occurred on the first day of the relevant period; provided that the
aggregate amount of such cost savings and cost synergies, together with any cost savings and cost synergies
included in the calculation of Consolidated EBITDA pursuant to the immediately succeeding sentence, shall
not exceed, for any such fiscal period, ten percent (10%) of Consolidated EBITDA for such period (as
calculated without giving effect this sentence or the immediately succeeding sentence). In addition, in the
event that any member of the Consolidated Group acquired or disposed of any Person, business unit or line
of business or made any investment during the relevant period, Consolidated EBITDA will be determined
giving pro forma effect to such acquisition, disposition or investment as if such acquisition, disposition or
investment and any related incurrence or repayment of Debt had occurred on the first day of the relevant
period, but shall not take into account any cost savings or synergies projected to be realized as a result of
such acquisition or disposition other than cost savings or cost synergies that are factually supportable and
quantifiable pro forma cost savings or expense reductions related to operational efficiencies (including the
entry into any material contract or arrangement), strategic initiatives or purchasing improvements and other
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cost savings, improvements or cost synergies, in each case, that have been realized, or are reasonably
expected to be realized, by any member of the Consolidated Group based upon actions to be taken within
12 months after the consummation of the action as if such cost savings, expense reductions, improvements
and cost synergies occurred on the first day of the relevant period; provided that the aggregate amount of
such cost savings and cost synergies, together with any cost savings and cost synergies included in the
calculation of Consolidated EBITDA pursuant to the immediately preceding sentence, shall not exceed, for
any such fiscal period, ten percent (10%) of Consolidated EBITDA for such period (as calculated without
giving effect this sentence or the immediately preceding sentence).
“Consolidated Group” means, prior to the consummation of the Target Acquisition, the Borrower and
its Subsidiaries (excluding the Target and its Subsidiaries) and thereafter, the Borrower and its Subsidiaries
(including the Target and its Subsidiaries).
“Consolidated Interest Expense” means, for any fiscal period,
interest expense of the
Consolidated Group on a Consolidated basis determined in accordance with IFRS, including the imputed
interest component of capitalized lease obligations during such period, and all commissions, discounts and
other fees and charges owed with respect to letters of credit, if any, and net costs under Hedge Agreements;
provided that if any member of the Consolidated Group acquired or disposed of any Person or line of
business during the relevant period (including for the avoidance of doubt the Transactions), Consolidated
Interest Expense will be determined giving pro forma effect to any incurrence or repayment of Debt related
to such acquisition or disposition as if such incurrence or repayment of Debt had occurred on the first day of
the relevant period.
the total
“Consolidated Net Assets” means the aggregate amount of assets (less applicable reserves and other
properly deductible items) after deducting therefrom all current liabilities, as set forth on the Consolidated
balance sheet of
to
Section 5.01(i)(ii) prior to the time as of which Consolidated Net Assets shall be determined.
recently furnished to the Lenders pursuant
the Consolidated Group most
“Consolidated Net Debt” means, as of any date of determination, the aggregate amount of Borrowed
Debt of the Consolidated Group determined on a Consolidated basis as of such date, minus all unrestricted
cash and cash equivalents of the Consolidated Group.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of
the management or policies of a Person, whether through the ability to exercise voting power, by contract or
otherwise. The terms “Controlling” and “Controlled” have meanings correlative thereto.
“Conversion”, “Convert”, or “Converted” each refers to a conversion of Advances of one Type into
Advances of the other Type pursuant to Section 2.08 or 2.12.
“Cost of Funds Rate Advance” means an Advance that bears interest as provided in Section 2.07(a)(i).
“Cost of Funds Rate” means the weighted average of the rates notified to the Administrative Agent by
each Lender as soon as practicable and in any event not later than 10:00 A.M. (Tokyo time) one Business
Day prior to the first day of the Interest Period applicable to a Cost of Funds Advance (or, if earlier,
10:00 A.M. (Tokyo time) in the date falling one Business Day before the date on which interest is due to be
paid in respect of such Advance), to be that which expresses as a percentage rate per annum the cost to the
relevant Lender of funding its Advance from whatever source it may reasonably select; provided that if any
Lender does not supply a quotation by the time specified in this definition, the Cost of Funds Rate shall be
calculated on the basis of the quotations of the other Lenders that have so supplied a quotation.
“Court” means the Royal Court of Jersey.
“Court Meeting” means the meeting or meetings of Scheme Shareholders (or any adjournment thereof)
to be convened by order of the Court under Article 125(1) of the Jersey Companies Law for the purposes of
considering and, if thought fit, approving the Scheme.
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“Court Order” means the Act of Court sanctioning the Scheme under Article 125(2) of the Jersey
Companies Law.
“Credit Party” means the Administrative Agent or any Lender.
“Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed
money, (b) all obligations of such Person for the deferred purchase price of property or services that would
appear as a liability on the balance sheet of such Person prepared in accordance with IFRS (other than trade
payables incurred in the ordinary course of such Person’s business), (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such Person
created or arising under any conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or lender under such agreement
in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person
as lessee under leases that have been or should be, in accordance with IFRS, recorded as capital leases,
(f) all obligations, contingent or otherwise, of such Person in respect of acceptances, letters of credit or
similar extensions of credit, (g) all obligations of such Person in respect of Hedge Agreements, (h) all Debt
of others referred to in clauses (a) through (g) above or clause (i) below directly guaranteed in any manner
by such Person, or the payment of which is otherwise provided for by such Person, and (i) all Debt referred
to in clauses (a) through (h) above secured by any Lien on property (including, without limitation, accounts
and contract rights) owned by such Person, even though such Person has not assumed or become liable for
the payment of such Debt; provided, however, that the amount of such Debt will be the lesser of (x) the fair
market value of such asset at such date of determination and (y) the amount of such other Debt.
“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other
creditors, moratorium,
liquidation,
rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or
other applicable jurisdictions from time to time in effect.
conservatorship, bankruptcy,
the benefit of
assignment
for
“Default” means any Event of Default or any event that would constitute an Event of Default but for
the requirement specified in Article VI that notice be given or time elapse or both.
“Default Interest” has the meaning specified in Section 2.07(b).
“Defaulting Lender” means, subject to Section 2.19(b), any Lender that (a) has failed to (i) fund all or
any portion of its Advances within two Business Days of the date such Advances were required to be funded
hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such
failure is the result of such Lender’s determination that one or more conditions precedent to funding (each
of which conditions precedent, together with any applicable default, shall be specifically identified in such
writing) has not been satisfied, or (ii) pay to the Administrative Agent or any other Lender any other amount
required to be paid by it hereunder within two Business Days of the date when due, (b) has notified the
Borrower or the Administrative Agent in writing that it does not intend to comply with its funding
obligations hereunder, or has made a public statement to that effect (unless such writing or public statement
relates to such Lender’s obligation to fund an Advance hereunder and states that such position is based on
such Lender’s determination that a condition precedent to funding (which condition precedent, together with
any applicable default, shall be specifically identified in such writing or public statement) cannot be
satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the
Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its
prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender
pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the
Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a
proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee,
administrator, assignee for the benefit of creditors or similar Person charged with reorganization or
liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state
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or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-in Action;
provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of
any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental
Authority so long as such ownership interest does not result in or provide such Lender with immunity from
the jurisdiction of courts within the United States or from the enforcement of judgments or writs of
attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate,
disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the
Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d)
above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a
Defaulting Lender (subject to Section 2.19(b)) upon delivery of written notice of such determination to the
Borrower and each Lender.
“Disclosure Letter” means that certain Disclosure Letter dated as of the Effective Date from the
Borrower to the Arrangers.
“Dollars” and the “$” sign each means lawful currency of the United States.
“EEA Financial Institution” means (a) any institution established in any EEA Member Country which
is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member
Country which is a parent of an institution described in clause (a) of this definition, or (c) any institution
established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b)
of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of
the member states of
the European Union, Iceland,
Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with
public administrative authority of any EEA Member Country (including any delegee) having responsibility
for the resolution of any EEA Financial Institution.
“Effective Date” means the date on which the conditions set forth in Section 3.01 are satisfied (or
waived in accordance with Section 9.01).
“Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; (c) a commercial bank organized
under the laws of the United States, or any State thereof, and having total assets in excess of
$10,000,000,000; (d) a commercial bank organized under the laws of any other country that is a member of
the Organization for Economic Cooperation and Development or has concluded special
lending
arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or
a political subdivision of any such country, and having total assets in excess of $10,000,000,000, so long as
such bank is acting through a branch or agency located in the country in which it is organized or another
country that is described in this clause (d); and (e) any other Person approved by the Administrative Agent
and, so long as no Event of Default has occurred and is continuing, by the Borrower, such approval not to be
unreasonably withheld or delayed; provided, however, that no Defaulting Lender (or Person who would be a
Defaulting Lender upon becoming a Lender) nor the Borrower nor any Affiliate of the Borrower shall
qualify as an Eligible Assignee.
“Environmental Action” means any action,
suit, demand, demand letter, claim, notice of
noncompliance or violation, notice of liability or potential liability, investigation, proceeding, consent order
or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous
Materials or arising from alleged injury or threat of injury to health, safety or the environment, including,
without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any
third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.
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“Environmental Law” means any applicable federal, state, local or foreign statute; law (including
common law); ordinance; rule; regulation; code; final and binding court order, judgment, decree or judicial
or agency interpretation, policy or guidance; or agency order relating to pollution or protection of the
environment, health, safety or natural resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.
“Environmental Permit” means any permit, approval,
identification number,
license or other
authorization required under any Environmental Law.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a
limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and
any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity
interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
time, and the applicable regulations promulgated thereunder.
“ERISA Affiliate” means any trade or business (whether or not incorporated) that is a member of the
Borrower’s controlled group, or under common control with the Borrower, within the meaning of
Section 414 of the Code.
“ERISA Event” means:
(a) (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with
respect to any Single Employer Plan unless the 30-day notice requirement with respect to such event
has been waived by the PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA
(without regard to subsection (2) of such Section) are being met with a contributing sponsor, as defined
in Section 4001(a)(13) of ERISA, of a Single Employer Plan, and an event described in paragraph (9),
(10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to
such Plan within the following 30 days unless the 30-day notice requirement has been waived by the
PBGC;
(b) the application for a minimum funding waiver with respect to a Single Employer Plan;
(c) the termination of or provision of a notice of intent to terminate any Plan pursuant to
Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to
in Section 4041(e) of ERISA) or otherwise so as to incur liability of the Borrower or any ERISA
Affiliate under Title IV of ERISA (other than premiums due to the PBGC);
(d) the cessation of operations at a facility of the Borrower or any ERISA Affiliate in the
circumstances described in Section 4062(e) of ERISA;
(e) the withdrawal by the Borrower or any ERISA Affiliate from a Multiple Employer Plan during
a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(f) the conditions for the imposition of a lien under Section 303(k) of ERISA shall have been met
with respect to any Plan; or
(g) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of
ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that could
constitute grounds for the termination of a Plan, or the appointment of a trustee to administer a Single
Employer Plan or Multiple Employer Plan.
“Escrow Account” means any account established for the purpose of depositing funds prior to their
being applied towards Certain Funds Purposes.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan
Market Association (or any successor Person), as in effect from time to time.
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“Eurocurrency Liabilities” has the meaning specified in Regulation D of the Board, as in effect from
time to time.
“Eurocurrency Rate” means the London interbank offered rate as administered by the ICE Benchmark
Administration (or any other Person that takes over the administration of such rate) for Dollars for a period
equal in length to such Interest Period as displayed on pages LIBOR01 or LIBOR02 of the Reuters Screen
that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on any
successor or substitute page on such screen that displays such rate, or on the appropriate page of such other
information service that publishes such rate from time to time as selected by the Administrative Agent in its
reasonable discretion; in each case, the “Screen Rate”) at approximately 11:00 A.M., London time on the
Quotation Day for such Interest Period; provided that if the Screen Rate shall be less than zero, such rate
shall be deemed to be zero for the purposes of this Agreement; provided further that, if the Screen Rate shall
not be available at such time for such Interest Period (an “Impacted Interest Period”) with respect to Dollars,
then the Eurocurrency Rate shall be the Interpolated Rate at such time; provided that if any Interpolated
Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Interpolated Rate” means, at any time, the rate per annum determined by the Administrative Agent (which
determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from
interpolating on a linear basis between: (a) the Screen Rate for the longest period (for which that Screen
Rate is available in Dollars) that is shorter than the Impacted Interest Period and (b) the Screen Rate for the
shortest period (for which that Screen Rate is available for Dollars) that exceeds the Impacted Interest
Period, in each case, at such time; provided further that if no Screen Rate is available for Dollars, the
Eurocurrency Rate shall be the Reference Bank Rate.
“Eurocurrency Rate Advance” means an Advance that bears interest as provided in Section 2.07(a)(ii).
“Eurocurrency Rate Reserve Percentage” means a fraction (expressed as a decimal), the numerator of
which is the number one and the denominator of which is the number one minus the aggregate of the
maximum reserve, liquid asset, fees or similar requirements (including any marginal, special, emergency or
supplemental reserves or other requirements) established by any central bank, monetary authority, the
Board, the Financial Conduct Authority, the Prudential Regulation Authority, the European Central Bank or
other Governmental Authority for any category of deposits or liabilities customarily used to fund loans in
the applicable currency, expressed in the case of each such requirement as a decimal. Such reserve, liquid
asset, fees or similar requirements shall
include those imposed pursuant to Eurocurrency Liabilities.
Eurocurrency Rate Advances shall be deemed to be subject to such reserve, liquid asset, fee or similar
requirements without benefit of or credit for proration, exemptions or offsets that may be available from
time to time to any Lender under any applicable law, rule or regulation, including Eurocurrency Liabilities.
The Eurocurrency Rate Reserve Percentage shall be adjusted automatically on and as of the effective date of
any change in any reserve, liquid asset or similar requirement.
“Events of Default” has the meaning specified in Section 6.01.
“Excluded Taxes” has the meaning specified in Section 2.14(a).
“Existing Target Indebtedness” means indebtedness of the Target existing on the Closing Date.
“FATCA” means (a) Sections 1471 to 1474 of the Code or any associated regulations, (b) any treaty,
law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the
United States and any other jurisdiction, which (in either case) facilitates the implementation of any law or
regulation referred to in paragraph (a) above; or (c) any agreement pursuant to the implementation of any
treaty, law or regulation referred to in paragraphs (a) or (b) above with the U.S. Internal Revenue Service,
the United States government or any governmental or taxation authority in any other jurisdiction.
“Fee and Syndication Letter” means that certain Fee and Syndication Letter, dated as of the date
hereof, by and among the Borrower and the Arrangers.
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“FIEA” means the Financial Instruments and Exchange Act of Japan (Law No. 25 of 1948, as
amended).
“Foreign Exchange Act” means the Foreign Exchange and Foreign Trade Act of Japan (Law No. 59 of
2009, as amended).
“GAAP” means generally accepted accounting principles as in effect in the United States from time to
time.
“General Meeting” means the extraordinary general meeting of the holders of Target Shares (or any
adjournment thereof) to be convened in connection with the implementation of a Scheme.
“Governmental Authority” means the government of Japan, the United States of America, or any other
nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government.
“Hazardous Materials” means (a) petroleum and petroleum products, byproducts or breakdown
products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and
(b) any other chemicals, materials or substances designated, classified or regulated as “hazardous” or
“toxic” or as a “pollutant” or “contaminant” or for which liability may be imposed, under any
Environmental Law.
“Hedge Agreements” means interest rate swap, cap or collar agreements, interest rate future or option
contracts, currency swap agreements, currency future or option contracts and other similar agreements.
“IFRS” means the International Financial Reporting Standards, as promulgated by the International
Accounting Standards Board (or any successor board or agency), as in effect on the Effective Date.
“Impacted Interest Period” has the meaning provided in the definition of “Eurocurrency Rate”.
“Indemnified Party” has the meaning specified in Section 9.04(b).
“Information” has the meaning specified in Section 9.08.
“Initial Lender” has the meaning specified in the definition of “Lenders”.
“Interest Period” means, for each Advance comprising part of the same Borrowing, the period
commencing on the date of such Advance and ending on the last day of the period selected by the Borrower
pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the period selected by the Borrower
pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or
six months (or, with respect to any Borrowing made less than one month prior to the Maturity Date for the
applicable Class, the period commencing on the date of such Borrowing and ending on the Maturity Date
(subject to availability)), as the Borrower may, upon written notice received by the Administrative Agent
not later than 9:00 A.M. (Tokyo time) on the third Business Day prior to the first day of such Interest
Period, select; provided, however, that:
(a) the Borrower may not select any Interest Period with respect to any Class that ends after the
Maturity Date for such applicable Class;
(b) Interest Periods commencing on the same date for Eurocurrency Rate Advances comprising
part of the same Borrowing shall be of the same duration (it being understood that the Borrower shall
be permitted to make multiple Borrowings consisting of Eurocurrency Rate Advances on the same
date, each of which may be of different durations);
(c) whenever the last day of any Interest Period would otherwise occur on a day other than a
Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding
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Business Day, provided, however, that, if such extension would cause the last day of such Interest
Period to occur in the next succeeding calendar month, the last day of such Interest Period shall occur
on the immediately preceding Business Day; and
(d) whenever the first day of any Interest Period occurs on a day of an initial calendar month for
which there is no numerically corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such succeeding calendar month.
“Interpolated Rate” has the meaning specified in the definition of “Eurocurrency Rate”.
“Jersey Companies Law” means the Companies (Jersey) Law 1991.
“Judgment Currency” has the meaning set forth in Section 9.16.
“Lenders” means, collectively, (a) each bank, financial institution and other institutional lender listed
on the signature pages hereof (each, an “Initial Lender”) and (b) each Eligible Assignee that shall become a
party hereto pursuant to Section 9.07(a), (b) and (c). Each Lender shall have a license required to engage in
the business of lending money in Japan.
“Lien” means any lien, security interest or other charge or encumbrance of any kind, or any other type
of preferential arrangement, intended as a security interest, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of way or other encumbrance on title to real
property.
“Loan Documents” means this Agreement and any amendments, notes or notices entered into in
connection herewith.
“Long Stop Date” means the date falling 12 months after the date of this Agreement; provided that
such date may be extended if and to the extent that (i) any condition in paragraphs 4(c) to (i) in Part A of
Appendix 1 to the Original Scheme Press Release (or the equivalent provision in any Original Offer Press
Announcement) has not been satisfied by the date falling 12 months after the date of this Agreement; (ii) the
Long Stop Date (as defined in the Original Offer Press Announcement) has also been extended (with the
Target having consented, to the extent required, to any such extension) and (iii) such date shall not be
extended beyond the date falling 15 months after the date of this Agreement.
“Losses” has the meaning specified in Section 9.04(b).
“Mandatory Cancellation Event” means the occurrence of any of the following conditions or events:
(i) where the Target Acquisition proceeds by way of a Scheme:
(a) the Court Meeting is held (and not adjourned or otherwise postponed) to approve the Scheme
at which a vote is held to approve the Scheme, but the Scheme is not so approved in accordance with
Article 125(2) of the Jersey Companies Law by the requisite majority of the Scheme Shareholders at
such Court Meeting;
(b) the General Meeting is held (and not adjourned or otherwise postponed) to pass the Scheme
Resolutions at which a vote is held on the Scheme Resolutions, but the Scheme Resolutions are not
passed by the requisite majority of the shareholders of Target at such General Meeting;
(c) an application for the issuance of the Court Order is made to the Court (and not adjourned or
otherwise postponed) but the Court (in its final judgment) refuses to grant the Court Order;
(d) either the Scheme lapses or it is withdrawn with the consent of the Panel or by order of the
Court; or
(e) the date which is 15 days after the Scheme Effective Date;
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unless, in respect of paragraphs (a) to (d) inclusive above, for the purpose of switching from a
Scheme to a Takeover Offer, within 5 Business Days of such event the Borrower has notified the
Administrative Agent that the Borrower intends to issue, and then within 10 Business Days after
delivery of such notice the Borrower does issue, an Offer Press Announcement and provides a copy to
the Administrative Agent (in which case no Mandatory Cancellation Event shall have occurred);
(ii) where the Target Acquisition proceeds by way of a Takeover Offer:
(a) such Takeover Offer lapses, terminates or is withdrawn unless, for the purpose of switching
from a Takeover Offer to a Scheme, within 5 Business Days of such event the Borrower has notified
the Administrative Agent that the Borrower intends to issue, and then within 10 Business Days after
delivery of such notice the Borrower does issue, a Scheme Press Release and provides a copy to the
Administrative Agent (in which case no Mandatory Cancellation Event shall have occurred); or
(b) the date which is six weeks after the date (or to the extent necessary to address a minority
shareholder’s application to Court
thereof and written notice is provided to the
Administrative Agent on or prior to the end of such initial six week period, twelve weeks after the date)
that the Borrower serves notice under Article 117 of the Jersey Companies Law to buy out minority
shareholders;
in protest
(iii) the date upon which all payments made or to be made for Certain Funds Purposes have been paid in
full in cleared funds (such date, the “Final Certain Funds Payment Date”); or
(iv) the date which is 15 days after the Long Stop Date.
“Margin Stock” has the meaning provided in Regulation U.
“Maximum Rate” has the meaning specified in Section 9.19.
“Material Adverse Effect” means a material adverse effect on (a) the financial condition or results of
operations of the Borrower or the Consolidated Group taken as a whole, (b) the rights and remedies of the
Administrative Agent or any Lender under this Agreement, taken as a whole, or (c) the ability of the
Borrower to perform its or their payment obligations under this Agreement.
“Maturity Date” means (i) in the case of Tranche 1 Advances, Tranche 2 Advances and Tranche 3
Advances, the date that is 364 calendar days following the Closing Date, or, if the date that is 364 calendar
days following the Closing Date is not a Business Day, the Business Day immediately preceding the date
that is 364 calendar days following the Closing Date, or (ii) in the case of Tranche 4 Advances, the date that
is 90 calendar days following the Closing Date, or, if the date that is 90 calendar days following the Closing
Date is not a Business Day, the Business Day immediately preceding the date that is 90 calendar days
following the Closing Date.
“Moody’s” means Moody’s Investors Service, Inc. (or any successor thereof).
“Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to
which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an obligation to make contributions.
“Multiple Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA,
that (a) is maintained for employees of the Borrower or any ERISA Affiliate and at least one Person other
than the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower
or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has
been or were to be terminated.
“Net Cash Proceeds” means:
(a) with respect to any Asset Sale, the excess, if any, of (i) the cash received in connection therewith
(including any cash received by way of deferred payment pursuant to, or by monetization of, a note
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receivable or otherwise, but only as and when so received) over (ii) the sum of (A) payments made to retire
any Debt that is secured by such asset and that is required to be repaid in connection with the sale thereof
(other than Advances), (B) the fees and expenses incurred by the Consolidated Group in connection
therewith, (C) taxes paid or reasonably estimated to be payable by the Consolidated Group in connection
with such transaction, and (D) the amount of reserves established by the Consolidated Group in good faith
and pursuant to commercially reasonable practices for adjustment in respect of the sale price of such asset or
assets in accordance with IFRS, provided that if the amount of such reserves exceeds the amounts charged
against such reserves, then such excess, upon the determination thereof, shall then constitute Net Cash
Proceeds; provided that if no Event of Default exists and the Borrower shall deliver to the Administrative
Agent a certificate of a Responsible Officer of the Borrower to the Administrative Agent promptly
following receipt of any such proceeds setting forth the Consolidated Group’s intention to use any portion of
such proceeds to acquire, maintain, develop, construct, improve, upgrade or repair tangible or intangible
assets useful in the business of the Consolidated Group, in each case within the Reinvestment Period, such
portion of such proceeds shall not constitute Net Cash Proceeds except to the extent not, within the
Reinvestment Period, so used;
(b) with respect to the incurrence, issuance, offering or placement of Borrowed Debt, the excess, if any,
of (i) cash received by the Consolidated Group in connection with such incurrence, issuance, offering or
placement over (ii) the sum of (A) payments made to retire any Debt that is required to be repaid in
connection with such issuance, offering or placement (other than Advances), and (B) the underwriting
discounts and commissions and other fees and expenses incurred by the Consolidated Group in connection
with such issuance, offering or placement; and
(c) with respect to the issuance of Equity Interests, the excess of (i) the cash received in connection
with such issuance over (ii) the underwriting discounts and commissions and other fees and expenses
incurred by the Consolidated Group in connection with such issuance.
“New Term Loans” means term loans under any new senior unsecured term loan facility incurred by
the Borrower and identified by the Borrower as to be used for Certain Funds Purposes.
“Non-Consenting Lender” has the meaning specified in Section 9.01(c).
“Non-Defaulting Lender” means, at any time, a Lender that is not a Defaulting Lender.
“Notice” has the meaning specified in Section 9.02(d).
“Notice of Borrowing” has the meaning specified in Section 2.02(a).
“NPL” means the National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
“OFAC” means the U.S. Treasury Department’s Office of Foreign Assets Control.
“Offer Documents” means the Takeover Offer Document and the Offer Press Announcement.
“Offer Press Announcement” means a press announcement released by or on behalf of the Borrower in
accordance with Rule 2.7 of the City Code announcing that the Target Acquisition is to be effected by a
Takeover Offer and setting out the terms and conditions of the Takeover Offer.
“Original Offer Press Announcement” has the meaning specified in Section 5.01(j)(i).
“Original Scheme Press Release” has the meaning specified in Section 5.01(j)(i).
“Other Connection Taxes” means, with respect to the Administrative Agent or any Lender, Taxes
imposed as a result of a present or former connection between the Administrative Agent or such Lender and
the jurisdiction imposing such Tax (other than connections arising from the Administrative Agent or such
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Lender having executed, delivered, become a party to, performed its obligations under, received payments
under, received or perfected a security interest under, engaged in any other transaction pursuant to, or
enforced, any Loan Document, or sold or assigned an interest in any Loan Document).
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“Other Taxes” has the meaning specified in Section 2.14(b).
“Panel” means the Panel on Takeovers and Mergers.
“Participant Register” has the meaning specified in Section 9.07(e).
“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, signed into law October 26, 2001.
“PBGC” means the Pension Benefit Guaranty Corporation (or any successor thereto).
“Person” means an individual, partnership, corporation (including a business trust),
joint stock
company, trust, unincorporated association, joint venture, limited liability company or other entity, or a
government or any political subdivision or agency thereof.
“Plan” means a Single Employer Plan or a Multiple Employer Plan.
“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA,
as amended from time to time.
“Platform” has the meaning specified in Section 5.01(i).
“Pro Forma Financials” has the meaning provided in Section 3.02(g).
“Projections” means any projections and any forward looking statements (including statements with
respect to booked business) of the Consolidated Group furnished to the Lenders or the Administrative Agent
by or on behalf of the Borrower prior to the Closing Date.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any
such exemption may be amended from time to time.
“Public Debt Rating” means, as of any date and subject to the provisions of the next succeeding
sentence, the lowest rating that has been most recently announced by each of S&P or Moody’s, as the case
may be, for any class of non-credit enhanced long-term senior unsecured debt issued by the Borrower. For
purposes of the foregoing: (a) if only one of S&P and Moody’s shall have in effect a Public Debt Rating, the
Applicable Percentage and the Applicable Margin shall be determined by reference to the available rating;
(b) if neither S&P nor Moody’s shall have in effect a Public Debt Rating, the Applicable Percentage and the
Applicable Margin shall be set in accordance with Level 6 under the definition of Applicable Percentage or
Applicable Margin, as the case may be; (c) if the ratings established by S&P and Moody’s shall fall within
different levels, the Applicable Percentage and the Applicable Margin shall be based upon the higher of
such ratings, except that, in the event that the lower of such ratings is more than one level below the higher
of such ratings, the Applicable Percentage and the Applicable Margin shall be based upon the level
immediately above the lower of such ratings; (d) if any rating established by S&P or Moody’s shall be
changed, such change shall be effective as of the date on which such change is first announced publicly by
the rating agency making such change; and (e) if S&P or Moody’s shall change the basis on which ratings
are established, each reference to the Public Debt Rating announced by S&P or Moody’s, as the case may
be, shall refer to the then equivalent rating by S&P or Moody’s, as the case may be.
“Public Lender” has the meaning set forth in Section 5.01.
“Qualifying Committed Financing” means any committed but unfunded securities or loan facility
(including any amendment to an existing loan facility), including, without limitation, the New Term Loans,
identified by the Borrower as to be used for Certain Funds Purposes which has conditions to availability of
funds thereunder that are no more restrictive to the borrower thereunder than the conditions precedent set
forth in Sections 3.02 and 3.03 and the terms and conditions cross-referenced in these Sections.
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“Quotation Day” means with respect to any Interest Period, two Business Days prior to the first day of
such Interest Period, unless market practice differs in the London interbank market for Dollars, in which
case the Quotation Day shall be determined by the Administrative Agent in accordance with market practice
in the London interbank market (and if quotations would normally be given by leading banks in the London
interbank market on more than one day, the Quotation Day shall be the last of those days.
“Reference Bank Rate” means the arithmetic mean of the rates (rounded upwards to four decimal
places) supplied to the Administrative Agent at its request by the Reference Banks (as the case may be) as of
the applicable time on the Quotation Day for Advances in the applicable currency and the applicable Interest
Period as the rate at which the relevant Reference Bank could borrow funds in the London (or other
applicable) interbank market in the relevant currency and for the relevant period, were it to do so by asking
for and then accepting interbank offers in reasonable market size in that currency and for that period.
“Reference Banks” means such banks as may be appointed by the Administrative Agent (and agreed by
such bank) in consultation with the Borrower.
“Register” has the meaning specified in Section 9.07(d).
“Registrar” means the Registrar of Companies for Jersey.
“Reinvestment Period” means, with respect to any Net Cash Proceeds received in connection with any
Asset Sale, the period of six months following the receipt of such Net Cash Proceeds; provided that, in the
event that, during such six-month period, a member of the Consolidated Group enters into a binding
commitment to reinvest any Net Cash Proceeds, the Reinvestment Period with respect to such Net Cash
Proceeds shall be the period of 227 days following the receipt of such Net Cash Proceeds.
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners,
directors, officers, employees, agents, trustees and advisors of such Person and of such Person’s Affiliates.
“Required Lenders” means, at any time, Lenders holding more than 50% of the unused Commitments
and aggregate outstanding principal amount of Advances at such time; provided that the Commitment of,
and the Advances held or deemed held by, any Defaulting Lender shall be excluded for purposes of making
a determination of Required Lenders.
“Resignation Effective Date” has the meaning provided in Section 7.06(a).
“Responsible Officer” means, with respect to the Borrower, the Chief Executive Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Head of Corporate Law, Japan
Legal and the General Counsel of the Borrower (or other executive officer of the Borrower performing
similar functions) or any other officer of the Borrower responsible for overseeing or reviewing compliance
with this Agreement.
“Restricted Margin Stock” means Margin Stock owned by the Consolidated Group the value of which
(determined as required under clause 2(i) of the definition of “Indirectly Secured” set forth in Regulation U)
represents not more than 25% of the aggregate value (determined as required under clause (2)(i) of the
definition of “Indirectly Secured” set forth in Regulation U), on a consolidated basis, of the property and
assets of the Consolidated Group (excluding any Margin Stock) that is subject to the provisions of
Section 5.02(a) or (b).
“S&P” means Standard & Poor’s Financial Services LLC (or any successor thereof).
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or
target of comprehensive Sanctions (at the time of this Agreement, Crimea, Cuba, Iran, North Korea, Sudan
and Syria).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of
designated Persons maintained by OFAC, the U.S. Department of State, the Ministry of Finance of Japan,
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the United Nations Security Council, the European Union, Her Majesty’s Treasury of the United Kingdom,
any relevant and applicable European Union member state or other relevant sanctions authority, (b) any
Person operating, organized or resident in a Sanctioned Country, (c) any Person owned or controlled by any
such Person or Persons described in the foregoing clauses (a) or (b) or (d) any Person otherwise the subject
of any Sanctions.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or
enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S.
Department of State, (b) the Japanese government, including those imposed under the Foreign Exchange
Act and the Import Trade Control Order of Japan (Cabinet Order No. 414 of 1949, as amended) or (c) the
United Nations Security Council, the European Union, Her Majesty’s Treasury of the United Kingdom or
any relevant and applicable European Union member state or other relevant sanctions authority.
“Scheme” means a scheme of arrangement to be effected under Article 125 of the Jersey Companies
Law between Target and the Scheme Shareholders pursuant to which the Borrower will become the holder
of all of the Scheme Shares in accordance with the Scheme Documents, subject to such changes and
amendments to the extent not prohibited by the Loan Documents.
“Scheme Circular” means the document issued by or on behalf of Target to the Scheme Shareholders
setting out the terms and conditions of and an explanatory statement in relation to the Scheme, stating the
recommendation of the Target Acquisition and the Scheme to the Scheme Shareholders by the board of
directors of Target and setting out the notices of the Court Meeting and the General Meeting as such
document may be amended from time to time to the extent such amendment is not prohibited by the Loan
Documents.
“Scheme Documents” means, collectively (a) the Scheme Press Release, (b) the Scheme Circular,
(c) the Scheme Resolutions and (d) any other document issued by or on behalf of Target to its shareholders
in respect of the Scheme and any other document designated as a “Scheme Document” by the
Administrative Agent and the Borrower.
“Scheme Effective Date” means the date on which the Court Order sanctioning the Scheme is duly
delivered on behalf of Target to the Registrar in accordance with Article 125(3) of the Jersey Companies
Law.
“Scheme Press Release” means a press announcement released by the Borrower in accordance with
Rule 2.7 of the City Code announcing that the Target Acquisition is to be effected by a Scheme and setting
out the terms and conditions of the Scheme.
“Scheme Resolutions” means the resolutions of the shareholders of Target which are required to
implement the Scheme and which are referred to and substantially in the form set out in the Scheme Circular
and which are to be proposed at the General Meeting.
“Scheme Shareholders” means the registered holders of Scheme Shares at the relevant time.
“Scheme Shares” means the Target Shares which are subject to the Scheme in accordance with its
terms.
“Screen Rate” has the meaning set forth in the definition of “Eurocurrency Rate”.
“Service of Process Agent” means CT Corporation Systems, 111 Eighth Avenue, 13th Floor,
New York, New York 10011.
“Significant Subsidiary” means any Subsidiary of the Borrower that constitutes a “significant
subsidiary” under Regulation S-X promulgated by the Securities and Exchange Commission, as in effect
from time to time.
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“Single Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA,
that (a) is maintained for employees of the Borrower or any ERISA Affiliate and no Person other than the
Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any
ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were
to be terminated.
“Subsidiary” means, with respect to any Person, any corporation, partnership, joint venture, limited
liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding
capital stock having ordinary voting power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of
such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or
estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or
more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.
“Takeover Offer” means a “takeover offer” within the meaning of Article 116(1) of the Jersey
Companies Law proposed to be made by the Borrower to acquire (directly or indirectly) Target Shares,
substantially on the terms and conditions set out in an Offer Press Announcement (as such offer may be
amended in any way which is not prohibited by the terms of the Loan Documents).
“Takeover Offer Document” means the document
issued by or on behalf of the Borrower and
dispatched to shareholders of Target in respect of a Takeover Offer containing the terms and conditions of
the Takeover Offer reflecting the Offer Press Announcement in all material respects as such document may
be amended from time to time to the extent such amendment is not prohibited by the Loan Documents.
“Target” means Shire plc.
“Target Acquisition” means the direct or indirect acquisition, pursuant to the Offer Documents or
Scheme Documents, as applicable, of the Target Shares, which acquisition will be effected pursuant to a
Scheme or Takeover Offer.
“Target Shares” means all of the issued and to be issued ordinary shares in the capital of the Target
(including any issued pursuant to the exercise of any options or awards or other instruments convertible into
or exchangeable for shares of the Target).
“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, withholdings
(including back-up withholdings), assessments, fees or other like charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable thereto.
“Tranche 1 Advance” means an advance by a Lender pursuant to its Tranche 1 Commitment to the
Borrower as part of a Borrowing.
“Tranche 1 Commitment” means as to any Lender, the commitment of such Lender to make an
Advance pursuant to Section 2.01(a), as such commitment may be reduced from time to time pursuant to the
terms hereof. The initial amount of each Lender’s Tranche 1 Commitment is (a) the amount set forth in the
column labeled “Tranche 1 Commitment” opposite such Lender’s name on Schedule I hereto, or (b) if such
Lender has entered into any Assignment and Acceptance, the amount set forth for such Lender in the
Register maintained by the Administrative Agent pursuant to Section 9.07(d), as such amount may be
reduced pursuant to Section 2.05. As of the Effective Date, the aggregate amount of the Tranche 1
Commitments is $15,350,000,000 as such amount may be reduced in accordance with Section 2.05 or 6.01.
“Tranche 2 Advance” means an advance by a Lender pursuant to its Tranche 2 Commitment to the
Borrower as part of a Borrowing.
“Tranche 2 Commitment” means as to any Lender, the commitment of such Lender to make an
Advance pursuant to Section 2.01(b), as such commitment may be reduced from time to time pursuant to the
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terms hereof. The initial amount of each Lender’s Tranche 2 Commitment is (a) the amount set forth in the
column labeled “Tranche 2 Commitment” opposite such Lender’s name on Schedule I hereto, or (b) if such
Lender has entered into any Assignment and Acceptance, the amount set forth for such Lender in the
Register maintained by the Administrative Agent pursuant to Section 9.07(d), as such amount may be
reduced pursuant to Section 2.05. As of the Effective Date, the aggregate amount of the Tranche 2
Commitments is $4,500,000,000 as such amount may be reduced in accordance with Section 2.05 or 6.01.
“Tranche 3 Advance” means an advance by a Lender pursuant to its Tranche 3 Commitment to the
Borrower as part of a Borrowing.
“Tranche 3 Commitment” means as to any Lender, the commitment of such Lender to make an
Advance pursuant to Section 2.01(c), as such commitment may be reduced from time to time pursuant to the
terms hereof. The initial amount of each Lender’s Tranche 3 Commitment is (a) the amount set forth in the
column labeled “Tranche 3 Commitment” opposite such Lender’s name on Schedule I hereto, or (b) if such
Lender has entered into any Assignment and Acceptance, the amount set forth for such Lender in the
Register maintained by the Administrative Agent pursuant to Section 9.07(d), as such amount may be
reduced pursuant to Section 2.05. As of the Effective Date, the aggregate amount of the Tranche 3
Commitments is $7,500,000,000 as such amount may be reduced in accordance with Section 2.05 or 6.01.
“Tranche 4 Advance” means an advance by a Lender pursuant to its Tranche 4 Commitment to the
Borrower as part of a Borrowing.
“Tranche 4 Commitment” means as to any Lender, the commitment of such Lender to make an
Advance pursuant to Section 2.01(d), as such commitment may be reduced from time to time pursuant to the
terms hereof. The initial amount of each Lender’s Tranche 4 Commitment is (a) the amount set forth in the
column labeled “Tranche 4 Commitment” opposite such Lender’s name on Schedule I hereto, or (b) if such
Lender has entered into any Assignment and Acceptance, the amount set forth for such Lender in the
Register maintained by the Administrative Agent pursuant to Section 9.07(d), as such amount may be
reduced pursuant to Section 2.05. As of the Effective Date, the aggregate amount of the Tranche 4
Commitments is $3,500,000,000 as such amount may be reduced in accordance with Section 2.05 or 6.01.
“Transactions” means the Target Acquisition, the entry into this Agreement and the transactions
contemplated hereby, the borrowings by the Borrower under each of the Tranche 1 Commitments, the
Tranche 2 Commitments, the Tranche 3 Commitments and the Tranche 4 Commitments, and in each case,
related fees costs and expenses.
“Type” refers to a Cost of Funds Rate Advance or a Eurocurrency Rate Advance.
“United States” and “U.S.” each means the United States of America.
“Unrestricted Margin Stock” means any Margin Stock owned by the Consolidated Group which is not
Restricted Margin Stock.
“Voting Stock” means shares of capital stock issued by a corporation, or equivalent interests in any
other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such Person, even if the right so to vote
has been suspended by the happening of such a contingency.
“Withdrawal Liability” has the meaning specified in Part I of Subtitle E of Title IV of ERISA.
“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the
write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In
Legislation for the applicable EEA Member Country, which write-down and conversion powers are
described in the EU Bail-In Legislation Schedule.
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SECTION 1.02 Computation of Time Periods. In this Agreement, in the computation of periods of time
from a specified date to a later specified date, the word “from” means “from and including”, the word “through”
means “through and including” and each of the words “to” and “until” mean “to but excluding”.
SECTION 1.03 Accounting Terms. Except as otherwise expressly provided herein, all accounting
terms not specifically defined herein shall be construed in accordance with, and all financial data (including
financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with,
IFRS, as in effect from time to time. If at any time any change in IFRS would affect the calculation of any
covenant set forth herein and either the Borrower or the Required Lenders shall so request, the Administrative
Agent, the Lenders and the Borrower shall negotiate in good faith to amend such covenant to preserve the
original intent thereof in light of such change in IFRS (subject to the approval of the Required Lenders); provided
that, until so amended, (i) such covenant shall continue to be calculated in accordance with IFRS prior to such
change and (ii) the Borrower shall provide to the Administrative Agent and the Lenders, concurrently with the
delivery of any financial statements or reports with respect
to such covenant, statements setting forth a
reconciliation between calculations of such covenant made before and after giving effect to such change in IFRS.
Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein
shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving
effect to (i) any election under applicable accounting standards to value any Debt or other liabilities of the
Borrower or any Subsidiary at “fair value” or similar term and (ii) any treatment of Debt in respect of convertible
debt instruments under applicable accounting standards to value any such Debt in a reduced or bifurcated
manner, and such Debt shall at all times be valued at the full stated principal amount thereof.
SECTION 1.04 Terms Generally. The definitions of terms herein shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same
meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to
instrument or other document herein shall be construed as referring to such agreement,
any agreement,
instrument or other document as from time to time amended, restated, supplemented or otherwise modified
(subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein),
(b) any definition of or reference to any statute, rule or regulation shall be construed as referring thereto as from
time to time amended, supplemented or otherwise modified (including by succession of comparable successor
laws), (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns
(subject to any restrictions on assignment set forth herein and (d) the words “herein”, “hereof” and “hereunder”,
and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular
provision hereto.
SECTION 1.05 Jersey Terms. In each Loan Document, where it relates to a person incorporated or
formed or having its centre of main interests in Jersey, a reference to:
(a)
a winding up, administration or dissolution includes, without limitation, bankruptcy (as that term is
interpreted pursuant to Article 8 of the Interpretation (Jersey) Law 1954), any procedure or process
referred to in Part 21 of the Jersey Companies Law, and any other similar proceedings affecting the
rights of creditors generally under Jersey law, and shall be construed so as to include any equivalent or
analogous proceedings; or
(b) a receiver, administrative receiver, administrator or the like includes, without limitation, the Viscount
of the Royal Court of Jersey, autorisés or any other person performing the same function of each of the
foregoing.
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ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
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SECTION 2.01 The Advances. Each Lender severally and not jointly agrees, on the terms and
conditions hereinafter set forth (a) to make Tranche 1 Advances denominated in Dollars to the Borrower from
time to time on any Business Day during the Availability Period in an amount not to exceed such Lender’s
outstanding Tranche 1 Commitment immediately prior to the making of the Tranche 1 Advance, (b) to make
Tranche 2 Advances denominated in Dollars to the Borrower from time to time on any Business Day during the
Availability Period in an amount not to exceed such Lender’s outstanding Tranche 2 Commitment immediately
prior to the making of the Tranche 2 Advance, (c) to make Tranche 3 Advances denominated in Dollars to the
Borrower from time to time on any Business Day during the Availability Period in an amount not to exceed such
Lender’s outstanding Tranche 3 Commitment immediately prior to the making of the Tranche 3 Advance and
(d) to make Tranche 4 Advances denominated in Dollars to the Borrower from time to time on any Business Day
during the Availability Period in an amount not to exceed such Lender’s outstanding Tranche 4 Commitment
immediately prior to the making of the Tranche 4 Advance. Each Borrowing shall be in an aggregate amount
equal to the Borrowing Minimum or a Borrowing Multiple in excess thereof and shall initially consist of
Eurocurrency Rate Advances of the same Class made on the same day by the Lenders ratably according to their
respective relevant Commitments. Upon the making of any Advance by a Lender such Lender’s relevant
Commitment will be permanently reduced by the aggregate principal amount of such Advance. The Borrower
may prepay Advances pursuant to Section 2.10, provided that Advances may not be reborrowed once repaid.
SECTION 2.02 Making the Advances. (a) Each Borrowing shall be made on notice by the Borrower,
given not later than 9:00 A.M. (Tokyo time) on the third Business Day prior to the date of the proposed
Borrowing, to the Administrative Agent, which shall give to each Lender prompt notice thereof by telecopier or
other electronic communication. Each notice of a Borrowing (a “Notice of Borrowing”) shall be by telephone,
confirmed immediately in writing, including by telecopier (or other electronic communication) in substantially
the form of Exhibit A hereto, specifying therein the requested (i) date of such Borrowing (which shall be a
Business Day), (ii) Class of Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing,
(iv) initial Interest Period for such Advance, if such Borrowing is to consist of Eurocurrency Rate Advances, and
(v) account or accounts in which the proceeds of the Borrowing should be credited. Each Lender shall, before
11:00 A.M. (Tokyo time) on the date of such Borrowing make available for the account of its Applicable
Lending Office to the Administrative Agent at the applicable Administrative Agent’s Office, in same day funds,
such Lender’s ratable portion of such Borrowing. After the Administrative Agent’s receipt of such funds and
upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such
funds available to the Borrower in immediately available funds to the account or accounts specified by the
Borrower to the Administrative Agent in the Notice of Borrowing relating to the applicable Borrowing.
Notwithstanding anything to the contrary herein, there shall not be more than ten separate Borrowings of
Advances.
(b) Anything in Section 2.02(a) to the contrary notwithstanding, (i) the Borrower may not select
Eurocurrency Rate Advances if the obligation of the Lenders to make Eurocurrency Rate Advances shall then be
suspended pursuant to Section 2.08 or 2.12 and (ii) the Eurocurrency Rate Advances may not be outstanding as
part of more than ten separate Borrowings.
(c) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any
Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurocurrency Rate Advances, the
Borrower shall indemnify each Lender against any reasonable loss, cost or expense incurred by such Lender as a
result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article III, including, without limitation, any reasonable loss (excluding loss of
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anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other
funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when
such Advance, as a result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice from a Lender prior to the time of any
Borrowing that such Lender will not make available to the Administrative Agent such Lender’s ratable portion of
such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the
Administrative Agent on the date of such Borrowing in accordance with Section 2.02(a) and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding
amount. If and to the extent that any Lender shall not have so made such ratable portion available to the
Administrative Agent, such Lender and the Borrower severally agree to pay or to repay to the Administrative
Agent forthwith on demand such corresponding amount and to pay interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is paid or repaid to the Administrative
Agent, at (i) in the case of the Borrower, the higher of (A) the interest rate applicable at the time to Advances
comprising such Borrowing and (B) the cost of funds incurred by the Administrative Agent in respect of such
amount and (ii) in the case of such Lender, the greater of the Cost of Funds Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank compensation. If the Borrower and
such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the
Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for
such period. If such Lender shall pay to the Administrative Agent such corresponding principal amount, such
amount so paid shall constitute such Lender’s Advance as part of such Borrowing for all purposes of this
Agreement. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have
against a Lender that shall have failed to make such payment to the Administrative Agent.
(e) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not
relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such
other Lender on the date of any Borrowing.
(f) If any Lender makes available to the Administrative Agent funds for any Advance to be made by
such Lender as provided herein, and such funds are not made available to the Borrower by the Administrative
Agent because the conditions to such Borrowing are not satisfied or waived in accordance with the terms hereof,
the Administrative Agent shall promptly return such funds (in like funds as received from such Lender) to such
Lender, without interest.
(g) Each Lender at its option may make any Advance by causing any domestic or foreign branch or
Affiliate of such Lender to make such Advance (and in the case of an Affiliate, the provisions of Sections 2.08,
2.11 and 2.14 shall apply to such Affiliate to the same extent as to such Lender); provided that any exercise of
such option shall not affect the obligation of the Borrower to repay such Advance in accordance with the terms of
this Agreement.
SECTION 2.03 [Reserved].
SECTION 2.04 Fees.
(a) Commitment Fee. As part of
the consideration for each Lender’s
Commitment hereunder, the Borrower agrees to pay to the Administrative Agent, for the account of each Lender
(other than a Defaulting Lender for such time as such Lender is a Defaulting Lender), a non-refundable
commitment fee from (and excluding) the date which is 60 days after the Effective Date and from time to time
through and including the date of termination of the Commitments in full, at a rate per annum (x) equal to 0.10%
until the receipt of a Public Debt Rating (after giving effect to the Target Acquisition) and (y) thereafter, equal to
the Applicable Percentage per annum, on the aggregate daily amount of such Lender’s Commitments during such
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period, such fee to be earned and payable in arrears quarterly on the last Business Day of each March, June,
September and December, and on the date the Commitment terminates in full or is otherwise reduced to zero.
(b) Duration Fee. As part of the consideration for each Lender’s Commitment hereunder, the Borrower
will pay to the Administrative Agent for the account of each Lender (subject to Section 2.19(a)(ii)) a duration fee
on each date set forth below in an amount equal to the percentage set forth opposite such date of the aggregate
principal amount of Advances and undrawn Commitments held by such Lender on such date:
DATE
PERCENTAGE
90 days after the Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
180 days after the Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
270 days after the Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.50%
0.75%
1.00%
(c) Additional Fees. The Borrower shall pay to the Administrative Agent and Arrangers for their
account (or that of their applicable Affiliate) such fees as may from time to time be agreed between any of the
Consolidated Group and the Administrative Agent and/or Arrangers.
(d) Calculation of Commitment. For the avoidance of doubt, with respect
to the definition of
“Mandatory Cancellation Event” and the ability thereunder for the Borrower to provide notices and issue
documents to facilitate a switch from a Scheme to a Takeover Offer and vice versa, the Commitment shall be
deemed to be in effect until the end of the day on which the applicable notice or issuance is required to but does
not occur for the purposes of calculating any fees under this Agreement or any fee letters related hereto.
SECTION 2.05 Termination or Reduction of the Commitments; Mandatory Prepayments. (a) Unless
previously terminated, the Commitments shall terminate in full at 5:00 p.m. (Tokyo time) on the earlier of (i) the
date on which all of the Certain Funds Purposes have been achieved without the making of any Advances and
(ii) the date on which the Certain Funds Period terminates; provided that
the Tranche
1 Commitments, Tranche 2 Commitments and Tranche 3 Commitments shall terminate in full at 5:00 p.m.
(Tokyo time) on the date that is 364 days after the Closing Date and the Tranche 4 Commitments shall terminate
in full at 5:00 p.m. (Tokyo time) on the date that is 90 days after the Closing Date. Additionally, each Lender’s
Commitment will be permanently reduced upon such Lender making any Advance under such Commitment by
an amount equal to the amount of such Advance. Any termination or reduction of the Commitments shall be
permanent.
in any event
(b) Ratable Reduction or Termination. The Borrower shall have the right, upon at least three Business
Days’ notice to the Administrative Agent, to terminate in whole or permanently reduce ratably in part the unused
portions of any Class of Commitments of the Lenders; provided that each partial reduction shall be in an
aggregate amount of not less than $50,000,000 and an integral multiple of $5,000,000 in excess thereof; provided
further that any such notice may state that such notice is conditioned upon the effectiveness of other credit
facilities or the consummation of a specific transaction, in which case such notice may be revoked by the
Borrower if such condition is not satisfied.
(c) [Reserved].
(d) Mandatory Prepayment. First, any outstanding Advances of a Class shall be prepaid, and second, if
any Commitments of a Class are outstanding and no Advances of such Class are outstanding on (or such
Advances of such Class have been prepaid as of) the applicable date, the Commitments of such Class shall be
reduced, in each case, on a Dollar-for-Dollar basis by or with an amount equal to that specified in this paragraph
(d) (with amounts received in non-Dollar currencies to be converted by the Borrower to Dollars for the purposes
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of this calculation based upon foreign exchange rates actually received in the case of a prepayment (or in the case
of a Commitment reduction, with the amount of such reduction to be calculated based on the amount notified by
the Borrower to the Administrative Agent as the amount that would actually be received by the Borrower if it
converted the amount so received to Dollars, as determined by the Borrower acting in good faith and in a
commercially reasonable manner in consultation with the Administrative Agent and taking into account any
hedging arrangements which the Borrower has in place) in each case within three Business Days of receipt by the
Consolidated Group of any Net Cash Proceeds (or in the case of a Qualifying Committed Financing, receipt by
any member of the Consolidated Group of commitments thereof) referred to in this paragraph (d)):
(i)
(x) from 100.0% of the Net Cash Proceeds actually received by the Consolidated Group from the
incurrence of Borrowed Debt by such entity (excluding (A) intercompany debt of such entities, (B) any
other ordinary course borrowings under existing working capital or overdraft facilities, (C) issuances of
commercial paper and refinancings thereof (other than any such issuances that are identified by the
Borrower as to be used for Certain Funds Purposes), (D) purchase money indebtedness incurred in the
ordinary course of business, (E) indebtedness with respect to capital leases incurred in the ordinary course
of business, (F) renewals, refinancings or replacements of indebtedness existing on the Effective Date (or, in
the case of indebtedness of the Target and its Subsidiaries, existing on the Closing Date) (provided that the
existing indebtedness being renewed, refinanced or replaced is scheduled to mature within 12 months after
the date of such renewal, refinancing or replacement), (G) the incurrence of Borrowed Debt under local
bilateral revolving credit financing arrangements existing on the Effective Date and (H) other Debt in an
amount not to exceed $1,000,000,000 in the aggregate) (or, to the extent any such Net Cash Proceeds are
identified by the Borrower as to be used for Certain Funds Purposes and are denominated in a currency
other than Dollars, 85% of such Net Cash Proceeds (the aggregate amount of Net Cash Proceeds in excess
of such 85%, the “Withheld Debt Proceeds”); provided that the aggregate Withheld Debt Proceeds, together
with the aggregate Withheld Equity Proceeds (as defined below) and the aggregate Withheld Debt
Commitments (as defined below) (other than any Withheld Debt Commitments which have been converted
into Withheld Debt Proceeds and therefore already been counted in this calculation), shall not exceed
$2,000,000,000); provided that with respect
to any Net Cash Proceeds referred to in this clause
(i) denominated in a currency other than Dollars, upon the earlier of the Final Certain Funds Payment Date
and the conversion of any such Net Cash Proceeds into Dollars, to the extent such amount in Dollars
exceeds the amount by which the Commitments were reduced and/or Advances were prepaid as a result of
the receipt of those Net Cash Proceeds, there shall be a further mandatory prepayment and/or commitment
reduction pursuant to this clause (d) in an amount equal to the lower of (I) such excess and (II) the relevant
Withheld Debt Proceeds in respect of those Net Cash Proceeds) and (y) the aggregate amount of
commitments received in respect of any Qualifying Committed Financing (or, with respect
to any
Qualifying Committed Financing denominated in a currency other than Dollars, 85% of the aggregate
commitments received in respect of any such Qualifying Committed Financing (the aggregate amount of
commitments in excess of such 85%, the “Withheld Debt Commitments”); provided that the aggregate
Withheld Debt Commitments,
together with the aggregate Withheld Debt Proceeds (other than any
Withheld Debt Proceeds which represent the proceeds of any Withheld Debt Commitments that have
already been counted in this calculation) and the aggregate Withheld Equity Proceeds, shall not exceed
$2,000,000,000) (it being understood that (1) following the effectiveness of such Commitment reduction
and solely to the extent of the amount thereof (together with any Withheld Debt Commitments), there shall
be no duplicative prepayment of Loans from subsequent proceeds (up to such amount (together with any
Withheld Debt Commitments)) received from such Borrowed Debt or Qualifying Committed Financing
pursuant to clause (d)(i)(x) or (d)(i)(y) of this Section 2.05 other than pursuant to clause (2) below and to the
extent any Qualifying Committed Financing is not required to be applied to the cancellation of any
Commitments pursuant to this paragraph (d), there shall be no requirement to apply any loan proceeds
to any Qualifying Committed Financing
arising from any New Term Loans and (2) with respect
denominated in a currency other than Dollars, upon the earlier of the Final Certain Funds Payment Date and
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the conversion of any such Qualifying Committed Financing or the proceeds thereof into Dollars, to the
extent such amount in Dollars exceeds the amount by which the Commitments were reduced as a result of
the receipt of those commitments in respect of a Qualifying Committed Financing, there shall (except to the
extent that a mandatory prepayment and/or commitment reduction has been made in respect of those
proceeds pursuant to the equivalent provision in clause (d)(i)(x) above) be a further mandatory prepayment
and/or commitment reduction pursuant to this clause (d) in an amount equal to the lower of (I) such excess
and (II) the relevant Withheld Debt Commitments in respect of that Qualifying Committed Financing;
(ii) from 100.0% of the Net Cash Proceeds actually received from the issuance of any Equity Interests
by the Consolidated Group (other than (A) issuances pursuant to employee stock plans or other benefit or
employee incentive arrangements, (B) issuances among the Consolidated Group or (C) other issuances not
to exceed $100,000,000 in the aggregate) ( to the extent any such Net Cash Proceeds are identified by the
Borrower as to be used for Certain Funds Purposes and are denominated in a currency other than Dollars,
85% of such Net Cash Proceeds (the aggregate amount of Net Cash Proceeds in excess of such 85%, the
“Withheld Equity Proceeds”); provided that the aggregate Withheld Equity Proceeds, together with the
aggregate Withheld Debt Commitments and the aggregate Withheld Debt Proceeds (other than any
Withheld Debt Proceeds which represent the proceeds of any Withheld Debt Commitments that have
already been counted in this calculation), shall not exceed $2,000,000,000); provided that with respect to
any Net Cash Proceeds referred to in this clause (ii) denominated in a currency other than Dollars, upon the
earlier of the Final Certain Funds Payment Date and the conversion of any such Net Cash Proceeds into
Dollars, to the extent such amount in Dollars exceeds the amount by which the Commitments were reduced
and/or the Advances were prepaid as a result of the receipt of those Net Cash Proceeds, there shall be a
further mandatory prepayment and/or commitment reduction pursuant to this clause (d) in an amount equal
to the lower of (I) such excess and (II) the relevant Withheld Equity Proceeds in respect of those Net Cash
Proceeds; and
(iii) from 100.0% of the Net Cash Proceeds actually received by the Consolidated Group from Asset
Sales outside the ordinary course of business (except for (A) Asset Sales between or among such entities
and (B) Asset Sales, the Net Cash Proceeds of which do not exceed $100,000,000 in any single transaction
or related series of transactions or $1,000,000,000 in the aggregate).
All mandatory prepayments or Commitment reductions (a) in respect of the issuance of senior notes
and/or mandatorily convertible securities and/or hybrid equity or Equity Interests (other than hybrid securities
denominated in Japanese Yen) shall be applied first to Tranche 1 Advances and Tranche 1 Commitments, second
to Tranche 3 Advances and Tranche 3 Commitments, third to Tranche 2 Advances and Tranche 2 Commitments
and fourth to Tranche 4 Advances and Tranche 4 Commitments, (b) in respect of the issuance of hybrid securities
denominated in Japanese Yen shall be applied first to the Tranche 2 Advances and Tranche 2 Commitments,
second ratably to the Tranche 1 Advances and Tranche 1 Commitments and Tranche 3 Advances and Tranche 3
Commitments, and third to the Tranche 4 Advances and Tranche 4 Commitments, (c) in respect of the incurrence
of New Term Loans shall be applied first to Tranche 3 Advances and Tranche 3 Commitments, second to
Tranche 1 Advances and Tranche 1 Commitments, third Tranche 2 Advances and Tranche 2 Commitments and
fourth to Tranche 4 Advances and Tranche 4 Commitments, and (d) in respect of other mandatory prepayments
or commitment reductions described in this clause (d) shall be applied first ratably to Tranche 1 Advances and
Tranche 1 Commitments and Tranche 3 Advances and Tranche 3 Commitments, second to the Tranche 2
Advances and Tranche 2 Commitments and third to Tranche 4 Advances and Tranche 4 Commitments. All
mandatory prepayments and Commitment reductions will be applied without penalty or premium (except for
breakage costs and accrued interest, if any) and will be applied pro rata among the Lenders of the applicable
Class of Advances (or, if applicable, Class of Commitments). Mandatory prepayments of the Advances may not
be reborrowed.
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If the Net Cash Proceeds are received by any Person other than the Borrower, the Commitments shall
only be reduced (or the Advances prepaid) to the extent that such Net Cash Proceeds are not prohibited or
delayed by applicable law and can be immediately transferred to the Borrower (with such amount net of the costs
and taxes associated therewith); it being understood that if such a restriction on transfer exists, upon such
restriction ceasing to apply, the Commitments will be immediately reduced or, if applicable, the Advances will
be repaid within three Business Days thereof, in the manner set forth above as if such Net Cash Proceeds were
received by the Borrower on the date such restriction ceased to exist.
SECTION 2.06 Repayment of Advances. The Borrower shall repay on the Maturity Date for the
applicable Class to the Administrative Agent for the ratable account of the Lenders of such Class, the aggregate
principal amount of all Advances under such Class made to the Borrower outstanding on such date.
SECTION 2.07 Interest on Advances. (a) Scheduled Interest. The Borrower shall pay interest on the
unpaid principal amount of each Advance made to it from the date of such Advance until such principal amount
shall be paid in full, at the following rates per annum:
(i) Cost of Funds Rate Advances. During such periods as such Advance is a Cost of Funds Rate
Advance, a rate per annum equal at all times to the sum of (A) the Cost of Funds Rate in effect from
time to time and (B) the Applicable Margin, payable in arrears quarterly on the last Business Day of
each March, June, September and December, during such periods and on the date the Advances are
paid in full.
(ii) Eurocurrency Rate Advances. During such periods as such Advance is a Eurocurrency Rate
Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum
of (A) the Eurocurrency Rate for such Interest Period for such Advance, and (B) the Applicable
Margin, payable in arrears on the last day of such Interest Period and, if such Interest Period has a
duration of more than three months, on each day that occurs during such Interest Period every three
months from the first day of such Interest Period and on the date such Eurocurrency Rate Advance
shall be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the continuance of an Event of Default pursuant to
Section 6.01(a), the Administrative Agent shall, upon the request of the Required Lenders, require the Borrower
to pay interest (“Default Interest”), which amount shall accrue as of the date of occurrence of the Event of
Default, on (i) amounts that are overdue, payable in arrears on the dates referred to in Section 2.07(a)(i) or
2.07(a)(ii), at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid
on such overdue amount pursuant to Section 2.07(a)(i) or 2.07(a)(ii) and (ii) to the fullest extent permitted by
law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date
such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall
be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid on Advances pursuant to Section 2.07(a)(ii) (or, if all Advances have been Converted to Cost
of Funds Rate Advances pursuant to Section 2.07(a)(i)), provided, however, that following acceleration of the
Advances pursuant to Section 6.01, Default Interest shall accrue and be payable hereunder whether or not
previously required by the Administrative Agent.
(c) Additional Interest on Eurocurrency Rate Advances. The Borrower shall pay to each Lender, so
long as and to the extent such Lender shall be subject to, under applicable law, rules or regulations to reserves,
liquid asset, fees or similar requirements (as further described in the definition of Eurocurrency Rate Reserve
Percentage) with respect to deposits or liabilities (as so described), additional interest on the unpaid principal
amount of each Advance of such Lender made to the Borrower that is a Eurocurrency Rate Advance, from the
date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to
the remainder obtained by subtracting (a) the Eurocurrency Rate for the applicable Interest Period for such
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Advance from (b) the rate obtained by dividing such Eurocurrency Rate by a percentage equal to 100% minus the
Eurocurrency Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which
is payable on such Advance. Such Lender shall as soon as practicable provide notice to the
interest
Administrative Agent and the Borrower of any such additional interest arising in connection with such Advance,
which notice shall be conclusive and binding, absent demonstrable error.
SECTION 2.08 Interest Rate Determination. (a) The Administrative Agent shall give prompt notice to
the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes
of Section 2.07(a)(i) or 2.07(a)(ii).
(b) If, with respect to any Eurocurrency Rate Advances, (i) the Administrative Agent shall have
determined (which determination shall be conclusive and binding absent manifest error) that adequate and
reasonable means (including, without limitation, by means of an Interpolated Rate) do not exist for ascertaining
the Eurocurrency Rate for such Interest Period or (ii) the Required Lenders notify the Administrative Agent that
(x) they are unable to obtain matching deposits in the London inter-bank market at or about 11:00 A.M. (London
time) on the second Business Day before the making of a Borrowing in sufficient amounts to fund their
respective Advances as a part of such Borrowing during its Interest Period or (y) the Eurocurrency Rate for any
Interest Period for such Advances will not adequately and fairly reflect the cost to the Required Lenders of
making, funding or maintaining their respective Eurocurrency Rate Advances for such Interest Period, the
Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon (A) (x) the Borrower
will, on the last day of the then existing Interest Period therefor prepay such Advances or (y) any such Advance
shall automatically, on the last day of the then existing Interest Period therefor, be Converted to a Cost of Funds
Rate Advance with an Interest Period of the same duration and (B) the obligation of the Lenders to make
Eurocurrency Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer exist.
(c) If at any time the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that (i) the circumstances set forth in clause (b)(i) have arisen and such circumstances are
unlikely to be temporary or (ii) the circumstances set forth in clause (b)(i) have not arisen but the supervisor for
the administrator of the Screen Rate or a Governmental Authority having jurisdiction over the Administrative
Agent has made a public statement identifying a specific date after which the Screen Rate shall no longer be used
for determining interest rates for loans, then the Administrative Agent and the Borrower shall endeavor to
establish an alternate rate of interest to the Eurocurrency Rate that gives due consideration to the then prevailing
market convention for determining a rate of interest for syndicated loans in the United States at such time, and
shall enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related
changes to this Agreement as may be applicable (but for the avoidance of doubt, such related changes shall not
include a reduction of the Applicable Margin); provided that, if such alternate rate of interest as so determined
would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.
Notwithstanding anything to the contrary in Section 9.01, such amendment shall become effective without any
further action or consent of any other party to this Agreement so long as the Administrative Agent shall not have
received, within five Business Days of the date notice of such alternate rate of interest is provided to the Lenders,
a written notice from the Required Lenders stating that such Required Lenders object to such amendment. Until
an alternate rate of interest shall be determined in accordance with this clause (c) (but, in the case of the
circumstances described in clause (ii) of the first sentence of this Section 2.08(c), only to the extent the Screen
Rate for the applicable currency and such Interest Period is not available or published at such time on a current
basis), (x) any request from the Borrower to continue any Advance as a Eurocurrency Rate Advance shall be
ineffective and any such Advance shall automatically, on the last day of the then existing Interest Period therefor,
be Converted to a Cost of Funds Rate Advance with an Interest Period of the same duration and (y) the obligation
of the Lenders to make Eurocurrency Rate Advances shall be suspended.
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(d) If the Borrower shall fail to select the duration of any Interest Period for any Eurocurrency Rate
Advances made to the Borrower in accordance with the provisions contained in the definition of “Interest Period”
in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such
Eurocurrency Rate Advances will automatically, on the last day of the then existing Interest Period therefor, be
continued as a Eurocurrency Advance with an Interest Period of one month.
SECTION 2.09 [Intentionally Omitted].
SECTION 2.10 Optional Prepayments of Advances. The Borrower may, upon written notice to the
Administrative Agent stating the proposed date and aggregate principal amount of the proposed prepayment,
given not later than 10:00 A.M. (Tokyo time) one Business Day prior to the date (which date shall be a Business
Day) of such proposed prepayment, in the case of a Borrowing consisting of Cost of Funds Rate Advances, and
not later than 10:00 A.M. (Tokyo time) at least two Business Days prior to the date of such proposed
prepayment, in the case of a Borrowing consisting of Eurocurrency Rate Advances, and if such notice is given,
the Borrower shall, prepay the outstanding principal amount of the Advances comprising part of the same
Borrowing made to the Borrower in whole or ratably in part, and together with accrued interest to the date of
such prepayment on the principal amount prepaid; provided, however, that (i) each partial prepayment shall be in
an aggregate principal amount of the Borrowing Minimum or a Borrowing Multiple in excess thereof and (ii) if
any prepayment of a Eurocurrency Rate Advance is made on a date other than the last day of an Interest Period
for such Eurocurrency Rate Advance, the Borrower shall also pay any amount owing pursuant to Section 9.04(c);
and provided, further, that, subject to clause (ii) of the immediately preceding proviso, any such notice may state
that such notice is conditioned upon the effectiveness of other credit facilities or the consummation of a specific
transaction, in which case such notice may be revoked by the Borrower if such condition is not satisfied.
Notwithstanding anything in this Agreement to the contrary, the Borrower shall not optionally prepay any
Tranche 1 Advances, Tranche 2 Advances or Tranche 3 Advances while any Tranche 4 Advances are
outstanding.
SECTION 2.11 Increased Costs. (a) If, due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance with any directive, guideline or request from any
central bank or other Governmental Authority including, without limitation, any agency of the European Union
or similar monetary or multinational authority (whether or not having the force of law), in each case after the date
hereof (or with respect to any Lender (or the Administrative Agent), if later, the date on which such Lender (or
the Administrative Agent) becomes a Lender (or the Administrative Agent)), there shall be any increase in the
cost to any Lender or the Administrative Agent of agreeing to make or making, funding or maintaining Advances
(excluding for purposes of this Section 2.11 any such increased costs resulting from (i) Taxes as to which such
Lender is indemnified under Section 2.14, (ii) Excluded Taxes, or (iii) Other Taxes), then the Borrower shall
from time to time, upon demand by such Lender or the Administrative Agent (with a copy of such demand to the
Administrative Agent, if applicable), pay to the Administrative Agent for the account of such Lender (or for its
own account, if applicable) additional amounts sufficient to compensate such Lender or the Administrative Agent
for such increased cost as reasonably determined by such Lender or the Administrative Agent (which
determination shall be made in good faith (and not on an arbitrary or capricious basis) and consistent with
similarly situated customers of the applicable Lender or the Administrative Agent under agreements having
provisions similar to this Section 2.11 after consideration of such factors as such Lender or the Administrative
Agent then reasonably determines to be relevant). A certificate describing such increased costs in reasonable
detail delivered to the Borrower shall be conclusive and binding for all purposes, absent demonstrable error.
(b) If any Lender reasonably determines that compliance with any law or regulation or any directive,
guideline or request from any central bank or other Governmental Authority including, without limitation, any
agency of the European Union or similar monetary or multinational authority (whether or not having the force of
law), in each case promulgated or given after the date hereof (or with respect to any Lender, if later, the date on
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which such Lender becomes a Lender), affects or would affect the amount of capital, insurance or liquidity
required or expected to be maintained by such Lender or any corporation controlling such Lender and that the
amount of such capital, insurance or liquidity is increased by or based upon the existence of such Lender’s
commitment to lend hereunder and other commitments of this type, the Borrower shall, from time to time upon
demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative
Agent for the account of such Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances as reasonably determined by such Lender (which determination
shall be made in good faith (and not on an arbitrary or capricious basis) and consistent with similarly situated
customers of the applicable Lender under agreements having provisions similar to this Section 2.11 after
consideration of such factors as such Lender then reasonably determines to be relevant), to the extent that such
Lender reasonably determines such increase in capital, insurance or liquidity to be allocable to the existence of
such Lender’s Advances or commitment to lend hereunder. A certificate as to such amounts submitted to the
Borrower and the Administrative Agent by such Lender shall be conclusive and binding for all purposes, absent
demonstrable error.
(c) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall
not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall
not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred
more than six months prior to the date that such Lender notifies the Borrower of the change or circumstance
giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor;
provided further that, if the change or circumstance giving rise to such increased costs or reductions is
retroactive, then the six-month period referred to above shall be extended to include the period of retroactive
effect thereof. Any Lender making a claim for compensation under this Section 2.11 may be required to assign
all of its rights and obligations hereunder upon a request by the Borrower in accordance with Section 8.07.
(d) Notwithstanding anything in this Section 2.11 to the contrary, for purposes of this Section 2.11, (A)
the Dodd Frank Wall Street Reform and Consumer Protection Act and the rules and regulations issued thereunder
or in connection therewith or in implementation thereof, and (B) all requests, rules, guidelines and directions
promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any
similar or successor agency, or the United States or foreign regulatory authorities, in each case, pursuant to Basel
III) shall be deemed to have been enacted following the date hereof (or with respect to any Lender, if later, the
date on which such Lender becomes a Lender); provided that no Lender shall demand compensation pursuant to
this Section 2.11(c) unless such Lender is making corresponding demands on similarly situated borrowers in
comparable credit facilities to which such Lender is a party.
SECTION 2.12 Illegality. Notwithstanding any other provision of this Agreement, with respect to
Dollar denominated Advances, (a) if any Lender shall notify the Administrative Agent that the introduction of or
any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other
Governmental Authority, including without limitation, any agency of the European Union or similar monetary or
multinational authority, asserts that it is unlawful, for such Lender or its Eurocurrency Lending Office to perform
its obligations hereunder to make Eurocurrency Rate Advances or to fund or maintain Eurocurrency Rate
Advances hereunder, (i) each Eurocurrency Rate Advance of such Lender will automatically, upon such
notification, be Converted into a Cost of Funds Rate Advance with an Interest Period of one month and (ii) the
obligation of such Lender to make Eurocurrency Rate Advances or to Convert Advances into Eurocurrency Rate
Advances shall be suspended until the Administrative Agent shall notify the Borrower and such Lender that the
circumstances causing such suspension no longer exist and (b) if Lenders constituting the Required Lenders so
notify the Administrative Agent, (i) each Eurocurrency Rate Advance of each Lender will automatically, upon
such notification, Convert into a Cost of Funds Rate Advance with an Interest Period of one month and (ii) the
obligation of each Lender to make Eurocurrency Rate Advances or to Convert Advances into Eurocurrency Rate
Advances shall be suspended until the Administrative Agent shall notify the Borrower and each Lender that the
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circumstances causing such suspension no longer exist. Any Lender that is prohibited from performing its
obligations to make Advances or to continue to fund or maintain Advances may be required to assign all of its
rights and obligations hereunder upon a request by the Borrower in accordance with Section 8.07.
SECTION 2.13 Payments and Computations. (a) The Borrower shall make each payment required to be
made by it under this Agreement not later than 11:00 A.M. (Tokyo time) on the day when due in Dollars to the
Administrative Agent at the applicable Administrative Agent’s Office in same day funds. The Administrative
Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or
commitment fees ratably (other than amounts payable pursuant to Section 2.02(c), 2.07(c), 2.11, 2.12(a) (or if
applicable the last sentence of Section 2.12), 2.14, 2.15 or 9.04(c)) to the Lenders for the account of their
respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to
any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to Section 9.07(c), from and after the
effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments
hereunder in respect of the interest assigned thereby to the assignor for amounts which have accrued to but
excluding the effective date of such assignment and to the assignee for amounts which have accrued from and
after the effective date of such assignment. All payments to be made by the Borrower shall be made without
condition or deduction for any counterclaim, defense, recoupment or setoff.
(b) The Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender by
the Borrower is not made when due hereunder, to charge from time to time against any or all of the Borrower’s
accounts with such Lender any amount so due, unless otherwise agreed between the Borrower and such Lender.
(c) All computations of interest hereunder shall be made by the Administrative Agent on the basis of a
year of 360 days and in each case for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest or such fees are payable. Each determination by the
Administrative Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent
demonstrable error.
(d) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case
be included in the computation of payment of interest or commitment fee, as the case may be; provided,
however, that, if such extension would cause payment of interest on or principal of Eurocurrency Rate Advances
to be made in the next following calendar month, such payment shall be made on the immediately preceding
Business Day.
the Administrative Agent may assume that
(e) Unless the Administrative Agent shall have received written notice from the Borrower prior to the
date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in
full,
to the
Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause
to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to
the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender
shall repay to the Administrative Agent, following prompt notice thereof, forthwith on demand such amount
distributed to such Lender, together with interest thereon, for each day from the date such amount is distributed
to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Cost of Funds
Rate.
the Borrower has made such payment
in full
SECTION 2.14 Taxes. (a) Any and all payments by or on behalf of the Borrower under any Loan
Document shall be made, in accordance with Section 2.13, free and clear of and without deduction for any Taxes,
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excluding, in the case of each Lender and the Administrative Agent, (i) taxes imposed on (or measured by) its
overall net income (however denominated), franchise taxes, and branch profits taxes, in each case (A) imposed by
the jurisdiction under the laws of which such Lender or the Administrative Agent, as the case may be, is organized
or any political subdivision thereof, by the jurisdiction of the Administrative Agent’s principal office or such
Lender’s Applicable Lending Office, as the case may be, or any political subdivision thereof or (B) that are Other
Connection Taxes, (ii) with respect to a Lender that is not a Japanese tax resident or a Japanese branch of a non-
Japanese tax resident and is not entitled to a full exemption on Japanese withholding tax on interest payments under
a tax treaty entered into by Japan and that is in effect on the date specified in this clause (ii)(A)-(B) below, any
Japanese withholding Taxes imposed by a Governmental Authority pursuant to a law in effect on the date on which
(A) a Lender acquires such interest in an Advance or Commitment or, with respect to the Administrative Agent, the
date that the Administrative Agent becomes a party to a Loan Document or (B) a Lender changes its Applicable
Lending Office, except in each case to the extent that, pursuant to Section 2.14, amounts with respect to such Taxes
were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such
Lender immediately before it changed its Applicable Lending Office, (iii) any Tax that is imposed (for the
avoidance of doubt, including any Tax that is imposed at higher effective tax rate) by reason of such Lender’s or the
Administrative Agent’s failure to comply with Section 2.14(f), and (iv) any withholding taxes imposed under
FATCA (all such excluded Taxes in respect of payments under any Loan Document being hereinafter referred to as
“Excluded Taxes”). If any Taxes from or in respect of any sum payable under any Loan Document to any Lender or
the Administrative Agent shall be required to be deducted or withheld under applicable law, (A) the Borrower shall
be entitled to make such deductions or withholdings and (B) the Borrower shall pay the full amount deducted or
withheld to the relevant taxation authority or other Governmental Authority in accordance with applicable law. If
any Taxes other than Excluded Taxes shall be required to be deducted from or in respect of any sum payable under
any Loan Document to any Lender or the Administrative Agent, the sum payable by the Borrower shall be increased
as may be necessary so that after making all required deductions (including deductions applicable to additional
sums payable under this Section 2.14) such Lender or the Administrative Agent, as the case may be, receives an
amount equal to the sum it would have received had no such deductions been made.
(b) In addition, without duplication of any other obligation set forth in this Section 2.14, the Borrower
agrees to pay to the relevant taxing authority or Governmental Authority any present or future stamp and
documentary Taxes and any other excise or property Taxes, charges or similar levies that arise from any payment
made by it under any Loan Document or from the execution, delivery or registration of, or performance under, or
otherwise with respect to, any Loan Document other than any such Taxes, charges or similar levies that are Other
Connection Taxes imposed with respect to an assignment or the designation of a new Applicable Lending Office
(other than an assignment or designation pursuant to a request by the Borrower) (such Taxes, charges or similar
levies, hereinafter referred to as “Other Taxes”).
(c) Without duplication of any other obligation set forth in this Section 2.14, the Borrower shall
indemnify each Lender and the Administrative Agent for the full amount of Taxes (other than Excluded Taxes)
and Other Taxes (except to the extent such Other Taxes are Other Connection Taxes imposed solely as a result of
an assignment or the designation of a new Applicable Lending Office (other than an assignment or designation
pursuant to a request by the Borrower)) imposed on or paid by such Lender or the Administrative Agent, as the
case may be, in respect of Advances made to the Borrower and any liability (including, without limitation,
penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made
within 30 days from the date such Lender or the Administrative Agent, as the case may be, makes written
demand therefor. Such Lender or the Administrative Agent shall deliver to the Borrower a certificate describing
in reasonable detail the amount of such payment or liability.
(d) Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand
therefor, for (i) any Taxes attributable to such Lender (but only to the extent that the Borrower has not already
indemnified the Administrative Agent for such Taxes and without limiting the obligation of the Borrower to do
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so) and (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.07(e)
relating to the maintenance of a Participant Register, in either case, that are payable or paid by the Administrative
Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant governmental
authority. A certificate describing in reasonable detail the amount of such payment or liability delivered to any
Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the
Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan
Document or otherwise payable by the Administrative Agent to the Lender from any other source against any
amount due to the Administrative Agent under this paragraph (d).
(e) As soon as practical after the date of any payment of Taxes or Other Taxes for which the Borrower
is responsible under this Section 2.14, the Borrower shall furnish to the Administrative Agent, at its address as
specified in Schedule II, the original or a certified copy of a receipt evidencing payment thereof.
(f) (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect
to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the
time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and
executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such
payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if
reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation
prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable
the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup
withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding
two sentences, the completion, execution and submission of such documentation (other than such documentation
set forth in Section 2.14(f)(ii) below) shall not be required if in the Lender’s reasonable judgment such
completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or
would materially prejudice the legal or commercial position of such Lender.
(ii) Without limiting the generality of the foregoing:
(1) Any Lender that is a “United States person” within the meaning of Section 7701(a)(30) of
the Code shall deliver to the Borrower and the Administrative Agent executed originals of IRS
Form W-9 (and any applicable successor form) and such other documentation or information
prescribed by applicable Laws or reasonably requested by the Borrower or the Administrative
Agent certifying that such Lender is exempt from U.S. federal backup withholding tax. The forms
described in this Section 2.14(e)(ii)(1) shall be provided by each Lender to the Borrower and the
Administrative Agent at the time such Lender becomes a party to this Agreement, at the time or
times prescribed by applicable Laws, when reasonably requested by the Borrower or the
Administrative Agent, and promptly upon the obsolescence, invalidity or expiration of any form
previously provided by such Lender;
(2) Any Lender that is neither a Japanese tax resident nor a Japanese branch of a non-
Japanese tax resident shall provide, to the extent it is legally entitled to do so, the applicable
documentation to claim the benefits of a tax treaty entered into by Japan, at the time or times
prescribed by applicable Laws and when reasonably requested by the Borrower or
the
Administrative Agent;
(3) Any Lender that is a Japanese branch of a non-Japanese tax resident shall present, to the
extent it is legally entitled to do so, a Certificate of Exemption for Withholding Tax for Foreign
Corporations issued by the relevant tax authority in Japan pursuant to Article 180 of the Income
Tax Act of Japan (shotokuzeihou) at the time or times prescribed by applicable Laws and when
reasonably requested by the Borrower or the Administrative Agent.
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(iii) If a payment made to a Lender under any Loan Document would be subject to withholding tax
imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA
(including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to
the Borrower and the Administrative Agent, at the time or times prescribed by law and at such time or times
reasonably requested by the Borrower or the Administrative Agent, such documentation prescribed by applicable
law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation
reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower or the
Administrative Agent to comply with its obligations under FATCA, to determine that such Lender has complied
with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such
payment. Solely for the purposes of this clause 2.14(f)(ii), “FATCA” shall include any amendments made to
FATCA after the date of this Agreement.
(iv) Each Lender agrees that if any form or certification it previously delivered expires or becomes
obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower
and the Administrative Agent in writing of its legal inability to do so.
(v) Notwithstanding the foregoing, any Japanese Taxes resulting from the failure or legal inability of a
Lender to provide any tax forms pursuant to Section 2.14(f)(i)-(ii) or (iv) shall be considered Excluded Taxes
unless (x) such Taxes are imposed as a result of a change in law or treaty occurring after the date the Lender
became a party to this Agreement or acquired its interest in a Loan or Commitment and would otherwise have not
been treated as an Excluded Tax under Section 2.14(a) but for this Section 2.14(f)(v) or (y) such Taxes were
grossed up with respect to the Lender’s assignor immediately before such Lender became a party.
(g)
In the event that an additional payment is made under Section 2.14(a) or 2.14(c) for the account of
the Administrative Agent or any Lender and the Administrative Agent or such Lender, in its sole discretion
exercised in good faith, determines that it has received a refund of any tax paid or payable by it in respect of or
calculated with reference to the deduction or withholding giving rise to such additional payment (including by
the payment of additional amounts pursuant to this Section 2.14), the Administrative Agent or such Lender shall
pay to the Borrower such amount equal to such refund as the Administrative Agent or such Lender shall, in its
reasonable discretion exercised in good faith, have determined is attributable to such deduction or withholding
and will leave the Administrative Agent or such Lender (after such payment) in no worse position than it would
have been had the Borrower not been required to make such deduction or withholding. The Borrower, upon the
request of the Administrative Agent or such Lender, shall repay to the Administrative Agent or such Lender the
amount paid over pursuant to this paragraph (g) (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) in the event that the Administrative Agent or such Lender is required to repay
such refund to such Governmental Authority. Nothing contained in this Section 2.14(g) shall (i) interfere with the
right of a Lender to arrange its tax affairs in whatever manner it thinks fit or (ii) oblige the Administrative Agent
or any Lender to disclose any information relating to its tax returns, tax affairs or any computations in respect
thereof or (iii) require any Lender to take or refrain from taking any action that would prejudice its ability to
benefit from any other credits, reliefs, remissions or repayments to which it may be entitled.
(h) Each party’s obligations under this Section 2.14 shall survive the resignation or replacement of the
Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the
Commitments and the repayment, satisfaction or discharge of all obligations under the Loan Documents.
(i) For purposes of this Section 2.14, the term “applicable law” includes FATCA.
SECTION 2.15 Sharing of Payments, Etc. Subject to Section 2.19 in the case of a Defaulting Lender, if
any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff,
or otherwise) on account of the Advances owing to it (other than pursuant to Section 2.02(c), 2.07(c), 2.11,
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2.12(a), 2.14 or 9.04(c)) in excess of its ratable share of payments on account of the Advances obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances owing
to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of
them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such
Lender’s ratable share (according to the proportion of (a) the amount of such Lender’s required repayment to
(b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.15 may, to the fullest extent permitted
by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of such participation. The provisions of
this Section 2.15 shall not be construed to apply to (A) any payment made by the Borrower pursuant to and in
accordance with the express terms of this Agreement (including the application of funds arising from a
Defaulting Lender) as in effect from time to time or (B) any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Advances to any assignee or participant permitted
hereunder.
SECTION 2.16 Use of Proceeds. The proceeds of the Advances shall be available, and the Borrower
agrees that it shall apply such proceeds, solely towards Certain Funds Purposes.
SECTION 2.17 Evidence of Debt. (a) The Register maintained by the Administrative Agent pursuant to
Section 9.07(d) shall include (i) the date and amount of each Borrowing made hereunder by the Borrower, the
Type and Class of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable
thereto, (ii) the terms of each Assignment and Acceptance delivered to and accepted by it, (iii) the amount of any
principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder
and (iv) the amount of any sum received by the Administrative Agent from the Borrower hereunder and each
Lender’s share thereof.
(b) Entries made reasonably and in good faith by the Administrative Agent in the Register pursuant to
subsection (a) above shall be prima facie evidence of the amount of principal and interest due and payable or to
become due and payable from the Borrower to each Lender under this Agreement, absent manifest error;
provided, however, that the failure of the Administrative Agent to make an entry, or any finding that an entry is
incorrect, in the Register or such account or accounts shall not limit, expand or otherwise affect the obligations of
the Borrower under this Agreement.
SECTION 2.18 [Reserved].
SECTION 2.19 Defaulting Lenders.
(a) Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a
Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender (it
being understood that the determination of whether a Lender is no longer a Defaulting Lender shall be made as
described in Section 2.19(b)):
(i)
such Defaulting Lender will not be entitled to any fees accruing during such period pursuant
to Section 2.04(a);
(ii) such Defaulting Lender will not be entitled to any fees accruing under Section 2.04(b) with
respect to its undrawn Commitment to the extent it is a Defaulting Lender on the date such fee would
otherwise be payable and such fee would be attributable to its Commitment (for the avoidance of doubt
fees attributable to funded Advances shall be payable);
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(iii) to the fullest extent permitted by applicable law, such Lender will not be entitled to vote in
respect of amendments and waivers hereunder, and the Commitment and the outstanding Advances of
such Lender hereunder will not be taken into account in determining whether the Required Lenders or
all of the Lenders, as required, have approved any such amendment or waiver (and the definition of
“Required Lenders” will automatically be deemed modified accordingly for the duration of such
period); provided that any such amendment or waiver that would increase or extend the term of the
Commitment of such Defaulting Lender, extend the date fixed for the payment of principal or interest
owing to such Defaulting Lender hereunder, reduce the principal amount of any obligation owing to
such Defaulting Lender, reduce the amount of or the rate or amount of interest on any amount owing to
such Defaulting Lender or of any fee payable to such Defaulting Lender hereunder, or alter the terms of
this proviso, will require the consent of such Defaulting Lender; and
(iv) the Borrower may, at its sole expense and effort, require such Defaulting Lender to assign and
delegate its interests, rights and obligations under this Agreement pursuant to Section 9.07.
(b) If the Borrower and the Administrative Agent agree in writing in their discretion that a Lender is
no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the
effective date specified in such notice and subject to any conditions set forth therein, such Lender will cease to be
a Defaulting Lender and will be a Non-Defaulting Lender; provided that no adjustments will be made
retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender
was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the
affected parties, no change hereunder from Defaulting Lender to Non-Defaulting Lender will constitute a waiver
or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.
(c) Any payment of principal, interest, fees or other amounts received by the Administrative Agent
hereunder for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to
Section 6.01 or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to
Section 9.05 shall be applied at such time or times as follows: first, to the payment of any amounts owing by
such Defaulting Lender to the Administrative Agent hereunder; second as the Borrower may request (so long as
no Default or Event of Default exists), to the funding of any Advance in respect of which such Defaulting Lender
has failed to fund its portion thereof as required by this Agreement, as reasonably determined by the
Administrative Agent; third, as the Borrower may request, to be held in a deposit account and released pro rata in
order to satisfy such Defaulting Lender’s potential future funding obligations with respect to Advances under this
Agreement; fourth, to the payment of any amounts owing to the Lenders as a result of any judgment of a court of
competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such Defaulting
Lender’s breach of its obligations under this Agreement; fifth, so long as no Default or Event of Default exists, to
the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent
jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s
breach of its obligations under this Agreement; and sixth, to such Defaulting Lender or as otherwise directed by a
court of competent jurisdiction. Any payments, prepayments or other amounts paid or payable to a Defaulting
Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or otherwise pursuant to this
Section 2.19(c) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably
consents hereto.
SECTION 2.20 Mitigation. (a) Each Lender shall promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge that will result in, and will use reasonable commercial efforts
available to it (and not, in such Lender’s good faith judgment, otherwise disadvantageous to such Lender) to
mitigate or avoid, (i) any obligation by the Borrower to pay any amount pursuant to Section 2.11 or 2.14 or
(ii) the occurrence of any circumstance described in Section 2.12 (and, if any Lender has given notice of any such
event described in clause (i) or (ii) above and thereafter such event ceases to exist, such Lender shall promptly so
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notify the Borrower and the Administrative Agent). In furtherance of the foregoing, each Lender will designate a
different funding office if such designation will avoid (or reduce the cost to the Borrower of) any event described
in clause (i) or (ii) of the preceding sentence and such designation will not, in such Lender’s good faith judgment,
be otherwise disadvantageous to such Lender.
(b) Notwithstanding any other provision of this Agreement, if any Lender fails to notify the Borrower
of any event or circumstance which will entitle such Lender to compensation pursuant to Section 2.11 within
180 days after such Lender obtains knowledge of such event or circumstance, then such Lender shall not be
entitled to compensation from the Borrower for any amount arising prior to the date which is 180 days before the
date on which such Lender notifies the Borrower of such event or circumstance.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01 Conditions Precedent to Effective Date. This Agreement shall become effective on and
as of the first date on which the following conditions precedent have been satisfied (with the Administrative
Agent acting reasonably in assessing whether the conditions precedent are satisfactory) (or waived in accordance
with Section 9.01):
(a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a
counterpart of this Agreement and the other Loan Documents signed on behalf of such party or (ii) written
evidence reasonably satisfactory to the Administrative Agent (which may include .pdf or facsimile
transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this
Agreement.
(b) All fees and other amounts then due and payable by the Consolidated Group to the Administrative
Agent, the Arrangers and the Lenders under the Loan Documents or pursuant to any fee or similar letters
relating to the Loan Documents shall be paid, to the extent invoiced by the relevant person at least one
Business Day prior to the Effective Date and to the extent such amounts are payable on or prior to the
Effective Date.
(c) The Administrative Agent shall have received on or before the Effective Date, each dated on or
about such date:
(i) Certified copies of the resolutions or similar authorizing documentation of the governing
bodies of the Borrower authorizing such Person to enter into and perform its obligations under the
Loan Documents to which it is a party;
(ii) Certified copies of the Borrower’s articles of incorporation, certificate of incorporation and
bylaws (or comparable organizational documents) and any amendments thereto;
(iii) A certificate of the Borrower attaching a certificate of commercial registry (rireki jikou zenbu
shomeisho) of the Borrower issued by a Legal Affairs Bureau and certifying that all information
required to be registered under the laws of Japan has been registered in the commercial registry;
(iv) A customary certificate of the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign this Agreement and the other documents to be delivered by
it hereunder; and
(v) A favorable opinion letter of each of (i) Linklaters LLP and (ii) Gaikokuho Kyodo-Jigyo
in each case in form and substance reasonably satisfactory to the
Horitsu Jimusho Linklaters,
Administrative Agent.
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(d) The Administrative Agent shall have received satisfactory evidence of the Borrower’s Public Debt
Rating as of a reasonably recent date prior to the Effective Date.
(e) The Administrative Agent shall have received a copy, certified by the Borrower, of a draft of the
Scheme Press Release or Offer Press Announcement (as applicable, depending upon whether it is proposed
at that time to effect the Target Acquisition by way of a Scheme or Takeover Offer) substantially in the
form in which it is proposed to be issued.
(f) The Administrative Agent shall have received, at least 3 Business Days prior to the Effective Date,
so long as requested no less than 10 Business Days prior to the Effective Date, all documentation and other
information required by regulatory authorities under applicable “know your customer” and anti-money
laundering rules and regulations,
including the Criminal Proceeds Transfer Prevention Act of Japan
(Law No. 22 of 2007, as amended) and the Patriot Act, in each case relating to the Borrower and its
Subsidiaries, including the Borrower.
(g) The Administrative Agent shall have received a letter from the Service of Process Agent indicating
its consent to its appointment by the Borrower as its agent to receive service of process as specified in this
Agreement, and confirming that such appointment is in full force and effect and applies to this Agreement in
all respects.
(h) The Administrative Agent shall have received copies of the Hedge Agreements (if any) that have
been entered into in connection with the Target Acquisition and/or the Bridge Facility.
(i) The Arrangers shall have received a copy of the Disclosure Letter, it being acknowledged that
neither the Administrative Agent nor any Lender shall have any approval right as regards the form or
contents of the Disclosure Letter.
The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date in writing
promptly upon such conditions precedent being satisfied (or waived in accordance with Section 9.01), and such
notice shall be conclusive and binding.
SECTION 3.02 Conditions Precedent to Closing Date. Subject to Section 3.04, the obligation of each
Lender to make an Advance on the Closing Date is subject to the satisfaction (or waiver in accordance with
Section 9.01) of the following conditions:
(a) The Effective Date shall have occurred.
(b) If the Target Acquisition is effected by way of a Scheme, the Administrative Agent shall have
received:
(i) a certificate of the Borrower signed by a director certifying:
(1) the date on which the Scheme Circular was posted to the shareholders of the Target;
(2) the date on which the Court has sanctioned the Scheme and that the Court Order has been
duly delivered to the Registrar in accordance with Article 125(3) of the Jersey Companies Law;
(3) confirmation as to the satisfaction of each condition set forth in clauses (d) and (e) below;
(4) the Target Acquisition shall have been, or, within the time period permitted by the City
Code, shall be, consummated in all material respects in accordance with the terms and conditions
of the Scheme Documents except to the extent not prohibited by the Loan Documents; and
(5) each copy of the documents specified in paragraph (ii) below is correct and complete and
has not been amended or superseded on or prior to the Closing Date, except to the extent such
changes thereto have been required pursuant to the City Code or required by the Panel or by a
court of competent jurisdiction or to the extent not prohibited by the Loan Documents; and
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(ii) a copy of the Scheme Circular which is consistent in all material respects with the terms and
conditions in the Scheme Press Release and the Scheme Resolutions, in each case, except to the extent
changes thereto have been required pursuant to the City Code or required by the Panel or by a court of
competent jurisdiction or are not prohibited by the Loan Documents.
(c) If the Target Acquisition is effected by way of a Takeover Offer, the Administrative Agent shall
have received:
(i) a certificate of the Borrower signed by a director certifying:
(1) the date on which the Takeover Offer Document was posted to the shareholders of the
Target;
(2) confirmation as to the satisfaction of each condition set forth in clauses (d) and (e) below;
(3) each copy of the documents specified in paragraph (ii) below is correct and complete and
has not been amended or superseded on or prior to the Closing Date, except to the extent such
changes thereto have been required pursuant to the City Code or required by the Panel or are not
prohibited by the Loan Documents; and
(4) that the Takeover Offer has been declared unconditional in all respects without any
material amendment, modification or waiver of the conditions to the Takeover Offer or of the
Acceptance Condition except to the extent not prohibited by the Loan Documents; and
(ii) a copy of the Takeover Offer Document which is consistent in all material respects with the
terms and conditions in the Offer Press Announcement, except to the extent changes thereto have been
required pursuant to the City Code or required by the Panel or a court of competent jurisdiction or are
permitted under the Loan Documents.
(d) On the date of the applicable borrowing request and on the proposed date of such borrowing (x) no
Certain Funds Default is continuing or would result from the proposed Borrowing and (y) all the Certain
Funds Representations are true or, if a Certain Funds Representation does not include a materiality concept,
true in all material respects.
(e) All fees due and payable by the Borrower to the Arrangers, the Administrative Agent and the
Lenders pursuant to paragraphs 1(i), (ii), (iii) or (iv) of the Fee and Syndication Letter shall be paid or
satisfied from the proceeds of the proposed Advance, to the extent invoiced at least one Business Day prior
to the Closing Date by the relevant person and to the extent such amounts are payable on or prior to the
Closing Date.
(f) The Administrative Agent shall have received a Notice of Borrowing in accordance with
Section 2.02.
(g) The Administrative Agent shall have received a pro forma consolidated balance sheet and related
pro forma consolidated statement of income of the Borrower and its Subsidiaries as of and for the
twelve-month period ending on the last day of the most recently completed four-fiscal quarter period ended
at least 45 days prior to the Closing Date, prepared after giving effect to the Transactions as if the
Transactions had occurred as of such date (in the case of such balance sheet) or at the beginning of such
period (in the case of such statement of income) (the “Pro Forma Financials”), it being acknowledged that
neither the Administrative Agent nor any Lender shall have any approval right as regards the form or
contents of the Pro Forma Financials).
(h) It is not illegal for any Lender to lend and there is no injunction, restraining order or equivalent
prohibiting any Lender from lending its portion of the Advances or restricting the application of the
proceeds thereof; provided that such Lender has used commercially reasonable efforts to make the Loans
the
through an Affiliate of such Lender not subject
to such legal restriction; provided further,
that
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occurrence of such event in relation to one Lender shall not relieve any other Lender of its obligations to
make Advances hereunder.
The Administrative Agent shall notify the Borrower and the Lenders of the Closing Date as soon as
practicable upon its occurrence, and such notice shall be conclusive and binding.
SECTION 3.03 Conditions to Advances after the Closing Date. The obligation of each Lender to make
an Advance on any date after the Closing Date and during the Availability Period is subject to the satisfaction (or
waiver in accordance with Section 9.01) of the following conditions:
(a) Each of the Effective Date and the Closing Date shall have occurred.
(b) The Administrative Agent shall have received a Notice of Borrowing in accordance with
Section 2.02.
(c) On the date of the applicable borrowing request and on the proposed date of such borrowing (i) no
Certain Funds Default is continuing or would result from the proposed Borrowing and (ii) all the Certain
Funds Representations are true or, if a Certain Funds Representation does not include a materiality concept,
true in all material respects.
(d) All fees due and payable by the Borrower to the Arrangers, the Administrative Agent and the
Lenders pursuant to paragraph 1(ii) of the Fee and Syndication Letter shall be paid or satisfied from the
proceeds of the proposed Advance to the extent invoiced at least two Business Days prior to the date of the
Advance by the relevant person and to the extent such amounts are payable on or before the date of such
Advance.
(e)
It is not illegal for any Lender to lend and there is no injunction, restraining order or equivalent
prohibiting any Lender from lending its portion of the Advances or restricting the application of the
proceeds thereof; provided that such Lender has used commercially reasonable efforts to make the Loans
through an Affiliate of such Lender not subject
the
occurrence of such event in relation to one Lender shall not relieve any other Lender of its obligations to
make Advances hereunder.
to such legal restriction; provided further,
that
SECTION 3.04 Actions by Lenders During the Certain Funds Period. During the Certain Funds Period
and notwithstanding (i) any provision to the contrary in the Loan Documents or (ii) that any condition set out in
Sections 3.01, 3.02 or 3.03 may subsequently be determined to not have been satisfied or any representation
given was incorrect in any material respect, none of the Lenders nor the Administrative Agent shall, unless a
Certain Funds Default has occurred and is continuing or would result from a proposed borrowing or a Certain
Funds Representation remains incorrect or, if a Certain Funds Representation does not include a materiality
concept, incorrect in any material respect, be entitled to:
(i)
cancel any of its Commitments;
(ii)
rescind, terminate or cancel the Loan Documents or the Commitments or exercise any similar right or
remedy or make or enforce any claim under the Loan Documents it may have to the extent to do so
would prevent or limit (A) the making of an Advance for Certain Funds Purposes or (B) the application
of amounts standing to the credit of an Escrow Account for Certain Funds Purposes;
(iii) refuse to participate in the making of an Advance for Certain Funds Purposes unless the conditions set
forth in Section 3.02 or, after the Closing Date, 3.03, as applicable, have not been satisfied;
(iv) exercise any right of set-off or counterclaim in respect of an Advance to the extent to do so would
prevent or limit (A) the making of an Advance for Certain Funds Purposes or (B) the application of
amounts standing to the credit of an Escrow Account for Certain Funds Purposes; or
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(v) cancel, accelerate or cause repayment or prepayment of any amounts owing under any Loan Document
to the extent to do so would prevent or limit (A) the making of an Advance for Certain Funds Purposes
or (B) the application of amounts standing to the credit of an Escrow Account for Certain Funds
Purposes;
provided that immediately upon the expiry of the Certain Funds Period all such rights, remedies and
entitlements shall be available to the Lenders and the Administrative Agent notwithstanding that they may not
have been used or been available for use during the Certain Funds Period.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Borrower. The Borrower represents and
warrants on the Effective Date and the date of the making of each Advance (it being understood the conditions to
the Effective Date are solely those set out in Section 3.01 and the conditions to each Advance are solely those set
out in Sections 3.02 and 3.03, as applicable) as follows:
(a) The Borrower is duly organized, validly existing and in good standing (to the extent that such
concept exists) under the laws of its jurisdiction of organization.
(b) The execution, delivery and performance by the Borrower of this Agreement and the other Loan
Documents to which it is a party, and the consummation of the transactions contemplated hereby and
thereby, (i) are within the Borrower’s organizational powers, (ii) have been duly authorized by all necessary
organizational action, (iii) do not contravene (A) the Borrower’s charter, articles of incorporation or by-laws
or other organizational documents or (B) any law, regulation or contractual restriction binding on or
affecting the Borrower and (iv) will not result in or require the creation or imposition of any Lien upon or
with respect to any of the properties of the Consolidated Group (other than Liens created or required to be
created pursuant to the terms hereof), except, in the case of clause (iii)(B) and (iv), as would not be
reasonably expected to have a Material Adverse Effect.
(c) No authorization or approval or other action by, and no notice to or filing with, any Governmental
Authority or regulatory body is required for the due execution, delivery and performance by the Borrower of
this Agreement and the consummation of the transactions contemplated hereby, other than (i) the Panel, as
directed by the Panel pursuant to the requirements of the City Code, anti-trust regulators, as directed by anti-
trust regulators, as contemplated by the Scheme Documents or (as the case may be) the Takeover Offer
Documents or as is obtained by the time required and (ii) the Bank of Japan with respect to post-facto filings
that may be required under the Foreign Exchange Act
in connection with the performance of this
Agreement.
(d) This Agreement and the other Loan Documents have been duly executed and delivered by the
Borrower. This Agreement and the other Loan Documents are legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with its terms, except as affected by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and
general principles of equity (whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
(e) The Borrower has heretofore furnished to the Lenders (i) its consolidated balance sheet at
March 31, 2017 and the related consolidated statements of operations, shareholders’ equity and cash flows
for the fiscal year ended March 31, 2017, in each case reported on by KPMG AZSA LLC, independent
public accountants and (ii) the consolidated balance sheet of the Target as December 31, 2017 and the
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related consolidated statements of operations, shareholders’ equity and cash flows for the fiscal year ended
December 31, 2017. Such financial statements (to the Borrower’s knowledge with respect to the financial
statements of the Target) present fairly, in all material respects, the consolidated financial position and
results of operations and cash flows of the Borrower and the Target, as applicable, and their respective
consolidated Subsidiaries as of such dates and for such periods in accordance with IFRS and GAAP, as
applicable, except as may be indicated in the notes thereto and subject to year-end audit adjustments and the
absence of footnotes in the case of unaudited financial statements.
(f) There is no action, suit, investigation, litigation or proceeding (including, without limitation, any
Environmental Action), affecting the Consolidated Group pending or, to the knowledge of the Borrower,
threatened before any court, governmental agency or arbitrator that would reasonably be expected to be
adversely determined, and if so determined, (a) would reasonably be expected to have a material adverse
effect on the financial condition or results of operations of the Consolidated Group taken as a whole (other
than the litigation set forth in the Disclosure Letter) or (b) would adversely affect the legality, validity and
enforceability of any material provision of this Agreement in any material respect.
(g) Following application of the proceeds of each Advance, not more than 25 percent of the value of
the assets of the Borrower and of the Consolidated Group, on a Consolidated basis, subject to the provisions
of Section 5.02(a) will be Margin Stock. No part of the proceeds of any Advance have been used or will be
used for any purpose that entails a violation of any of the regulations of the Board, including Regulations T,
U and X of the Board.
(h) All written information (other than the Projections) concerning the Borrower, the Target and their
Subsidiaries and the transactions contemplated hereby or otherwise prepared by or on behalf of the
Borrower and its Subsidiaries and furnished to the Agents or the Lenders in connection with the negotiation
of, or pursuant to the terms of, this Agreement when taken as a whole (and with respect to information
regarding the Target Group, to the Borrower’s knowledge), was true and correct in all material respects as of
the date when furnished by such Person to the Agents or the Lenders and did not, taken as a whole, when so
furnished contain any untrue statement of a material fact as of any such date or omit to state a material fact
necessary in order to make the statements contained therein, taken as a whole, not misleading in light of the
circumstances under which such statements were made. The Projections and estimates and information of a
general economic nature prepared by or on behalf of the Borrower or its Subsidiaries and that have been
furnished by such Person to any Lenders or the Administrative Agent in connection with the transactions
contemplated hereby have been prepared in good faith based upon assumptions believed by such Person to
be reasonable as of the date of such Projections (it being understood that actual results may vary materially
from the Projections).
(i) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan which
would reasonably be expected to have a Material Adverse Effect.
(j)
[reserved].
(k) Neither the Borrower nor any ERISA Affiliate (i) is reasonably expected to incur any Withdrawal
Liability to any Multiemployer Plan or has incurred any Withdrawal Liability that has not been satisfied in
full or (ii) has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization (within the meaning of Section 4241 of ERISA) or has been determined to be in
“endangered” or “critical’ status (within the meaning of Section 432 of the Code or Section 305 of ERISA),
and no such Multiemployer Plan is reasonably expected to be in reorganization or in “endangered” or
“critical” status.
(l)
(i) The operations and properties of the Consolidated Group comply, and have complied for the
previous three years, in all respects with all applicable Environmental Laws and Environmental Permits
except to the extent that the failure to so comply, either individually or in the aggregate, would not
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reasonably be expected to have a Material Adverse Effect; (ii) all past non-compliance with such
Environmental Laws and Environmental Permits has been resolved without any ongoing obligations or costs
except to the extent that such non-compliance, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect; and (iii) to the Borrower’s knowledge, no circumstances exist
that would be reasonably expected to (A) form the basis of an Environmental Action against a member of
the Consolidated Group or any of its properties that, either individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect or (B) cause any such property to be subject to
any restrictions on ownership, occupancy, use or transferability under any Environmental Law that, either
individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
(m) (i) None of the properties currently or formerly owned or operated by a member of the
Consolidated Group is listed or formally proposed for listing on the NPL or on the CERCLIS or any
analogous foreign, state or local list; (ii) to the Borrower’s knowledge, there are no, and never have been
any, underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or
lagoons in which Hazardous Materials are being or have been treated, stored or disposed of on any property
currently owned or operated by any member of the Consolidated Group or, to the Borrower’s knowledge, on
any property formerly owned or operated by a member of the Consolidated Group that, either individually
or in the aggregate, would reasonably be expected to have a Material Adverse Effect; (iii) to the Borrower’s
knowledge, there is no asbestos or asbestos-containing material on any property currently owned or operated
by a member of the Consolidated Group the mitigation of which, either individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect; and (iv) to the Borrower’s knowledge, no
Hazardous Materials have been released, discharged or disposed of on any property currently or formerly
owned, leased or operated by a member of the Consolidated Group for which a member of the Consolidated
Group could be expected to be made liable to remediate under Environmental Law except in each case as
would not have a Material Adverse Effect.
(n) No member of the Consolidated Group is undertaking either individually or together with other
potentially responsible parties, any investigation or assessment or remedial or response action relating to
any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or
operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the
requirements of any Environmental Law that, either individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect; and, to the Borrower’s knowledge, all Hazardous Materials
generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly
owned or operated by a member of the Consolidated Group, or any offsite locations to which a member of
the Consolidated Group sent Hazardous Materials for treatment or disposal, have been disposed of in a
manner that, either individually or in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect.
(o) The Borrower is not an “investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940, as amended.
(p) The Advances and all related obligations of the Borrower under this Agreement rank pari passu
with all other unsecured obligations of the Borrower that are not, by their terms, expressly subordinate to the
obligations of the Borrower hereunder.
(q) The proceeds of the Advances will be used in accordance with Section 2.16.
(r) The Borrower has implemented and maintains in effect policies and procedures reasonably
designed to promote compliance by the Borrower, its Subsidiaries and their respective directors, officers,
employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Borrower,
its
Subsidiaries and their respective officers and directors and to the knowledge of the Borrower its employees
and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects.
None of (i) the Borrower, any Subsidiary, any of their respective directors or officers or to the knowledge of
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the Borrower or such Subsidiary employees, or (ii) to the knowledge of the Borrower, any agent of the
Borrower or any agent of any Subsidiary that will act in any capacity in connection with or benefit from the
credit facility established hereby, is a Sanctioned Person.
(s) No Borrowing or use of proceeds thereof or the Transactions will violate any applicable
Anti-Corruption Law or applicable Sanctions.
(t) The Borrower has delivered to the Administrative Agent a complete and correct copy of the
Scheme Documents (if and when issued) or, as the case may be, the Offer Documents (if and when issued),
including all schedules and exhibits thereto. The release of the Offer Press Announcement and the posting of
the Takeover Offer Documents if a Takeover Offer is pursued has been or will be, prior to their release or
posting (as the case may be) duly authorized by the Borrower. Each of the material obligations of the
Borrower under the Takeover Offer Documents is or will be, when entered into and delivered, the legal,
valid and binding obligation of the Borrower, enforceable against such Persons in accordance with its terms
in each case, except as may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws
affecting the rights and remedies of creditors generally and (ii) general principles of equity.
(u) The Scheme Press Release and the Scheme Circular (in each case if and when issued) when taken
as a whole: (i) except for the information that relates to the Target or the Target Group, do not (or will not if
and when issued) contain (to the best of its knowledge and belief (having taken all reasonable care to ensure
that such is the case)) any statements which are not in accordance with the material facts, or where
appropriate, do not omit anything likely to affect the import of such information and (ii) contain all the
material terms of the Scheme.
(v)
If the Target Acquisition is effected by way of a Scheme, each of the Scheme Documents
complies in all material respects with the Jersey Companies Law and the City Code, subject to any
applicable waivers by or requirements of the Panel.
(w) The Borrower is not an EEA Financial Institution.
SECTION 4.02 Representations and Warranties of the Lenders and the Borrower. Each of the
Borrower and each Lender represents and warrants on the Effective Date and the date of the making of each
Advance (it being understood the conditions to the Effective Date are solely those set out in Section 3.01
and the conditions to each Advance are solely those set out in Sections 3.02 and 3.03, as applicable) that it is
not classified, does not belong to nor is it associated with an Anti-Social Group, does not have an
Anti-Social Relationship and has not engaged in Anti-Social Conduct, whether directly or indirectly through
a third party.
ARTICLE V
COVENANTS
SECTION 5.01 Affirmative Covenants. So long as any Advance shall remain unpaid or any Lender
shall have any Commitment hereunder, the Borrower will:
(a) Compliance with Laws, Etc. (i) Comply, and cause each member of the Consolidated Group to
comply, with all applicable laws, rules, regulations and orders (such compliance to include, without
limitation, compliance with ERISA and Environmental Laws), except to the extent that the failure to so
comply, either individually or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect, and (ii) maintain in effect and enforce policies and procedures reasonably designed to
promote compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and
agents with Anti-Corruption Laws and applicable Sanctions.
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(b) Payment of Taxes, Etc. Pay and discharge, or cause to be paid and discharged, before the same shall
become delinquent, all taxes, assessments and governmental charges levied or imposed upon a member of
the Consolidated Group or upon the income, profits or property of a member of the Consolidated Group, in
each case except to the extent that (i) the amount, applicability or validity thereof is being contested in good
faith and by proper proceedings and with respect to which reserves in conformity with applicable accounting
standards have been provided or (ii) the failure to pay such taxes, assessments and charges, either
individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
(c) Maintenance of Insurance. Except where the failure to do so would reasonably be expected to result
in a Material Adverse Effect, maintain, and cause each member of the Consolidated Group to maintain,
insurance with responsible and reputable insurance companies or associations (or pursuant to self-insurance
arrangements) in such amounts (after giving effect to any self-insurance which the Borrower believes (in the
good faith judgement of management of the Borrower) is reasonable and prudent in light of the size and
nature of its business) and covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which any member of the
Consolidated Group operates.
(d) Preservation of Existence, Etc. Do, or cause to be done, all things necessary to preserve and keep in
full force and effect its (i) existence and (ii) rights (charter and statutory) and franchises; provided, however,
that the Borrower may consummate any merger or consolidation permitted under Section 5.02(b); and
provided further that the Borrower shall not be required to preserve any such right or franchise if the
management of the Borrower shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Borrower and that the loss thereof is not disadvantageous in any material
respect to the Lenders.
(e) Visitation Rights. At any reasonable time and from time to time during normal business hours (but
not more than once annually if no Event of Default has occurred and is continuing), upon no less than ten
(10) days’ prior notice to the Borrower, permit the Administrative Agent or any of the Lenders, or any
agents or representatives thereof coordinated through the Administrative Agent, to examine and make
copies of and abstracts from the records and books of account, and visit the properties, of the Consolidated
Group, and to discuss the affairs, finances and accounts of the Consolidated Group with any of the members
of the senior treasury staff of the Borrower.
(f) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and
account, in which full and correct entries shall be made of all financial transactions and the assets and
business of the Consolidated Group sufficient
the preparation of financial statements in
accordance with IFRS.
to permit
(g) Maintenance of Properties, Etc. Cause all of its properties that are used or useful in the conduct of
its business or the business of any member of the Consolidated Group to be maintained and kept in good
condition, repair and working order (ordinary wear and tear excepted) and supplied with all necessary
equipment, and cause to be made all necessary repairs,
replacements, betterments and
improvements thereof, all as in the judgment of the Borrower may be necessary so that the business carried
on in connection therewith may be properly and advantageously conducted at all times, except, in each case,
where the failure to do so would not reasonably be expected to result in a Material Adverse Effect.
renewals,
(h) [Reserved].
(i) Reporting Requirements. Furnish to the Administrative Agent for further distribution to the
Lenders:
(i)
as soon as available and in any event within 60 days after the end of each of the first three
quarters of each fiscal year of the Borrower, a Consolidated balance sheet of the Consolidated Group as
of the end of such quarter and Consolidated statements of income and cash flows of the Consolidated
Group for the period commencing at the end of the previous fiscal year and ending with the end of such
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quarter, duly certified by the Chief Financial Officer or the Treasurer of the Borrower as having been
prepared in accordance with IFRS (subject to the absence of footnotes and year end audit adjustments);
(ii)
as soon as available and in any event within 120 days after the end of each fiscal year of the
Borrower, a copy of the annual audit report for such year for the Consolidated Group, containing a
Consolidated balance sheet of the Consolidated Group as of the end of such fiscal year and
Consolidated statements of income and cash flows of the Consolidated Group for such fiscal year, in
each case accompanied by an unqualified opinion or an opinion reasonably acceptable to the Required
Lenders by KPMG AZSA LLC or other independent public accountants of recognized national
standing;
(iii)
simultaneously with each delivery of the financial statements referred to in subclauses (i)(i)
and (i)(ii) of this Section 5.01, a certificate of the Chief Executive Officer, Chief Financial Officer or
the Treasurer of the Borrower in substantially the form of Exhibit C hereto certifying that no Default or
Event of Default has occurred and is continuing (or if such event has occurred and is continuing the
actions being taken by the Borrower to cure such Default or Event of Default), including, if such
the calculations necessary to
covenant
demonstrate compliance with Section 5.03;
is tested at such time, setting forth in reasonable detail
(iv) as soon as possible and in any event within five days after any Responsible Officer of the
Borrower shall have obtained knowledge of the occurrence of each Default continuing on the date of
such statement, a statement of a Responsible Officer of the Borrower setting forth details of such
Default and the action that the Borrower has taken and proposes to take with respect thereto;
(v)
promptly after the sending or filing thereof, copies of all reports that the Borrower sends to
any of its securityholders, in their capacity as such, and copies of all reports and registration statements
that members of the Consolidated Group file with the Prime Minister of Japan through the Financial
Services Agency of Japan,
the Securities and Exchange Commission or any national securities
exchange;
(vi) promptly after a Responsible Officer of
the
commencement thereof, notice of all actions, suits, investigations, litigations and proceedings before
any court, governmental agency or arbitrator affecting the Consolidated Group of the type described in
Section 4.01(f)(b) subject, in each case, to any confidentiality, legal or regulatory restrictions relating
to the supply of such information; and
the Borrower obtains knowledge of
(vii) such other information respecting the Consolidated Group as any Lender through the
Administrative Agent may from time to time reasonably request.
The Borrower shall be deemed to have delivered the financial statements and other information
referred to in paragraphs (i), (ii) and (v) above when such financial statements and other information
have been posted on the Borrower’s internet website or the website of the Financial Services Agency of
Japan, the Securities and Exchange Commission or any national securities exchange (in each case, to
the extent such website is accessible by the Lenders without charge) and the Borrower has notified the
Administrative Agent by electronic mail of such posting. If the Administrative Agent requests hard
copies of such financial statements and other information, the Borrower shall furnish these to the
Administrative Agent provided that no request shall affect that delivery has deemed to occur in
accordance with the immediately preceding sentence.
(j) The Scheme and Related Matters. To the extent applicable, the Borrower shall or it shall procure
that the applicable members of the Consolidated Group shall:
(i)
Issue a Scheme Press Release or, as the case may be, an Offer Press Announcement, (in the
form delivered to the Administrative Agent pursuant to Section 3.01(e), subject to such amendments as
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are not material to the interests of the Lenders or have been approved by the Arrangers in writing (such
approval not to be unreasonably withheld, delayed or conditioned)) within five Business Days of the
Effective Date (such issued document, the “Original Scheme Press Release” or “Original Offer Press
Announcement”, as applicable).
(ii)
Provide evidence that a Scheme Circular or (if the Target Acquisition is effected by way of a
Takeover Offer) a Takeover Offer Document is issued and dispatched as soon as is reasonably
practicable and in any event within 28 days (or such longer period as may be agreed with the Panel)
after the issuance of the Scheme Press Release or Offer Press Announcement, as applicable unless,
during that period the Borrower has elected to convert the Target Acquisition from a Scheme to a
Takeover Offer, or vice versa (in which case the Scheme Circular or Takeover Offer Document, as
applicable) shall be issued and dispatched as soon as reasonably practicable and in any event within
28 days (or such longer period as may be agreed with the Panel) after the issuance of the Scheme Press
Release or an Offer Press Announcement, as applicable.
(iii) Comply in all material respects with the City Code (subject to any waivers or dispensations
granted by the Panel or the Court) and all other applicable laws and regulations in relation to any
Takeover Offer or Scheme.
(iv) Except as consented to by the Arrangers in writing (such consent not to be unreasonably
withheld, delayed or conditioned) and save to the extent that following the issue of a Scheme Press
Release or an Offer Press Announcement the Borrower elects to proceed with the Target Acquisition
by way of Takeover Offer or Scheme respectively, ensure that (i) if the Target Acquisition is effected
by way of a Scheme, the Scheme Circular corresponds in all material respects to the terms and
conditions of the Scheme as contained in the Scheme Press Release to which it relates or (ii) if the
Target Acquisition is effected by way of a Takeover Offer, the Takeover Offer Document corresponds
in all material respects to the terms and conditions of the Takeover Offer as contained in the
corresponding Offer Press Announcement, subject to any variation required by the Court and to any
variations required by the Panel or which are not materially adverse to the interests of the Lenders (or
where the prior written consent of the Arrangers has been given).
(v) Ensure that the Scheme Documents or, if the Target Acquisition is effected by way of a
Takeover Offer, the Offer Documents, provided to the Arrangers contain all the material terms and
conditions of the Scheme or Takeover Offer, as at that date, as applicable.
(vi) Not make or approve any increase in the proposed amount of cash consideration payable per
Target Share or make any other acquisition of any Target Share (including pursuant to a Takeover
Offer) at a price that results in an increase in the cash consideration payable per Target Share stated in
the Original Scheme Press Release or Original Offer Press Announcement, (as the case may be), unless
such modification in price is not materially adverse to the interests of the Lenders (or where the prior
written consent of the Arrangers has been given).
(vii) Except as consented to by the Arrangers in writing in the event that the matter is material to
the interests of the Lenders (such consent not to be unreasonably withheld, delayed, or conditioned),
not (i) amend or waive any term of the Scheme Documents or the Takeover Offer Documents, as
applicable, in a manner materially adverse to the interests of the Lenders from those in the Original
Scheme Press Release or the Original Offer Press Announcement, as the case may be, or (ii) if the
Target Acquisition is proceeding as a Takeover Offer, amend or waive the Acceptance Condition, save
for, (A) in the case of clause (i), any amendment or waiver required by the Panel, the City Code, a
court or any other applicable law, regulation or regulatory body, (B) in the case of clause (ii), a waiver
of the Acceptance Condition to permit the Takeover Offer to become unconditional with acceptance of
Target Shares (excluding any shares held in treasury) which, when aggregated with all Target Shares
owned by the Borrower (directly or indirectly), represent not less than 75% of all Target Shares
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(excluding any shares held in treasury) as at the date on which the Takeover Offer is declared
unconditional as to acceptances, (C) in the case of clause (i) and any condition detailed in the Scheme
Press Release or Offer Press Announcement (as appropriate), any waiver of a condition, which such
condition would not have entitled the Borrower to lapse the Scheme or Takeover Offer (as the case
may be) under rule 13.5(a) of the Takeover Code or (D) an extension of the Long Stop Date (as defined
in the Original Offer Press Announcement) in the event that any condition in paragraphs 4(c) to (j) in
Part A of Appendix 1 to the Original Scheme Press Release (or the equivalent provision in any Original
Offer Press Announcement) has not been satisfied by the date falling 12 months after the date of this
Agreement.
(viii) Not take any action which would require the Borrower to make a mandatory offer for the
Target Shares in accordance with Rule 9 of the City Code.
(ix) Provide the Administrative Agent with copies of each Offer Document or Scheme
Document (as applicable) and such information as it may reasonably request regarding, in the case of a
Takeover Offer, the current level of acceptances subject to any confidentiality, legal, regulatory or
other restrictions relating to the supply of such information.
(x)
Promptly deliver to the Administrative Agent the receiving agent certificate issued under
Rule 10 of the City Code (if the Target Acquisition is being pursued pursuant to a Takeover Offer), any
written agreement between the Borrower or its Affiliates and Target to the extent material to the
interests of the Lenders (as reasonably determined by the Borrower) in relation to the consummation of
the Target Acquisition (in each case, upon such documents or agreements being entered into by a
member of the Consolidated Group), and all other material announcements and documents published
by the Borrower or delivered by the Borrower to the Panel pursuant to the Takeover Offer or Scheme
(other than the cash confirmation) and all legally binding agreements entered into by the Borrower in
connection with a Takeover Offer or Scheme, in each case to the extent the Borrower, acting
reasonably, anticipates they will be material to the interests of the Lenders in connection with the
Transactions, except to the extent it is prohibited by legal (including contractual) or regulatory
obligations from doing so.
(xi)
In the event that a Scheme is switched to a Takeover Offer or vice versa, (which the
Borrower shall be entitled to do on multiple occasions provided that it complies with the terms of this
Agreement), (i) within the applicable time periods provided in the definition of “Mandatory
Cancellation Event”, procure that an Offer Press Announcement or Scheme Press Release, as the case
may be, is issued, and (ii) except as consented to by the Arrangers in writing where such matters are
material to the interests of the Lenders (such consent not to be unreasonably withheld, delayed or
conditioned), ensure that (A) where the Target Acquisition is then proceeding by way of a Takeover
Offer, the terms and conditions contained in the Offer Document include the Acceptance Condition and
(B) except for any reference in the Scheme Documents to the recommendation of the Target
Acquisition and the Scheme to the Scheme Shareholders by the board of directors of the Target, the
conditions to be satisfied in connection with the Target Acquisition and contained in the Offer
Documents or the Scheme Documents (whichever is applicable) are otherwise consistent in all material
respects with those contained in the Offer Documents or Scheme Documents (whichever applied to the
immediately preceding manner in which it was proposed that the Target Acquisition would be effected)
(to the extent applicable for the legal form of a Takeover Offer or Scheme, as the case may be), in each
case other than (i) in the case of clause (B), any changes permitted or required by the Panel or the City
Code or any court of competent jurisdiction or are required to reflect the change in legal form to a
Takeover Offer or Scheme or (ii) changes that could have been made to the Scheme or a Takeover
Offer in accordance with the relevant provisions of this Agreement or which reflect the requirements of
the terms of this Agreement and the manner in which the Target Acquisition may be effected,
including, without limitation, changes to the price per Target Share which are made in accordance with
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the relevant provisions of this Agreement or any other agreement between the Borrower and the
Arrangers.
(xii) In the case of a Takeover Offer, (i) not declare the Takeover Offer unconditional as to
acceptances until the Acceptance Condition has been satisfied and (ii) promptly upon the Borrower
acquiring Target Shares which represent not less than 90% in nominal value of the Target Shares to
which the Takeover Offer relates or, if the Takeover Offer relates to Target Shares of different classes,
not less than 90% in nominal value of the shares of any class to which the Takeover Offer relates,
ensure that notices under Article 117 of the Jersey Companies Law in respect of Target Shares that the
Borrower has not yet agreed to directly or indirectly acquire are issued.
(xiii) In the case of a Scheme, within 90 days of the Scheme Effective Date, and in relation to a
Takeover Offer, within 90 days after the later of (i) the Closing Date and (ii) the date upon which the
Borrower (directly or indirectly) owns and/or has agreed to own or acquire and has received valid
acceptances (which have not been withdrawn or cancelled) of Target Shares (excluding any shares held
in treasury) in respect of, which, when aggregated with all other Target Shares owned by the Borrower
(directly or indirectly), represent not less than 75% of all Target Shares (excluding any shares held in
treasury), procure that such action as is necessary is taken to de-list the Target Shares from the Official
List of the Financial Conduct Authority and to cancel trading in the Target Shares on the main market
for listed securities of the London stock exchange and as soon as reasonably practicable thereafter, and
subject always to the Jersey Companies Law and any applicable listing rules, use its reasonable
endeavors to re-register Target as a private limited company.
(xiv) Except as consented by the Arrangers in writing, not give its consent with respect to any
frustrating action of the Target pursuant to Rule 21.1(c)(ii) of the City Code.
(k) Use of Proceeds. The proceeds of the Advances will be used in accordance with the provisions of
Section 2.16. No part of the proceeds of any Advance will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. The
Borrower will not request any Borrowing, and the Borrower shall not use, and the Borrower shall procure
that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the
proceeds of any Borrowing (i) for payments to any Person in violation of any Anti-Corruption Laws, (ii) for
the purpose of funding, financing or facilitating any activities, business or transaction of or with any
Sanctioned Person, or in any Sanctioned Country, to the extent such activities, businesses or transaction
would be prohibited by Sanctions if conducted by a corporation incorporated in the United States, Japan, the
United Kingdom or in a European Union member state or (iii) in any other manner that would result in the
violation of any Sanctions applicable to any party hereto.
(l) Anti-Social Conduct; Anti-Social Groups. Each party hereto shall ensure that (i) it is not classified
as an Anti-Social Group, nor shall any such party have any Anti-Social Relationship nor engage in any
Anti-Social Conduct, whether directly or indirectly through a third party and (ii) it shall not make any claim
against any other party hereto for any damages or losses suffered or incurred as a result of such other party
this clause (l) or any
exercising its rights under
misrepresentation in connection with Section 4.02.
this Agreement as a result of any breach of
The Borrower hereby acknowledges that the Administrative Agent and/or the Arrangers will make available to
the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively,
“Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar secure electronic
system (the “Platform”).
Certain of the Lenders (each, a “Public Lender”) may have personnel who do not wish to receive material
non-public information with respect to the Borrower or its respective Affiliates, or the respective securities of
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any of the foregoing, and who may be engaged in investment and other market-related activities with respect to
such Persons’ securities. The Borrower hereby agrees that (w) all Borrower Materials that are to be made
available to Public Lenders shall be clearly and conspicuously marked “PUBLIC”; (x) by marking Borrower
Materials “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent and the
Lenders to treat the Borrower Materials as not containing any material non-public information with respect to the
Borrower or its securities for purposes of the FIEA or United States Federal and state securities laws (provided,
however, that to the extent the Borrower Materials constitute Information, they shall be treated as set forth in
Section 9.08); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a
portion of the Platform designed “Public Side Information”; and (z) the Administrative Agent and the Arrangers
shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting
on a portion of the Platform not designated “Public Side Information.” Notwithstanding the foregoing, the
Borrower shall be under no obligation to mark any Borrower Materials “PUBLIC.”
For purposes of the foregoing paragraph, with respect to the Company or its affiliates or securities, the term
“material non-public information” shall include, without limitation (i) “material facts” (juyo jijitsu) as prescribed
in Paragraph 2, Article 166 (Prohibited Acts of Corporate Insiders) of the FIEA and/or (iii) “issuer related
information” (hojin kankei jyouho) as defined in Item 14, Paragraph 4, Article 1 of the Cabinet Office Ordinance
on Financial Instruments Business, etc. (Cabinet Office Ordinance No. 52 of August 6, 2007), meaning any
information relating to the operation, business or asset of the Company which is material non-public information
and, if it were made public, would likely to have an effect on the investment decision of the investors and any
non-public information in relation to a launch or a cancellation of a TOB of shares of common stock of the
Company.
SECTION 5.02 Negative Covenants. So long as any Advance shall remain unpaid or any Lender shall
have any Commitment hereunder, the Borrower will not:
(a) Liens, Etc. Incur, issue, assume or guarantee, or permit any member of the Consolidated Group to
incur, issue, assume or guaranty, at any time, any Borrowed Debt secured by a Lien on any property or asset
now owned or hereafter acquired by the Borrower or any member of the Consolidated Group (other than
Unrestricted Margin Stock), without effectively providing that the Advances outstanding at such time
(together with, if the Borrower shall so determine, any other Borrowed Debt of the Borrower or such
member of the Consolidated Group existing at such time or thereafter created that is not subordinate to the
Advances) shall be secured equally and ratably with (or prior to) such secured Borrowed Debt, so long as
such secured Borrowed Debt shall be so secured, unless, after giving effect thereto, the aggregate amount of
all such secured Borrowed Debt would not exceed $2,500,000,000; provided, however,
this
Section 5.02(a) shall not apply to, and there shall be excluded from secured Borrowed Debt in any
computation under this Section 5.02(a), Borrowed Debt secured by:
that
(i)
Liens on property of, or on any shares of stock or Borrowed Debt of, any Person existing at
the time such Person becomes a member of the Consolidated Group;
(ii) Liens in favor of any member of the Consolidated Group;
(iii) Liens incurred in the ordinary course of business to secure the performance of tenders,
statutory or regulatory obligations, surety, stay, customs and appeal bonds, statutory bonds, bids,
leases, government contracts, trade contracts, performance and return of money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) Liens on property of a member of the Consolidated Group in favor of the United States or
any State thereof, or any department, agency or instrumentality or political subdivision of the United
States or any State thereof, or in favor of any other country, or any political subdivision thereof, to
secure partial, progress, advance or other payments pursuant to any contract or statute;
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(v) Liens on property (including that of the Target and its Subsidiaries), shares of stock or
Borrowed Debt existing at the time of acquisition thereof (including acquisition through merger or
consolidation) or to secure the payment of all or any part of the purchase price or construction or
improvement cost thereof or to secure any Debt incurred prior to, at the time of, or within 180 days
after, the acquisition of such property or shares or Borrowed Debt or the completion of any such
construction or improvement for the purpose of financing all or any part of the purchase price or
construction or improvement cost thereof;
(vi) Liens existing on the Effective Date;
(vii) (x) bankers’ Liens, rights of setoff, revocation, refund, chargeback or overdraft protection,
and other similar Liens existing solely with respect to cash and cash equivalents on deposit in one or
more accounts maintained by the Borrower or any member of the Consolidated Group, in each case
granted in the ordinary course of business in favor of the bank or banks with which such accounts are
maintained, securing amounts owing to such bank with respect to cash management and operating
account arrangements,
including those involving pooled accounts and netting arrangements and
(y) Liens or rights of setoff against credit balances of the Borrower or any member of the Consolidated
Group with credit card issuers or credit card processors or amounts owing by payment card issuers or
payment card processors to Borrower or any member of the Consolidated Group in the ordinary course
of business;
(viii) Liens arising from any monetization, securitization or other financing of accounts receivable
or other receivables (including any related rights or claims) or in connection with factoring programs
entered into in the ordinary course of business and consistent with past practice and on a non-recourse
basis to the Borrower and its Subsidiaries; provided, that such Liens do not encumber any property or
assets other than the accounts receivable or other receivables (including any related rights or claims)
subject to such monetization, securitization, financing or factoring arrangement and any proceeds of
the foregoing; provided, further, that the aggregate principal amount of the obligations secured by such
Liens shall not exceed (x) prior to the Closing Date, $750,000,000 or (y) on or after the Closing Date,
$1,500,000,000.
(ix) Liens incurred in connection with pollution control, industrial revenue or similar financing;
(x)
survey exceptions and such matters as an accurate survey would disclose, easements,
trackage rights, leases, licenses, special assessments, rights of way covenants, conditions, restrictions
and declarations on or with respect to the use of real property, servicing agreements, development
agreements, site plan agreements and other similar encumbrances incurred in the ordinary course of
business and title defects or irregularities that are of a minor nature and that, in the aggregate, do not
interfere in any material respect with the ordinary conduct of the business of the Borrower or any
member of the Consolidated Group; and
(xi) any extension, renewal or replacement (or successive extensions, renewals or replacements),
as a whole or in part, of any Borrowed Debt secured by any Lien referred to in subclauses (i) through
(x) of this Section 5.02(a); provided, that (i) such extension renewal or replacement Lien shall be
limited to all or a part of the same property, shares of stock or Debt that secured the Lien extended,
renewed or replaced (plus improvements on such property) and (ii) the Borrowed Debt secured by such
Lien at such time is not increased.
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(b) Mergers, Etc. Merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or substantially all of its assets (other than
Unrestricted Margin Stock) (whether now owned or hereafter acquired) to, any Person, or permit any
member of the Consolidated Group to do so, except that:
(i) any member of (x) the Consolidated Group other than the Borrower may merge or consolidate
with or into or (y) the Consolidated Group may dispose of assets to, in each case, any other member of
the Consolidated Group;
(ii) the Borrower may merge with any other Person so long as (A) the Borrower is the surviving
entity or (B) the surviving entity shall succeed, by agreement reasonably satisfactory in form and
substance to the Required Lenders, to all of the businesses and operations of the Borrower and shall
assume all of the rights and obligations of the Borrower under this Agreement and the other Loan
Documents (it being understood that notwithstanding the foregoing,
the consummation of the
Transactions shall not be prohibited by this Section 5.02(b) or otherwise pursuant hereto);
(iii) any member of the Consolidated Group (other than the Borrower) may merge or consolidate
with or into another Person, convey, transfer, lease or otherwise dispose of all or any portion of its
assets so long as (A) the consideration received in respect of such merger, consolidation, conveyance,
transfer, lease or other disposition is at least equal to the fair market value of such assets and (B) no
Material Adverse Effect would reasonably be expected to result from such merger, consolidation,
conveyance, transfer, lease or other disposition;
provided, in the cases of clause (i), (ii) and (iii) hereof, that no Default or Event of Default (or, during the
Certain Funds Period, no Certain Funds Default) shall have occurred and be continuing at the time of such
proposed transaction or would result therefrom.
(c) Accounting Changes. Change the Borrower’s fiscal year-end from March 31 of each calendar year.
(d) Change in Nature of Business. Make any material change in the nature of the business of the
Consolidated Group, taken as a whole, from that carried out by the Borrower and its Subsidiaries (other than
the Target and its Subsidiaries) on the Effective Date and by Target and its Subsidiaries on the Closing
Date; it being understood that this Section 5.02(d) shall not prohibit (i) the Transactions or (ii) members of
the Consolidated Group from conducting any business or business activities incidental or related to such
business as carried on as of the Effective Date (in the case of the Borrower and its Subsidiaries other than
the Target and its Subsidiaries) or as of the Closing Date (in the case of the Target and its Subsidiaries) or
any business or activity that is reasonably similar or complementary thereto or a reasonable extension,
development or expansion thereof or ancillary thereto.
(e) Subsidiary Debt. Permit any of its Subsidiaries to create or suffer to exist any Borrowed Debt other
than:
(i)
Borrowed Debt existing on the Effective Date and disclosed to the Lenders prior to the date
hereof (the “Existing Debt”);
(ii) Borrowed Debt of any Person (including the Target or any of its Subsidiaries) that becomes
a Subsidiary after the date hereof; provided that such Borrowed Debt exists at the time such Person
becomes a Subsidiary of the Borrower and is not created in contemplation of or in connection with
such Person becoming a Subsidiary of the Borrower;
(iii) Borrowed Debt of any Subsidiary owed to any member of the Consolidated Group;
(iv) Borrowed Debt secured by Liens of the type described in and to the extent permitted by
Sections 5.02(a)(iii), (iv), (v), (ix) and (xi) (to the extent it applies to Borrowed Debt secured by Liens
referred to in Sections 5.02(a)(iii), (iv), (v) or (ix));
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(v) Borrowed Debt under ordinary course working capital or overdraft facilities;
(vi) Borrowed Debt consisting of commercial paper;
(vii) Borrowed Debt consisting of purchase money indebtedness; and
(viii) Borrowed Debt in an aggregate outstanding principal amount at any time not exceeding
$2,500,000,000;
SECTION 5.03 Financial Covenant. Consolidated Net Debt to Consolidated EBITDA. Beginning on
the last day of the first full fiscal half year ending after the Closing Date and on the last day of each fiscal half
year ending thereafter, the Borrower will not permit, as of the last day of any such fiscal half year, the ratio of
(x) Consolidated Net Debt at such time to (y) Consolidated EBITDA of the Borrower for the four consecutive
fiscal quarter period ending as of such date to exceed, for the last day of each fiscal half year ending on or prior
to September 30, 2019, 5.95 to 1.00, and for the last day of the fiscal half year ending March 31, 2020 and for the
last day of each fiscal half year thereafter, 5.35 to 1.00.
For purposes of calculating the aggregate principal amount of the Consolidated Net Debt of the
Borrower on any such date, the currency exchange rate used for such calculation shall be the rate used in the
annual or semi-annual financial statements for such date; provided, however, that if the Borrower determines that
an average exchange rate is a more accurate reflection of the value of such currency over such four consecutive
fiscal quarter period, the currency exchange rate used may be, at the option of the Borrower, the currency
exchange rate used for the statement of income of the Borrower for such fiscal half year.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01 Events of Default. If any of the following events (“Events of Default”) shall occur and
be continuing:
(a) The Borrower shall fail (i) to pay any principal of any Advance when the same becomes due and
payable or (ii) to pay any interest on any Advance or make any payment of fees or other amounts payable
under this Agreement within five Business Days after the same becomes due and payable; or
(b) Any representation or warranty made by the Borrower herein or in any other Loan Document (or
any of its officers or directors) in connection with this Agreement or in any certificate or other document
furnished pursuant to or in connection with this Agreement, if any, in each case shall prove to have been
incorrect in any material respect when made or deemed made; or
(c) (i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in
Section 5.01(d)(i), 5.01(i)(iv), 5.01(j), 5.02(a), 5.02(b), 5.02(d), 5.03, 9.01(b) or (ii) the Borrower shall fail
to perform or observe any term, covenant or agreement contained in Section 5.01(e) or clauses (i)-(iii) or
(v)-(vii) of Section 5.01(i) if such failure shall remain unremedied for 10 Business Days after written notice
thereof shall have been given to the Borrower by the Administrative Agent or any Lender, or (iii) the
to perform or observe any other term, covenant or agreement contained in this
Borrower shall fail
Agreement, if any, in each case on its part to be performed or observed if such failure shall remain
unremedied for 30 days after written notice thereof shall have been given to the Borrower by the
Administrative Agent or any Lender; or
(d) The Borrower or any Significant Subsidiary shall fail to pay any principal of or premium or interest
on any Debt that is outstanding in a principal amount, or, in the case of any Hedge Agreement, having a
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maximum Agreement Value, of at least $200,000,000 in the aggregate (but excluding Debt outstanding
hereunder) of the Borrower or such Significant Subsidiary, when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure
shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to
such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating
to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid or
redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased,
or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior
to the stated maturity thereof; it being understood and agreed that notwithstanding the foregoing, the
delivery of a notice of prepayment by one or more lenders under the Existing Target Indebtedness as a result
of the occurrence of the Target Acquisition will not result in an Event of Default under this clause (d);
provided that this clause (d) will apply to the extent there is a failure to make any such prepayment when the
same becomes due and payable; or
(e) The Borrower or any Significant Subsidiary shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any Significant
Subsidiary seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it (but not instituted by it), such proceeding
shall remain undismissed or unstayed for a period of 60 days; or the Borrower or any Significant Subsidiary
shall take any corporate action to authorize any of the actions set forth above in this Section 6.01(e). With
respect to the Borrower or any Significant Subsidiary organized under the laws of Japan, the following shall
constitute an Event of Default: if (i) the Borrower makes an express declaration or implicit declaration of its
inability to pay its debts to its creditors generally (shiharai teishi); (ii) a bank clearinghouse refuses to process
the Borrower’s checks (tegata torihiki teishi shobun); or densai.net Co., Ltd. (iii) an order is issued by a court
for the attachment (whether preliminary or otherwise) or preservation of the Borrower’s material property,
estate or other right and is not discharged within sixty (60) days; (iv) a receiver or trustee is appointed for all or
a portion of the property or estate of the Borrower; (v) an involuntary petition for commencement of
bankruptcy (hasan), corporate reorganization (kaisha kosei), civil rehabilitation (minji saisei), special
liquidation (tokubetsu seisan) or similar proceedings are filed against the Borrower and are not discharged
within sixty (60) days; (vi) the Borrower files a voluntary petition (including a petition filed by a director of the
Borrower) to commence, or a court of competent jurisdiction approves an involuntary petition with respect to
and commences the procedure of, any of the proceedings specified in subparagraph (v) above; (vii) a voluntary
petition to commence a special conciliation proceeding (tokutei choutei); or (viii) the Borrower adopts a
resolution for liquidation at a meeting of its shareholders; or
(f) Any one or more judgments or orders for the payment of money in excess of $200,000,000 shall be
rendered against a member of the Consolidated Group and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii) there shall be any period of
60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; provided, however, that, for purposes of determining whether an
Event of Default has occurred under this Section 6.01(f), the amount of any such judgment or order shall be
reduced to the extent that (A) such judgment or order is covered by a valid and binding policy of insurance
between the defendant and the insurer covering payment thereof and (B) such insurer, which shall be rated
at least “A” by A.M. Best Company, has been notified of, and has not disputed the claim made for payment
of, such judgment or order; or
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(g) Any Person shall become an owner (hoyusha) or two or more Persons shall become joint owners
(kyodo hoyusha) (in each case within the meaning of Articles 27-23 of the FIEA) of Voting Stock of the
Borrower (or other securities convertible into or exchangeable for such Voting Stock) representing 50% or
more of the combined voting power of all Voting Stock of the Borrower (as calculated pursuant to Article
27-23, Paragraph 4 of the FIEA); or
(h) One or more of the following shall have occurred or is reasonably expected to occur, which in each
case would reasonably be expected to result in a Material Adverse Effect: (i) any ERISA Event; (ii) the
partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan; or
(iii) the termination of a Multiemployer Plan; or
(i) This Agreement shall cease to be valid and enforceable against the Borrower (except to the extent it
is terminated in accordance with its terms) or the Borrower shall so assert in writing;
then, and in any such event (subject to Section 3.04), the Administrative Agent (i) shall at the request, or may
with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Lender to
make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the consent, of the Required Lenders, by notice to the Borrower, declare the Advances, all interest
thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the
Advances, all such interest and all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, (but for the avoidance of doubt, always subject to Section 3.04) that in the event of
an Event of Default under Section 6.01(e), (A) the Commitment of each Lender shall automatically be terminated
and (B) the Advances, all such interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the
Borrower.
Notwithstanding anything in this Agreement to the contrary, for a period commencing on the Closing
Date and ending on the date falling 180 days after the Closing Date (the “Clean-up Date”), notwithstanding any
other provision of any Loan Document, any breach of covenants, misrepresentation or other default which arises
with respect to the Target Group will be deemed not to be a breach of representation or warranty, a breach of
covenant or an Event of Default, as the case may be, if:
(i)
it is capable of remedy and reasonable steps are being taken to remedy it;
(ii) the circumstances giving rise to it have not knowingly been procured by or approved by the
Borrower; and
(iii) it is not reasonably likely to have a Material Adverse Effect.
If the relevant circumstances are continuing on or after the Clean-up Date,
there shall be a breach of
representation or warranty, breach of covenant or Event of Default, as the case may be, notwithstanding the
above.
ARTICLE VII
THE AGENTS
SECTION 7.01 Authorization and Action. Each Lender hereby irrevocably appoints JPMorgan Chase
Bank, N.A. (or any branch or Affiliate thereof designated by it) to act on its behalf as the Administrative Agent
hereunder and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers
as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are
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reasonably incidental thereto. The provisions of this Article VII (other than the third sentence of Section 7.04)
are solely for the benefit of the Administrative Agent and the Lenders, and the Borrower shall not have rights as a
third party beneficiary of any of such provisions (other than the third sentence of Section 7.04).
SECTION 7.02 Administrative Agent Individually. The Person serving as the Administrative Agent
hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise
the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless
otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the
Administrative Agent hereunder in its individual capacity as a Lender. Such Person and its Affiliates may accept
deposits from, own securities of, lend money to, act as the financial advisor or in any other advisory capacity for
and generally engage in any kind of business with any member of the Consolidated Group or other Affiliate
thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor
to the Lenders.
SECTION 7.03 Duties of Administrative Agent; Exculpatory Provisions.
(a) The Administrative Agent’s duties hereunder and under the other Loan Documents are solely
ministerial and administrative in nature, and the Administrative Agent shall not have any duties or obligations
except those expressly set forth herein or in any other Loan Document. Without limiting the generality of the
foregoing, the Administrative Agent shall not have any duty to take any discretionary action or exercise any
discretionary powers but shall be required to act or refrain from acting (and shall be fully protected in so acting
or refraining from acting) upon the written direction of the Required Lenders (or such other number or
percentage of the Lenders as shall be expressly provided for herein or in any other Loan Document); provided
that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its
counsel, may expose the Administrative Agent or any of its Affiliates to liability or that is contrary to any Loan
Document or applicable law, including for the avoidance of doubt, any action that may be in violation of the
automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of
property of a Defaulting Lender in violation of any Debtor Relief Law.
(b) The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the
consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be
necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances
as provided in Section 9.01 or 6.01) or (ii) in the absence of its own gross negligence or willful misconduct. The
Administrative Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until
the Borrower or any Lender shall have given notice to the Administrative Agent describing such Default or Event
of Default.
(c) The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty, representation or other information made or supplied in or in connection with this
Agreement or any other Loan Document or the information memorandum distributed in connection with the
syndication of the Commitments and Advances hereunder, (ii) the contents of any certificate, report or other
document delivered hereunder or thereunder or in connection herewith or therewith or the adequacy, accuracy
and/or completeness of the information contained therein, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default,
(iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any
other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article III or
elsewhere herein, other than (but subject to the foregoing clause (ii)) to confirm receipt of items expressly
required to be delivered to the Administrative Agent.
(d) Nothing in this Agreement or any other Loan Document shall require the Administrative Agent or
any of its Related Parties to carry out any “know your customer” or other checks in relation to any person on
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behalf of any Lender, and each Lender confirms to the Administrative Agent that it is solely responsible for any
such checks it is required to carry out and that it may not rely on any statement in relation to such checks made
by the Administrative Agent or any of its Related Parties.
SECTION 7.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely
upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement,
instrument, document or other writing (including any electronic message, Internet or intranet website posting or
other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the
proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In
determining compliance with any condition hereunder to the Effective Date, the making of any Advance or the
Closing Date that by its terms must be fulfilled to the satisfaction of a Lender, each Lender shall be deemed to
have consented to, approved or accepted such condition unless (i) an officer of the Administrative Agent
responsible for the transactions contemplated hereby shall have received notice to the contrary from such Lender
prior to the occurrence of the Effective Date, the making of such Advance or the Closing Date, as applicable, and
(ii) in the case of a condition to the making of an Advance, such Lender shall not have made available to the
Administrative Agent such Lender’s ratable portion of such Borrowing. The Administrative Agent may consult
with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected
by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
SECTION 7.05 Delegation of Duties. The Administrative Agent may perform any and all of its duties
and exercise its rights and powers hereunder by or through any one or more sub agents appointed by the
Administrative Agent. The Administrative Agent and any such sub agent may perform any and all of its duties
and exercise its rights and powers by or through their respective Related Parties. Each such sub agent and the
Related Parties of the Administrative Agent and each such sub agent shall be entitled to the benefits of all
provisions of this Article VII and Section 9.04 (as though such sub-agents were the “Administrative Agent”
under this Agreement) as if set forth in full herein with respect thereto.
SECTION 7.06 Resignation of Administrative Agent.
(a) The Administrative Agent may at any time give notice of its resignation to the Lenders and the
Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right (with the
consent of the Borrower, provided that no consent of the Borrower shall be required if an Event of Default has
occurred and is continuing), to appoint a successor, which shall be a bank with an office in the United States or
Tokyo, or an Affiliate of any such bank with an office in the United States or Tokyo. If no such successor shall
have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after
the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the
Required Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not
be obligated to), on behalf of the Lenders (and with the consent of the Borrower, provided that no consent of the
Borrower shall be required if an Event of Default has occurred and is continuing), appoint a successor
Administrative Agent meeting the qualifications set forth above. Whether or not a successor has been appointed,
such resignation shall become effective in accordance with such notice on the Resignation Effective Date.
(b) With effect from the Resignation Effective Date (i) the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder and under the other Loan Documents and (ii) except for any
indemnity payments owed to the retiring Administrative Agent, all payments, communications and
determinations to be made by, to or through the Administrative Agent shall instead be made by or to each Lender
directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided
for above. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor
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shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring
Administrative Agent (other than any rights to indemnity payments owed to the retiring Administrative Agent),
and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder and
under the other Loan Documents. The fees payable by the Borrower to a successor Administrative Agent shall be
the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.
After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the
provisions of this Article VII and Section 9.04 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub agents and their respective Related Parties in respect of any actions taken or
omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.
SECTION 7.07 Non-Reliance on Administrative Agent and Other Lenders. Each Lender acknowledges
and agrees that the extensions of credit made hereunder are commercial loans and not investments in a business
enterprise or securities. Each Lender further represents that it is engaged in making, acquiring or holding
commercial loans in the ordinary course of its business and has, independently and without reliance upon the
Administrative Agent, any arranger of the credit facilities evidenced by this Agreement or any other Lender and
their respective Related Parties and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement as a Lender, and to make, acquire or hold
Advances hereunder. Each Lender shall, independently and without reliance upon the Administrative Agent, any
arranger of the credit facilities evidenced by this Agreement or any amendment thereof or any other Lender and
their respective Related Parties and based on such documents and information (which may contain material,
non-public information within the meaning of the United States securities laws concerning the Borrower and its
Affiliates) as it shall from time to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any related agreement or any document furnished hereunder
or thereunder and in deciding whether or to the extent to which it will continue as a Lender or assign or otherwise
transfer its rights, interests and obligations hereunder. Nothing in this Agreement shall oblige the Administrative
Agent to conduct any “know your customer” or other procedures in relation to any Person or any check on the
extent to which any transaction contemplated by this Agreement might be unlawful for any Lender, on behalf of
any Lender and each Lender confirms to the Administrative Agent that it is solely responsible for any such
procedures or check it is required to conduct and that it shall not rely on any statement in relation to such
procedures or check made by the Administrative Agent.
SECTION 7.08 Indemnification. The Lenders agree to indemnify the Administrative Agent (to the
extent not reimbursed by the Borrower), ratably according to the respective principal amounts of the Advances
made by each of them (or, if no Advances are at the time outstanding, ratably according to the respective
amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Administrative Agent under this Agreement, in each case,
acting in the capacity of Administrative Agent; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent’s gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrative Agent in
connection with the preparation, execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Administrative Agent is not promptly reimbursed for
such expenses by the Borrower.
SECTION 7.09 Other Agents. None of the Lenders identified on the facing page or signature pages of
this Agreement as an “arranger” or “book runner” shall have any right, power, obligation, liability, responsibility
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or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing,
none of the Lenders so identified shall have or be deemed to have any fiduciary relationship with any Lender.
Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding
to enter into this Agreement or in taking or not taking action hereunder.
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ARTICLE VIII
[RESERVED]
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Amendments, Etc.
(a) Except as provided in Section 2.08(c), no amendment or waiver of any provision of this Agreement,
nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Required Lenders and the Borrower and acknowledged by the Administrative Agent,
and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no amendment, waiver or consent shall, unless in writing, do any of the
following:
(i) waive any of the conditions specified in Section 3.01, 3.02 or 3.03 unless signed by each
Lender directly and adversely affected thereby;
(ii) increase or extend the Commitments of a Lender or subject a Lender to any additional
obligations, unless signed by such Lender;
(iii) reduce the principal of, or stated rate of interest on, the Advances, the stated rate at which any
fees hereunder are calculated or any other amounts payable hereunder, unless signed by each Lender
directly and adversely affected thereby; provided that only the consent of the Required Lenders shall be
necessary to amend the definition of “Default Interest” or to waive any obligation of the Borrower to
pay Default Interest (except that no amendment entered into pursuant to the terms of Section 2.08(c)
shall constitute a reduction in the rate of interest or fees for purposes of this clause (ii));
(iv) postpone any date fixed for any payment of principal of, or interest on, the Advances or any
fees or other amounts payable hereunder, unless signed by each Lender directly and adversely affected
thereby;
(v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the
Advances, or the number of Lenders, that, in each case, shall be required for the Lenders or any of
them to take any action hereunder, unless signed by all Lenders; or
(vi) amend this Section 9.01, unless signed by all Lenders.
and provided further that no amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of
the Administrative Agent under this Agreement. Notwithstanding the foregoing, the Administrative Agent and
the Borrower may amend any Loan Document
to correct any errors, mistakes, omissions, defects or
inconsistencies, or to effect administrative changes that are not adverse to any Lender, and such amendment shall
become effective without any further consent of any other party to such Loan Document other than the
Administrative Agent and the Borrower.
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(b) Notwithstanding the foregoing, in the event that the terms of this Agreement are required to be
modified as specified in the applicable provisions of the Fee and Syndication Letter, then this Agreement may be
amended (to the extent not adverse to the interests of the Lenders) by the Administrative Agent and the Borrower
without the need to obtain the consent of any Lender. In furtherance of the foregoing, the Borrower agrees to
promptly execute and deliver any amendment to this Agreement requested by the Administrative Agent as shall
be necessary to implement any modification to this Agreement pursuant to the terms of the Fee and Syndication
Letter within five Business Days of any such request.
(c) If, in connection with any proposed amendment, waiver or consent requiring the consent of “all
Lenders,” “each Lender” or “each Lender directly and adversely affected thereby,” the consent of the Required
Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent
is necessary but not obtained being referred to herein as a “Non- Consenting Lender”), then the Borrower may
elect to replace a Non-Consenting Lender as a Lender party to this Agreement; provided that, concurrently with
such replacement, (i) another bank or other entity (which is reasonably satisfactory to the Borrower and the
Administrative Agent) shall agree, as of such date, to purchase at par for cash the Advances and other obligations
under the Loan Documents due to the Non-Consenting Lender pursuant to an Assignment and Acceptance and to
become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting
Lender to be terminated as of such date, and (ii) the Borrower shall pay to such Non-Consenting Lender in same
day funds on the day of such replacement all principal, interest, fees and other amounts then accrued but unpaid
to such Non-Consenting Lender by the Borrower to and including the date of termination. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
Each party hereto agrees that an assignment required pursuant to this paragraph may be effected pursuant to an
Assignment and Acceptance executed by the Borrower, the Administrative Agent and the assignee (or, to the
extent applicable, an agreement incorporating an Assignment and Acceptance by reference pursuant to an
approved electronic platform as to which the Administrative Agent and such parties are participants), and (b) the
Lender required to make such assignment need not be a party thereto in order for such assignment to be effective
and shall be deemed to have consented to an be bound by the terms thereof; provided that, following the
effectiveness of any such assignment, the other parties to such assignment agree to execute and deliver such
documents necessary to evidence such assignment as reasonably requested by the applicable Lender, provided
that any such documents shall be without recourse to or warranty by the parties thereto.
SECTION 9.02 Notices, Etc. (a) All notices and other communications provided for hereunder shall be
in writing (including telecopier) and mailed, telecopied or delivered, if to the Borrower or the Administrative
Agent, to the address, telecopier number or if applicable, electronic mail address, specified for such Person on
Schedule II; or, as to the Borrower or the Administrative Agent, at such other address as shall be designated by
such party in a written notice to the other parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to the Borrower and the Administrative Agent. All such notices and
communications shall, when mailed or telecopied, be effective three Business Days after being deposited in the
mails, postage prepaid, or upon confirmation of receipt (except that if electronic confirmation of receipt is
received at a time that the recipient is not open for business, the applicable notice or communication shall be
effective at the opening of business on the next business day of the recipient), respectively, except that notices
and communications to the Administrative Agent pursuant to Article II, III or VII shall not be effective until
received by the Administrative Agent. Delivery by telecopier or other electronic communication of an executed
counterpart of any amendment or waiver of any provision of this Agreement or of any Exhibit hereto to be
executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof.
(b) Electronic Communications. Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant
to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any
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Lender pursuant to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving
notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its
discretion, agree to accept notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular
notices or communications.
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an
e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended
recipient (such as by the “return receipt requested” function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication is not sent during the normal business
hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of
business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address
as described in the foregoing clause (i) of notification that such notice or communication is available and
identifying the website address therefor.
IMPLIED OR STATUTORY,
(c) THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES
(AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE
BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM
LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY
OF ANY KIND, EXPRESS,
INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY
AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no
event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any
liability to the Borrower, any Lender or any other Person for losses, claims, damages, liabilities or expenses of
any kind (whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative Agent’s
transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages,
liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment
to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in
no event shall any Agent Party have any liability to the Borrower, any Lender or any other Person for indirect,
special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
(d) Each Lender agrees that notice to it (as provided in the next sentence) (a “Notice”) specifying that
any communication has been posted to the Platform shall constitute effective delivery of such information,
documents or other materials to such Lender for purposes of this Agreement. Each Lender agrees to notify the
Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective
address, contact name, telephone number, telecopier number and electronic mail address to which notices and
other communications may be sent and (ii) accurate wire instructions for such Lender. Furthermore, each Public
Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected
the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to
enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and
applicable Law, including United States federal and state securities Laws, to make reference to Borrower
Materials that are not made available through the “Public Side Information” portion of the Platform and that may
contain material non-public information with respect to the Borrower or its securities for purposes of United
States federal or state securities laws.
(e) If any notice required under this Agreement is permitted to be made, and is made, by telephone,
actions taken or omitted to be taken in reliance thereon by the Administrative Agent or any Lender shall be
binding upon the Borrower notwithstanding any inconsistency between the notice provided by telephone and any
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subsequent writing in confirmation thereof provided to the Administrative Agent or such Lender; provided that
any such action taken or omitted to be taken by the Administrative Agent or such Lender shall have been in good
faith and in accordance with the terms of this Agreement.
(f) With respect to notices and other communications hereunder from the Borrower to any Lender, the
Borrower shall provide such notices and other communications to the Administrative Agent, and the
Administrative Agent shall promptly deliver such notices and other communications to any such Lender in
accordance with subsection (b) above or otherwise.
SECTION 9.03 No Waiver; Remedies. No failure on the part of any Lender or the Administrative
Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by
applicable law.
SECTION 9.04 Costs and Expenses. (a) The Borrower agrees to pay, upon demand, all reasonable and
documented out-of-pocket costs and expenses of each Agent in connection with the preparation, execution,
delivery, administration, modification and amendment of this Agreement and the other documents to be delivered
hereunder, including, (i) due diligence expenses, syndication expenses, travel expenses and (ii) the reasonable
and documented out-of-pocket fees, charges and expenses of a single primary counsel (and one local counsel in
each relevant jurisdiction) for the Administrative Agent with respect thereto and with respect to advising the
Agents as to their respective rights and responsibilities under this Agreement. The Borrower further agrees to
pay, upon demand, all reasonable and documented out-of-pocket costs and expenses of the Agents and the
legal proceedings or
Lenders,
otherwise) of this Agreement and the other documents to be delivered hereunder, including, without limitation,
reasonable and documented out-of-pocket fees and expenses of a single primary counsel and an additional single
local counsel in any relevant jurisdictions for the Agents and the Lenders and, solely in the case of an actual or
perceived conflict of interest where the Agents notify the Borrower of the existence of such conflict in writing,
one additional counsel, in connection with the enforcement of rights under this Agreement.
in connection with the enforcement (whether through negotiations,
if any,
(b) The Borrower agrees to indemnify and hold harmless each Agent and each Lender and each of their
Affiliates and their respective officers, directors, employees, agents and advisors (each, an “Indemnified Party”)
from and against any and all claims, damages, losses, penalties, liabilities and expenses (provided, that, the
Borrower’s obligations to the Indemnified Parties in respect of fees and expenses of counsel shall be limited to
the reasonable and documented out-of-pocket fees and expenses of one primary counsel for all Indemnified
Parties, taken together, (and, if reasonably necessary, one local counsel in any relevant jurisdiction) and, solely in
the case of an actual or potential conflict of interest of which you are notified in writing, of one additional
counsel for all Indemnified Parties, taken together (and, if reasonably necessary, one local counsel in any
relevant jurisdiction) (all such claims, damages, losses, penalties, liabilities and reasonable expenses being,
collectively, the “Losses”) that may be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of,
any investigation, litigation or proceeding arising out of, related to or in connection with (i) this Agreement, any
of the transactions contemplated hereby or the actual or proposed use of the proceeds of the Advances or (ii) the
actual or alleged presence or release of Hazardous Materials on any property of the Consolidated Group or any
Environmental Action relating in any way to the Consolidated Group, in each case whether or not such
investigation, litigation or proceeding is brought by the Borrower, its directors, shareholders or creditors or an
Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not
the transactions contemplated hereby are consummated, except to the extent Losses (A) are found in a final,
nonappealable judgment by a court of competent jurisdiction to have resulted from the gross negligence, bad
faith or willful misconduct of such Indemnified Party or any of its Related Indemnified Parties (including any
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breach of its obligations under this Agreement), (B) result from any dispute between an Indemnified Party and
one or more other Indemnified Parties (other than against an Agent or Arranger acting in such a role) or
(C) result from the claims of one or more Lenders solely against one or more other Lenders (and not claims by
one or more Lenders against any Agent acting in its capacity as such except, in the case of Losses incurred by
any Agent or any Lender as a result of such claims, to the extent such Losses are found in a final, nonappealable
judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence,
bad faith or willful misconduct (including any breach of its obligations under this Agreement)) not attributable to
any actions of a member of the Consolidated Group and for which the members of the Consolidated Group
otherwise have no liability. The Borrower further agrees that no Indemnified Party shall have any liability
(whether direct or indirect, in contract, tort or otherwise) to the Borrower or any of its shareholders or creditors
for or in connection with this Agreement or any of the transactions contemplated hereby or the actual or proposed
use of the proceeds of the Advances, except to the extent such liability is found in a final non-appealable
judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence,
bad faith or willful misconduct (including any breach of its obligations under this Agreement). In no event,
however, shall any Indemnified Party or the Borrower be liable on any theory of liability for any special, indirect,
consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated
savings); provided that nothing in this sentence shall limit the Borrower’s indemnity and reimbursement
obligations to the extent that such special, indirect, consequential or punitive damages are included in any claim
by a third party unaffiliated with any of the Indemnified Parties with respect to which the applicable Indemnified
Party is entitled to indemnification as set forth in the immediately preceding sentence. As used above, a “Related
Indemnified Party” of an Indemnified Party means (1) any Controlling Person or Controlled Affiliate of such
Indemnified Party, (2) the respective directors, officers, or employees of such Indemnified Party or any of its
Controlling Persons or Controlled Affiliates and (3) the respective agents, advisors or representatives of such
Indemnified Party or any of its Controlling Persons or Controlled Affiliates, in the case of this clause (3), acting
at the instructions of such Indemnified Party, Controlling Person or Controlled Affiliate; provided that each
reference to a Controlling Person, Controlled Affiliate, director, officer or employee in this sentence pertains to a
Controlling Person, Controlled Affiliate, director, officer or employee involved in the structuring, arrangement,
negotiation or syndication of the Bridge Facility and this Agreement. Notwithstanding the foregoing, this section
9.04(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc.
arising from any non-Tax claim.
(c) If any payment of principal of, or Conversion of, any Eurocurrency Rate Advance is made by the
Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Advance, as a
result of (i) a payment or Conversion pursuant to Section 2.06, 2.08(b), 2.08(c), 2.10 or 2.12, (ii) acceleration of
the maturity of the Advances pursuant to Section 6.01, (iii) a payment by an Eligible Assignee to any Lender
other than on the last day of the Interest Period for such Advance upon an assignment of the rights and
obligations of such Lender under this Agreement pursuant to Section 9.07 as a result of a demand by the
Borrower pursuant to Section 9.07(a) or (iv) for any other reason, the Borrower shall, upon demand by such
Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the
account of such Lender any amounts required to compensate such Lender for any additional reasonable losses,
costs or expenses that it may reasonably incur as a result of such payment or Conversion or as a result of any
inability to Convert or exchange in the case of Section 2.08 or 2.12, including, without limitation, any reasonable
loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by any Lender to fund or maintain such Advance.
(d) Without prejudice to the survival of any other agreement of the Borrower hereunder,
the
agreements and obligations of the Borrower contained in Sections 2.11, 2.14 and 9.04 shall survive the payment
in full of principal, interest and all other amounts payable hereunder.
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SECTION 9.05 Right of Setoff. Subject to Section 3.04, upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by
Section 6.01 to authorize the Administrative Agent to declare the Advances due and payable pursuant to the
provisions of Section 6.01, each Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such
Lender or such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations
of the Borrower now or hereafter existing under this Agreement, whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. Each Lender agrees promptly to
notify the Borrower after any such setoff and application is made by such Lender; provided that the failure to
give such notice shall not affect the validity of such setoff and application. The rights of each Lender and its
Affiliates under this Section 9.05 are in addition to other rights and remedies (including, without limitation, other
rights of setoff) that such Lender and its Affiliates may have.
SECTION 9.06 Binding Effect. This Agreement shall become effective upon the satisfaction (or waiver
in accordance with Section 9.01) of the conditions set forth in Section 3.01 and, thereafter, shall be binding upon
and inure to the benefit of, and be enforceable by, the Borrower, the Administrative Agent and each Lender and
their respective successors and permitted assigns, except that the Borrower shall have no right to assign their
rights hereunder or any interest herein without the prior written consent of the Lenders, and any purported
assignment without such consent shall be null and void.
SECTION 9.07 Assignments and Participations. (a) Each Lender may, with the consent of the
Borrower and the Administrative Agent, which consents shall not be unreasonably withheld or delayed (it being
agreed that notwithstanding anything herein, including the proviso set forth below, during the Certain Funds
Period the Borrower may withhold such consent in its sole discretion unless a Certain Funds Default is
continuing) and, in the case of the Borrower, (A) shall not be required while an Event of Default (or during the
Certain Funds Period a Certain Funds Default) has occurred and is continuing and (B) shall be deemed given if
the Borrower shall not have objected within 10 Business Days following its receipt of notice of such assignment
(and, within five days after demand by the Borrower (with a copy of such demand to the Administrative Agent)
to (i) any Defaulting Lender, (ii) any Lender that has made a demand for payment pursuant to Section 2.11 or
2.14, (iii) any Lender that has asserted pursuant to Section 2.08(b) or 2.12 that it is impracticable or unlawful for
such Lender to make Eurocurrency Rate Advances or (iv) any Lender that fails to consent to an amendment or
waiver hereunder for which consent of all Lenders (or all affected Lenders) is required and as to which the
Required Lenders shall have given their consent, such Lender will), assign to one or more Persons (other than
natural persons) all or a portion of its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitment and the Advances owing to it); provided, however, that:
(A) such consent shall not be required in the case of an assignment to any other Lender or an Affiliate
of any Lender, provided that (i) notice thereof shall have been given to the Borrower and the Administrative
Agent and (ii) solely with respect to assignments during the Certain Funds Period, such Affiliate has a rating
for its long term unsecured and non-credit enhanced debt obligations which is not less than that of the
relevant assigning Lender;
(B) each such assignment shall be of a constant, and not a varying, percentage of all rights and
obligations under this Agreement;
(C) except in the case of an assignment to a Person that, immediately prior to such assignment, was a
Lender or an assignment of all of a Lender’s rights and obligations under this Agreement associated with a
particular Class, the amount of the Commitment of the assigning Lender being assigned pursuant to each
such assignment (determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than $25,000,000 or an integral multiple of $5,000,000 in excess
thereof;
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(D) each such assignment shall be to an Eligible Assignee;
(E) each such assignment made as a result of a demand by the Borrower pursuant
to this
Section 9.07(a) shall be arranged by the Borrower with the approval of the Administrative Agent (which
approval shall not be unreasonably withheld) and shall be either an assignment of all of the rights and
obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and
obligations made concurrently with another such assignment or other such assignments that,
in the
aggregate, cover all of the rights and obligations of the assigning Lender under this Agreement;
(F) no Lender shall be obligated to make any such assignment as a result of a demand by the Borrower
pursuant to this Section 9.07(a), (1) so long as a Default shall have occurred and be continuing and
(2) unless and until such Lender shall have received one or more payments from one or more Eligible
Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the
Advances owing to such Lender, together with accrued interest thereon to the date of payment of such
principal amount, and from the Borrower or one or more Eligible Assignees in an aggregate amount equal to
all other amounts accrued to such Lender under this Agreement (including, without limitation, any amounts
owing under Sections 2.11, 2.14 or 9.04(c)) and (3) unless and until the Borrower shall have paid (or caused
to be paid) to the Administrative Agent a processing and recordation fee of $3,500; provided, however, that
the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in
the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire; and
(G) the parties to each such assignment (other than, except in the case of a demand by the Borrower
pursuant to this Section 9.07(a), the Borrower) shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance and, if such assignment does not
occur as a result of a demand by the Borrower pursuant to this Section 9.07(a) (in which case the Borrower
shall pay the fee required by subclause (F)(3) of this Section 9.07(a)), a processing and recordation fee of
$3,500; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such
processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver
to the Administrative Agent an Administrative Questionnaire.
Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement, except that such assigning Lender shall continue to be
entitled to the benefit of Section 9.04(a) and (b) with respect to matters arising out of the prior involvement of
such assigning Lender as a Lender hereunder (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall
cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and
the assignee thereunder confirm to and agree with each other and the other parties hereto as follows:
(i)
other than as provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or
document furnished pursuant hereto;
(ii)
such assigning Lender makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower or the performance or observance by the
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Borrower of any of its obligations under this Agreement or any other instrument or document furnished
pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement, together with copies of
the financial statements referred to in Section 4.01(e) and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and
Acceptance;
(iv) such assignee will, independently and without reliance upon any Agent, such assigning
Lender or any other Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking action under this
Agreement;
(v)
such assignee confirms that it is an Eligible Assignee;
(vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent
on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers and discretion as are reasonably
incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms all of the obligations
that by the terms of this Agreement are required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an
assignee representing that it is an Eligible Assignee, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit B hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof
to the Borrower; provided that the Administrative Agent shall only be required to execute any such Assignment
and Acceptance once it has satisfied and complied with all necessary “know your customer” or similar checks
under all applicable laws and regulations in relation to the proposed assignment to the assignee.
(d) The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower,
shall maintain at its address as set forth on Schedule II a copy of each Assignment and Acceptance delivered to
and accepted by it and a register for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount (and stated interest) of the Advances owing to, each Lender from time to
time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agents and the Lenders shall treat each Person whose name is recorded in
the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Each Lender may sell participations to one or more banks or other entities (other than the Borrower
or any of its Affiliates or any natural person) in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and the Advances owing to it)
without the consent of the Administrative Agent or the Borrower; provided, however, that:
(i)
such Lender’s obligations under
this Agreement
(including, without
limitation,
its
Commitment) shall remain unchanged;
(ii) such Lender shall remain solely responsible to the other parties hereto for the performance of
such obligations;
(iii) such Lender shall remain the Lender of any such Advance for all purposes of this Agreement;
(iv) the Borrower, the Agents and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender’s rights and obligations under this Agreement; and
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(v) no participant under any such participation shall have any right to approve any amendment or
waiver of any provision of this Agreement, or any consent to any departure by the Borrower herefrom
or therefrom, except to the extent that such amendment, waiver or consent would reduce the principal
of, or stated rate of interest on, the Advances or the stated rate at which any fees or any other amounts
payable hereunder are calculated, in each case to the extent subject to such participation, or postpone
any date fixed for any payment of principal of, or interest on, the Advances or any fees or any other
amounts payable hereunder, in each case to the extent subject to such participation.
Each Lender shall promptly notify the Borrower after any sale of a participation by such Lender pursuant to this
Section 9.07(e); provided that the failure of such Lender to give notice to the Borrower as provided herein shall
not affect the validity of such participation or impose any obligations on such Lender or the applicable
participant.
Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the
Borrower, maintain a register on which it enters the name and address of each participant and the principal
amounts (and stated interest) of each participant’s interest in the Advances or other obligations under the Loan
Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any
portion of the Participant Register (including the identity of any participant or any information relating to a
participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan
that such disclosure is necessary to establish that such
Document) to any Person except
commitment,
letter of credit or other obligation is in registered form under Treasury Regulations
loan,
Section 5f.103-1(c) and Proposed Treasury Regulations 1.163-5(b) (or any amended or successor version). The
entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each
Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of
this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent
(in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
to the extent
The Borrower agrees that each participant shall be entitled to the benefits of Sections 2.11, 2.14 and 9.04(c)
(subject to the requirements and limitations therein, including the requirements under Section 2.14(f) (it being
understood that the documentation required under Section 2.14(f) shall be delivered to the participating Lender))
to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section; provided that such participant (A) agrees to be subject to the provisions of Section 2.20 as if it were
an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment
under Section 2.11 or 2.14, with respect to any participation, than its participating Lender would have been
entitled to receive, except to the extent such entitlement to receive a greater payment results from the occurrence,
after the participant acquired the applicable participation, of any of the following: (i) the adoption or taking effect
of any law, rule, regulation or treaty or (ii) any change in any law, rule, regulation or treaty or in the
administration, interpretation, implementation or application thereof by any Governmental Authority.
(f) Any Lender may, in connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower;
provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall
agree to preserve the confidentiality of any Information relating to the Borrower received by it from such Lender
as more fully set forth in Section 9.08.
(g) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create
a security interest in all or any portion of its rights under this Agreement (including, without limitation and the
Advances owing to it) to secure obligations of such Lender, including, without limitation, any pledge or
assignment to secure obligations in favor of any Federal Reserve Bank in accordance with Regulation A of the
Board or any central bank having jurisdiction over such Lender.
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SECTION 9.08 Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain
the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its
Affiliates and to its and its Affiliates’ respective managers, administrators, trustees, partners, directors, officers,
employees, agents, advisors and other representatives (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction
over it or its Affiliates (including any self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal
process (provided that the Administrative Agent or such Lender, as applicable, agrees that it will, to the extent
practicable and other than with respect to any audit or examination conducted by bank accountants or any
governmental bank regulatory authority exercising examination or regulatory authority, notify the Borrower
promptly thereof, unless such notification is prohibited by law, rule or regulation), (d) to any other party hereto,
(e) in connection with the exercise of any remedies hereunder or any action or proceeding relating to this
Agreement or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or obligations under this Agreement or (ii) any actual or
prospective party (or its managers, administrators, trustees, partners, directors, officers, employees, agents,
advisors and other representatives) to any swap or derivative or similar transaction under which payments are to
be made by reference to the Borrower and its obligations, this Agreement or payments hereunder, (iii) any rating
agency, or (iv) the CUSIP Service Bureau or any similar organization, (g) with the consent of the Borrower or
(h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section
or (y) becomes available to the Administrative Agent, any Lender or any of their respective Affiliates on a non-
confidential basis from a source other than the Borrower. Each Lender acknowledges that its ability to disclose
information concerning the Transactions is restricted by the City Code and the Panel and that Section 9.08 is
subject to those restrictions.
For purposes of this Section, “Information” means this Agreement and the other Loan Documents and
all information received from the Consolidated Group relating to the Consolidated Group or any of their
respective businesses, other than any such information that is available to the Administrative Agent or any
Lender on a non-confidential basis prior to disclosure by the Consolidated Group and other than information
pertaining to this Agreement routinely provided by arrangers to data service providers, including league table
providers, that serve the lending industry. Any Person required to maintain the confidentiality of Information as
provided in this Section shall be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
SECTION 9.09 Debt Syndication during the Certain Funds Period. Each of the Lenders and the
Administrative Agent confirms that it is aware of the terms and requirements of Practice Statement No. 25 (Debt
Syndication during Offer Periods) issued by the Panel.
SECTION 9.10 Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York.
SECTION 9.11 Execution in Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of
an executed counterpart of a signature page to this Agreement by telecopier, facsimile or in a .pdf or similar file
shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 9.12 Jurisdiction, Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive jurisdiction of the United States District Court of the Southern
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District of New York, located in the Borough of Manhattan (or if such court lacks subject matter jurisdiction, the
Supreme Court of the State of New York sitting in the Borough of Manhattan), and any appellate court from any
such court, in any action or proceeding arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding shall be heard and determined in any such New York State
court or, to the extent permitted by law, in any such federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.
(b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any New York State or federal court. Each of
the parties hereto hereby irrevocably waives,
the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such court.
to the fullest extent permitted by law,
(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for
notices in Section 9.02. The Borrower irrevocably designates and appoints the Service of Process Agent, with
offices on the date of this Agreement at 111 Eighth Avenue, 13th Floor, New York, New York 10011, as its
authorized agent, to accept and acknowledge on its behalf, service of any and all process which may be served in
any suit, action or proceeding of the nature referred to in Section 9.12(a) in any federal or New York State court
sitting in New York City. Said designation and appointment shall be irrevocable by the Borrower. The Borrower
hereby consents to process being served in any suit, action or proceeding of the nature referred to in
Section 9.12(a) in any federal or New York State court sitting in New York City by service of process upon the
Service of Process Agent, with offices on the date of this Agreement at 111 Eighth Avenue, 13th Floor, New
York, New York 10011, as provided in this Section 9.12(c); provided that, to the extent lawful and possible,
notice of said service upon such agent shall be mailed by registered or certified air mail, postage prepaid, return
receipt requested, to the Service of Process Agent, and to the Borrower (with a copy thereof to the Service of
Process Agent) at the address specified for such Person on Schedule II or at such other address as shall be
designated by such party in a written notice to the Administrative Agent. The Borrower irrevocably waives, to
the fullest extent permitted by law, all claim of error by reason of any such service in such manner and agrees
that such service shall be deemed in every respect effective service of process upon the Borrower in any such
suit, action or proceeding and shall, to the fullest extent permitted by law, be taken and held to be valid and
personal service upon and personal delivery to the Borrower. To the extent the Borrower has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process (whether from service or notice,
attachment prior to judgment, attachment in aid of execution of a judgment, execution or otherwise), the
Borrower hereby irrevocably waives such immunity in respect of its obligations under the Loan Documents.
Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.
SECTION 9.13 Patriot Act Notice. Each Lender and the Administrative Agent (for itself and not on
behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the Patriot Act, it is
required to obtain, verify and record information that identifies the Borrower, which information includes the
name and address of the Borrower and other information that will allow such Lender or the Administrative
Agent, as applicable, to identify the Borrower in accordance with the Patriot Act. The Borrower shall provide, to
the extent commercially reasonable, such information and take such actions as are reasonably requested by the
Administrative Agent or any Lenders in order to assist the Administrative Agent and the Lenders in maintaining
compliance with the Patriot Act.
SECTION 9.14 No Advisory or Fiduciary Responsibility. The Borrower acknowledges and agrees, and
acknowledges its Subsidiaries’ understanding, that no Credit Party will have any obligations except those
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obligations expressly set forth herein and in the other Loan Documents and each Credit Party is acting solely in
the capacity of an arm’s length contractual counterparty to the Borrower with respect to the Loan Documents and
the transaction contemplated therein and not as a financial advisor or a fiduciary to, or an agent of, the Borrower
or any other person. The Borrower agrees that it will not assert any claim against any Credit Party based on an
alleged breach of fiduciary duty by such Credit Party in connection with this Agreement and the transactions
contemplated hereby. Additionally, the Borrower acknowledges and agrees that no Credit Party is advising the
Borrower as to any legal, tax, investment, accounting, regulatory or any other matters in any jurisdiction. The
Borrower shall consult with its own advisors concerning such matters and shall be responsible for making its own
independent investigation and appraisal of the transactions contemplated hereby, and the Credit Parties shall have
no responsibility or liability to the Borrower with respect thereto.
The Borrower further acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that
each Credit Party, together with its Affiliates, is a full service securities or banking firm engaged in securities
trading and brokerage activities as well as providing investment banking and other financial services. In the
ordinary course of business, any Credit Party may provide investment banking and other financial services to,
and/or acquire, hold or sell, for its own accounts and the accounts of customers, equity, debt and other securities
and financial instruments (including bank loans and other obligations) of, the Borrower and other companies with
which the Borrower may have commercial or other relationships. With respect to any securities and/or financial
instruments so held by any Credit Party or any of its customers, all rights in respect of such securities and
financial instruments, including any voting rights, will be exercised by the holder of the rights, in its sole
discretion.
In addition, the Borrower acknowledges and agrees, and acknowledges its Subsidiaries’ understanding,
that each Credit Party and its affiliates may be providing debt financing, equity capital or other services
(including financial advisory services) to other companies in respect of which the Borrower may have conflicting
interests regarding the transactions described herein and otherwise. No Credit Party will use confidential
information obtained from the Borrower by virtue of the transactions contemplated by the Loan Documents or its
other relationships with the Borrower in connection with the performance by such Credit Party of services for
other companies, and no Credit Party will furnish any such information to other companies. The Borrower also
acknowledges that no Credit Party has any obligation to use in connection with the transactions contemplated by
the Loan Documents, or to furnish to the Borrower, confidential information obtained from other companies.
SECTION 9.15 Waiver of Jury Trial. Each of the Borrower, the Administrative Agent and the Lenders
hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to this Agreement or the actions of the Administrative Agent
or any Lender in the negotiation, administration, performance or enforcement thereof.
SECTION 9.16 Conversion of Currencies. If, for the purpose of obtaining judgment in any court, it is
necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to
the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance
with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other
currency on the Business Day immediately preceding the day on which final judgment is given.
The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the
obligations owing hereunder (the “Applicable Creditor”) shall, notwithstanding any judgment in a currency (the
“Judgment Currency”) other than the currency in which such sum is stated to be due hereunder (the “Agreement
Currency”), be discharged only to the extent that, on the Business Day following receipt by the Applicable
Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance
with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment
Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the
70
in the Agreement Currency,
Applicable Creditor
the Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of
the Borrower contained in this Section 9.16 shall survive the termination of this Agreement and the payment of
all other amounts owing hereunder.
CONFORMED COPY
SECTION 9.17 Acknowledgement and Consent
Institutions.
Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or
understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial
Institution arising under any Loan Document may be subject to the Write-Down and Conversion Powers of an
EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
to Bail-In of EEA Financial
(a)
the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any
such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA
Financial Institution; and
(b)
the effects of any Bail-In Action on any such liability, including, if applicable:
(i)
a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in
such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or
otherwise conferred on it, and that such shares or other instruments of ownership will be accepted
by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan
Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and
Conversion Powers of any EEA Resolution Authority.
SECTION 9.18 Certain ERISA Matters.
(a) Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to,
and (y) covenants, from the date such Person became a Lender party hereto to the date such Person
ceases being a Lender party hereto, for the benefit of, the Administrative Agent and the Arrangers and
their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower,
that at least one of the following is and will be true:
(i)
(ii)
such Lender is not using “plan assets” (within the meaning of Plan Asset Regulations) of one or
more Benefit Plans in connection with the Commitments or Advances;
the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption
for certain transactions determined by independent qualified professional asset managers), PTE
95-60 (a class exemption for certain transactions involving insurance company general accounts),
PTE 90-1 (a class exemption for certain transactions involving insurance company pooled
separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank
collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined
by in-house asset managers),
to such Lender’s entrance into,
participation in, administration of and performance of the Advances, the Commitments and this
Agreement, and the conditions for exemptive relief thereunder are and will continue to be satisfied
in connection therewith,
is applicable with respect
(iii) (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager”
(within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager
made the investment decision on behalf of such Lender to enter into, participate in, administer and
perform the Commitments, the Advances and this Agreement, (C) the entrance into, participation
in, administration of and performance of the Commitments, the Advances and this Agreement
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satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84- 14 and (D) to the
best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are
satisfied with respect to such Lender’s entrance into, participation in, administration of and
performance of the Commitments, the Advances and this Agreement; or
(iv) such other representation, warranty and covenant as may be agreed in writing between the
Administrative Agent, in its sole discretion, and such Lender.
(b)
In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect to a
Lender or if such Lender has not provided another representation, warranty and covenant as provided
in sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and
warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date
such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto,
for the benefit of, the Administrative Agent and the Arrangers and their respective Affiliates, and not,
for the avoidance of doubt, to or for the benefit of the Borrower, that:
(i)
(ii)
none of the Administrative Agent or the Arrangers or their respective Affiliates is a fiduciary with
respect to the assets of such Lender (including in connection with the reservation or exercise of
any rights by the Administrative Agent under this Agreement, any Loan Document or any
documents related to hereto or thereto),
the Person making the investment decision on behalf of such Lender with respect to the entrance
into, participation in, administration of and performance of the Commitments, the Advances and
this Agreement is independent (within the meaning of 29 CFR § 2510.3-21) and is a bank, an
insurance carrier, an investment adviser, a broker-dealer or other person that holds, or has under
management or control, total assets of at least $50 million, in each case as described in 29
CFR § 2510.3-21(c)(1)(i)(A)-(E),
(iii) the Person making the investment decision on behalf of such Lender with respect to the entrance
into, participation in, administration of and performance of the Commitments, the Advances and
this Agreement is capable of evaluating investment risks independently, both in general and with
regard to particular transactions and investment strategies,
(iv) the Person making the investment decision on behalf of such Lender with respect to the entrance
into, participation in, administration of and performance of the Commitments, the Advances and
this Agreement
to the
Commitments, the Advances and this Agreement and is responsible for exercising independent
judgment in evaluating the transactions hereunder, and
is a fiduciary under ERISA or the Code, or both, with respect
(v) no fee or other compensation is being paid directly to the Administrative Agent or any Arranger or
any their respective Affiliates for investment advice (as opposed to other services) in connection
with the Commitments, the Advances or this Agreement.
(c) The Administrative Agent and each Arranger hereby informs the Lenders that each such Person is not
undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity, in
connection with the transactions contemplated hereby, and that such Person has a financial interest in
the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest
or other payments with respect to the Commitments, the Advances and this Agreement, (ii) may
recognize a gain if it extended the Commitments or the Advances for an amount less than the amount
being paid for an interest in the Commitments or the Advances by such Lender or (iii) may receive fees
or other payments in connection with the transactions contemplated hereby, the Loan Documents or
otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront fees,
underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees, utilization
fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate transaction fees,
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amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other early
termination fees or fees similar to the foregoing.
(d) The representations in this Section 8.09 are intended to comply with United States Department of
Labor Regulations codified at 29 C.F.R. § 2510.3-21(a) and (c)(1) as promulgated on April 8, 2016 (81
Fed. Reg. 20,997). To the extent these regulations are revoked, repealed or no longer effective, these
representations shall be deemed to be no longer in effect.
SECTION 9.19 Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any
time the interest rate applicable to any Advance, together with all fees, charges and other amounts which are
treated as interest on such Advance under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the
Lender holding such Advance in accordance with applicable law, the rate of interest payable in respect of such
Advance hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate
and, to the extent lawful, the interest and Charges that would have been payable in respect of such Advance but
were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Advances or periods shall be increased (but not above the Maximum
Rate therefor) until such cumulated amount, together with interest thereon at the Cost of Funds Rate to the date
of repayment, shall have been received by such Lender. Notwithstanding the forgoing, if the Lender shall have
received interest and/or Charges in an amount that exceeds the Maximum Rate, the excess interest and Charges
shall be (i) applied to the principal of such Advance, (ii) if it exceeds such unpaid principal of such Advance,
applied to the principal of other Advances held by such Lender, or (iii) if it exceeds such unpaid principal of
other Advances, refunded to the Borrower. The Borrower represents and warrants to the Lenders that, as of the
date of this Agreement, it falls into Article 2, Paragraph 1, Item 1 of the Act on Specified Commitment Line
Contract (Act No. 4 of 1999).
SECTION 9.20 English Language.
(a) Save where this Agreement expressly provides to the contrary, any notice given under or in connection
with this Agreement must be:
(i)
in English; or
(ii)
in any other language required in respect of such notice by applicable law and accompanied by a
certified English translation at the cost of the Borrower, which English translation will prevail in
all circumstances.
(b) All other documents provided under or in connection with this Agreement must be:
(iii) in English; or
(iv) if not in English, and if so required by the Administrative Agent, accompanied by a certified
English translation at the cost of this Agreement and, in this case, the English translation will
prevail in all circumstances unless the document is a constitutional, statutory or other official
document.
[SIGNATURE PAGES FOLLOW]
73
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of the date first above written.
CONFORMED COPY
TAKEDA PHARMACEUTICAL COMPANY
LIMITED, as Borrower
By: /s/ Christophe Weber
Name: Christophe Weber
Title: Representative Director
Signature Page to
364-Day Bridge Credit Agreement
CONFORMED COPY
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
By: /s/ Takasuke Sekine
Name: Takasuke Sekine
Title: Managing Director
JPMORGAN CHASE BANK, N.A., TOKYO
BRANCH, as a Lender
By: /s/ Takasuke Sekine
Name: Takasuke Sekine
Title: Managing Director
SUMITOMO MITSUI BANKING CORPORATION,
as Lender
By: /s/ Masatoshi Morino
Name: Masatoshi Morino
Title: General Manager, Tokyo Corporate
Banking Department 8
MUFG BANK, LTD., as Lender
By: /s/ Kanetsugu Mike
Name: Kanetsugu Mike
Title: President & CEO
Signature Page to
364-Day Bridge Credit Agreement
CONFORMED COPY
SCHEDULE I
COMMITMENTS
LENDER
JPMORGAN CHASE
TRANCHE 1
COMMITMENT
TRANCHE 2
COMMITMENT
TRANCHE 3
COMMITMENT
TRANCHE 4
COMMITMENT
BANK, N.A.
. . . . . . . . . . .
$10,362,000,000
$
0
$5,063,000,000
$
0
SUMITOMO MITSUI
BANKING
CORPORATION . . . . . . . .
. . . . . .
MUFG BANK, LTD.
AGGREGATE
$ 2,494,000,000
$ 2,494,000,000
$2,250,000,000
$2,250,000,000
$1,218,500,000
$1,218,500,000
$1,750,000,000
$1,750,000,000
COMMITMENTS . . . . . .
$15,350,000,000
$4,500,000,000
$7,500,000,000
$3,500,000,000
SCHEDULE II
CONFORMED COPY
ADMINISTRATIVE AGENT’S OFFICE; CERTAIN ADDRESSES FOR NOTICE
BORROWER:
Takeda Pharmaceutical Company Limited
Corporate Finance Department
12-10, Nihonbashi 2-chome, Chuo-ku, Tokyo 103-8668 Japan
Attention: Chief Financial Officer
Telephone: 03-3278-2284
Facsimile: 03-3278-2198
cc:
Takeda Pharmaceutical Company Limited
One Takeda Parkway
Deerfield, IL 60015
Attention: General Counsel
Facsimile No.: (224) 554-7831
CONFORMED COPY
ADMINISTRATIVE AGENT:
In the case of requests for Borrowings and other notices
JPMorgan Chase Bank, N.A.
Tokyo Building
7-3, Marunouchi 2-chome, Chiyoda-ku,
Tokyo 100-6432
Attention: Loan Agency Tokyo Branch
Facsimile: +81-3-6388-2534
E-Mail: loan.agency.tokyo.branch@jpmorgan.com
CONFORMED COPY
EXHIBIT A
FORM OF NOTICE OF BORROWING
JPMorgan Chase Bank, N.A.,
as Administrative Agent
JPMorgan Chase Bank, N.A.
Tokyo Building
7-3, Marunouchi 2-chome, Chiyoda-ku,
Tokyo 100-6432
Attention: Loan Agency Tokyo Branch
Facsimile: +81-3-6388-2534
Ladies and Gentlemen:
[Date]
Reference is hereby made to the 364-Day Bridge Credit Agreement dated as of May 8, 2018 (as the
same may be amended, restated, supplemented or otherwise modified from time to time,
the “Credit
Agreement”), among Takeda Pharmaceutical Company Limited (the “Borrower”), the Lenders from time to time
party thereto and JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the “Administrative
Agent”). Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the
Credit Agreement. This notice constitutes a Notice of Borrowing and the Borrower hereby requests an Advance
under the Credit Agreement, and in that connection the Borrower specifies the following information with
respect to the Advance requested hereby:
1.
Principal amount of Advance:
2. Date of Advance (which is a Business Day):
3. Class of Advance1:
4.
5.
[Interest Period2]
Location and number of the Borrower’s account to which proceeds of Advance are to be disbursed:
I, [
], hereby certify that I am the duly elected, qualified and acting [
] of the Borrower,
and that, as such, I am authorized to execute and deliver this certificate on behalf of the Borrower. I further
certify that, as of the date hereof, (x) no Certain Funds Default is continuing or would result from the borrowing
requested herein and (y) all the Certain Funds Representations are true, or, if a Certain Funds Representation
does not include a materiality construct, true in all material respects.
[Signature Page Follows]
1
2
Tranche 1 Advance, Tranche 2 Advance, Tranche 3 Advance or Tranche 4 Advance.
Applicable only in case of a Eurocurrency Rate Advance; if included, must comply with the definition of “Interest Period” and end not
later than the Maturity Date.
IN WITNESS WHEREOF, the undersigned has caused this Notice of Borrowing to be executed and
delivered as of the date first above written.
CONFORMED COPY
Very truly yours,
TAKEDA PHARMACEUTICAL COMPANY
LIMITED, as the Borrower
By:
Name:
Title:
EXHIBIT B
FORM OF ASSIGNMENT AND ACCEPTANCE
CONFORMED COPY
This Assignment and Acceptance (the “Assignment and Acceptance”) is dated as of the Assignment
Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert
name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given
to them in the Credit Agreement identified below (as amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee.
The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated
herein by reference and made a part of this Assignment and Acceptance as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the
Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the
Standard Terms and Conditions and the Credit Agreement, as of the Assignment Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a
Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the
extent related to the amount and percentage interest identified below of all of such outstanding rights and
obligations of the Assignor under the respective facilities identified below and (ii) to the extent permitted to be
assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its
capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the
Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract
claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the
rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned
pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale
and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and
Acceptance, without representation or warranty by the Assignor.
1.
2.
3.
4.
5.
6.
Assignor:
Assignee:
Borrower:
Takeda Pharmaceutical Company Limited
[and is an Affiliate of [identify Lender]3]
Administrative Agent:
JPMorgan Chase Bank, N.A., as the administrative agent under the Credit
Agreement
Credit Agreement:
Assigned Interest:
The 364-Day Bridge Credit Agreement dated as of May 8, 2018 among
Takeda Pharmaceutical Company Limited, as borrower,
the Lenders
parties thereto and JPMorgan Chase Bank, N.A., as Administrative Agent
Facility Assigned4
Aggregate Amount of
Commitment/Advances for
all Lenders
Amount of
Commitment/Advances
Assigned
Percentage Assigned of
Commitment/Advances5
$
$
$
$
$
$
%
%
%
3
4
5
Select as applicable.
Fill in the appropriate terminology for the Class of facilities under the Credit Agreement that are being assigned under this Assignment
(e.g., “Tranche 1 Commitment”, “Tranche 2 Commitment”, “Tranche 3 Commitment”, “Tranche 1 Advance”, “Tranche 2 Advance”,
“Tranche 3 Advance”, etc.).
Set forth, to at least 9 decimals, as a percentage of the Commitment/Advances of all Lenders thereunder.
CONFORMED COPY
Assignment Date:
[TO BE INSERTED BY ADMINISTRATIVE AGENT
AND WHICH SHALL BE THE ASSIGNMENT DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]
, 20
The Assignee agrees to deliver to the Administrative Agent a completed Administrative Questionnaire
in which the Assignee designates one or more credit contacts to whom all syndicate-level information (which
may contain material non-public information about the Borrower and their Related Parties or their respective
securities) will be made available and who may receive such information in accordance with the Assignee’s
compliance procedures and applicable laws, including U.S. Federal and state securities laws.
The terms set forth in this Assignment and Acceptance are hereby agreed to:
ASSIGNOR
[NAME OF ASSIGNOR]
By:
Name:
Title:
ASSIGNEE
[NAME OF ASSIGNEE]
By:
Name:
Title:
[Consented to and]6 Accepted:
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
By:
Name:
Title:
[Consented to:]7
TAKEDA PHARMACEUTICAL COMPANY LIMITED
By:
Name:
Title:
6
7
To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.
To be added only if the consent of the Borrower is required by the terms of the Credit Agreement.
Exhibit B-2
CONFORMED COPY
ANNEX I
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ACCEPTANCE
1. Representations and Warranties.
1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of
the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim
and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this
Assignment and Acceptance and to consummate the transactions contemplated hereby; and (b) assumes no
responsibility with respect to (i) any statements, warranties or representations made in or in connection with the
Credit Agreement, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement or any collateral
thereunder, (iii) the financial condition of the Borrower, any of its
Subsidiaries or Affiliates or any other Person obligated in respect of the Credit Agreement or (iv) the
performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of
their respective obligations under the Credit Agreement.
1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has
taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the
transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire
the Assigned Interest and become a Lender, (iii) from and after the Assignment Date, it shall be bound by the
provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have
the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the
type represented by the Assigned Interest and either it, or the Person exercising discretion in making its decision
to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the
Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01
thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance and to purchase the Assigned Interest
on the basis of which it has made such analysis and decision independently and without reliance on the
Administrative Agent, any Arranger or any other Lender and their respective Related Parties, and (vi) attached to
the Assignment and Acceptance is any documentation required to be delivered by it pursuant to the terms of the
Credit Agreement, duly completed and executed by the Assignee; (b) makes for itself as of the date hereof rather
than the Effective Date, the representation and warranty concerning each Lender set forth in Section 9.18 of the
Credit Agreement and (c) agrees that (i) it will, independently and without reliance on the Administrative Agent,
any Arranger, the Assignor or any other Lender and their respective Related Parties, and based on such
documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement, and (ii) it will perform in accordance with their terms all
of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender.
2. Payments. From and after the Assignment Date, the Administrative Agent shall make all payments
in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the
Assignor for amounts which have accrued to but excluding the Assignment Date and to the Assignee for amounts
which have accrued from and after the Assignment Date.
3. General Provisions. This Assignment and Acceptance shall be binding upon, and inure to the benefit
of, the parties hereto and their respective successors and assigns. This Assignment and Acceptance may be
executed in any number of counterparts, which together shall constitute one instrument. Acceptance and adoption
of the terms of this Assignment and Acceptance by the Assignee and the Assignor by Electronic Signature or
delivery of an executed counterpart of a signature page of this Assignment and Acceptance by any Electronic
System shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance.
This Assignment and Acceptance shall be governed by, and construed in accordance with, the law of the State of
New York.
CONFORMED COPY
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
CONFORMED COPY
JPMorgan Chase Bank, N.A.
Tokyo Building
7-3, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-6432
Attention: Loan Agency Tokyo Branch
Facsimile: +81-3-6388-2534
[Date]
Ladies and Gentlemen:
Reference is hereby made to the 364-Day Bridge Credit Agreement dated as of May 8, 2018 (as the
the “Credit
same may be amended, restated, supplemented or otherwise modified from time to time,
Agreement”), among Takeda Pharmaceutical Company Limited (the “Borrower”), the Lenders from time to time
party thereto and JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the “Administrative
Agent”). Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
The undersigned is the [Chief Executive Officer / Chief Financial Officer / Treasurer] of the
Borrower (the “Authorized Officer”) and, as such, the undersigned is authorized to execute and deliver this
in accordance with
Compliance Certificate to the Administrative Agent on behalf of
Section 5.01(i)(iii) of the Credit Agreement. The Authorized Officer hereby certifies as follows, in his/her
capacity as an officer of the Borrower and not in his/her individual capacity:
the Borrower
1.
2.
I have reviewed the terms of the Credit Agreement and I have made, or caused to be made under
my supervision, a review in reasonable detail of the transactions and conditions of the
Consolidated Group during the accounting period covered by the financial statements attached
hereto as Annex I [for quarterly financial statements add: and such financial statements have
been prepared in accordance with IFRS (subject to the absence of footnotes and year end audit
adjustments); [and]
The examinations described in paragraph 1 did not disclose[, except as set forth below], and I
have no knowledge of the existence of any condition or event which constitutes a Default or Event
of Default during or at the end of the accounting period covered by the attached financial
statements or as of the date of this Compliance Certificate; [and]
a.
[Please specify in reasonable detail each condition or event which constitutes a Default
or Event of Default and any action taken or proposed to be taken with respect thereto];
[and]
3.
[The Borrower is in compliance with the Consolidated Net Debt to Consolidated EBITDA
covenant contained in Section 5.03 of the Credit Agreement as shown in the calculations attached
hereto as Annex II.]
CONFORMED COPY
ANNEX I
FINANCIAL STATEMENTS FOR PERIOD ENDING [
]
[To be attached.]
CALCULATION OF CONSOLIDATED NET DEBT TO CONSOLIDATED EBITDA RATIO
[To be attached.]
CONFORMED COPY
ANNEX II
Exhibit 10.6
CONFORMED COPY
AMENDMENT NO. 1
Dated as of June 8, 2018
to
364-DAY BRIDGE CREDIT AGREEMENT
Dated as of May 8, 2018
THIS AMENDMENT NO. 1 (this “Amendment”) is made as of June 8, 2018 by and among Takeda
Pharmaceutical Company Limited, a joint-stock company organized and existing under the laws of Japan, (the
“Company”), the financial institutions listed on the signature pages hereof and JPMorgan Chase Bank, N.A., as
Administrative Agent (the “Administrative Agent”), under that certain 364-Day Bridge Credit Agreement dated
as of May 8, 2018 by and among the Company, the Lenders and the Administrative Agent (as amended, restated,
supplemented or otherwise modified from time to time prior to the date hereof, the “Credit Agreement”).
Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them
in the Credit Agreement.
WHEREAS, the Company has requested that the requisite Lenders and the Administrative Agent agree
to make certain amendments to the Credit Agreement;
WHEREAS, the Company, the Lenders party hereto and the Administrative Agent have so agreed on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions
contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company, the Lenders party hereto and the Administrative Agent hereby agree to enter into
this Amendment.
1.Amendments to the Credit Agreement. Effective as of the Amendment No. 1 Effective Date (as
defined below), the parties hereto agree that the Credit Agreement is hereby amended as follows:
(a) Section 1.01 of the Credit Agreement is hereby amended to add the following definition thereto in
the appropriate alphabetical order:
“Exchange Rate” means on any day, for purposes of determining the Dollar equivalent of any currency,
the rate at which such currency may be exchanged into Dollars at the time of determination on such day as
(and applying the Currency
quoted by Bloomberg on www.bloomberg.com/markets/currencies/fxc.html
Converter set forth on such webpage), or as displayed on such other information service which publishes that rate
of exchange from time to time in place of Bloomberg. In the event that such rate is not displayed by Bloomberg
on the webpage specified in the immediately preceding sentence, the Exchange Rate shall be determined by
reference to such other publicly available service for displaying exchange rates as may be agreed upon by the
Administrative Agent and the Borrower, or, in the absence of such an agreement, such Exchange Rate shall
instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where
its foreign currency exchange operations in respect of such currency are then being conducted, at or about such
time as the Administrative Agent shall elect after determining that such rates shall be the basis for determining
the Exchange Rate; provided that if at the time of any such determination, for any reason, no such spot rate is
being quoted, the Administrative Agent may use any reasonable method, in consultation with the Borrower, it
deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error.
CONFORMED COPY
(b) Article I of the Credit Agreement is hereby amended to add the following Section 1.06 at the end
thereof:
SECTION 1.06. Currency Translations. For purposes of (i) determining the amount of Borrowed Debt
incurred, outstanding or proposed to be incurred or outstanding under Section 5.02(e), (ii) determining the
amount of obligations secured by Liens incurred, outstanding or proposed to be incurred or outstanding under
Section 5.02(a) or (iii) determining the amount of Debt, the net assets of a Person or judgments outstanding under
Section 6.01(d), (e) or (f), all amounts incurred, outstanding or proposed to be incurred or outstanding in
currencies other than Dollars shall be translated into Dollars at the Exchange Rate on the applicable date;
provided that no Default shall arise as a result of any limitation set forth in Dollars in Section 5.02(a) or (e) being
exceeded solely as a result of changes in Exchange Rates from those rates applicable at the time or times Debt or
obligations secured by Liens were initially consummated or acquired in reliance on the exceptions under such
Sections.
(c) Section 2.05 of the Credit Agreement is hereby amended by deleting the phrase “hybrid securities
denominated in Japanese Yen” each place such phrase appears and replacing it with the phrase “hybrid securities
or loans denominated in Japanese Yen”.
(d) Section 2.07(a) of the Credit Agreement is hereby amended to restate clauses (i) and (ii) thereof in
their entirety as follows:
“(i) Cost of Funds Rate Advances. During such periods as such Advance is a Cost of Funds Rate
Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum
of (A) the Cost of Funds Rate for such Interest Period for such Advance and (B) the Applicable
Margin, payable in arrears on (x) the last day of such Interest Period and, if such Interest Period has a
duration of more than three months, on each day that occurs during such Interest Period every three
months from the first day of such Interest Period and (y) on the date such Cost of Funds Rate Advance
shall be Converted or paid in full; provided that, in the event of any payment of interest pursuant to
clause (y) above, accrued but unpaid interest shall only be payable in respect of the principal amount of
Advances prepaid or Converted on such date.”
“(ii) Eurocurrency Rate Advances. During such periods as such Advance is a Eurocurrency Rate
Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum
of (A) the Eurocurrency Rate for such Interest Period for such Advance, and (B) the Applicable
Margin, payable in arrears on (x) the last day of such Interest Period and, if such Interest Period has a
duration of more than three months, on each day that occurs during such Interest Period every three
months from the first day of such Interest Period and (y) on the date such Eurocurrency Rate Advance
shall be Converted or paid in full; provided that, in the event of any payment of interest pursuant to
clause (y) above, accrued but unpaid interest shall only be payable in respect of the principal amount of
Advances prepaid or Converted on such date.”
(e) The first sentence of Section 2.08(c) of the Credit Agreement is hereby amended and restated in its
entirety as follows:
“If at any time the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that (i) the circumstances set forth in clause (b)(i) have arisen and such
circumstances are unlikely to be temporary or (ii) the circumstances set forth in clause (b)(i) have not
arisen but either (w) the supervisor for the administrator of the Screen Rate has made a public
statement that the administrator of the Screen Rate is insolvent (and there is no successor administrator
that will continue publication of the Screen Rate), (x) the administrator of the Screen Rate has made a
public statement identifying a specific date after which the Screen Rate will permanently or indefinitely
cease to be published by it (and there is no successor administrator that will continue publication of the
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CONFORMED COPY
Screen Rate), (y) the supervisor for the administrator of the Screen Rate has made a public statement
identifying a specific date after which the Screen Rate will permanently or indefinitely cease to be
published or (z) the supervisor for the administrator of the Screen Rate or a Governmental Authority
having jurisdiction over the Administrative Agent has made a public statement identifying a specific
date after which the Screen Rate may no longer be used for determining interest rates for loans, then
the Administrative Agent and the Borrower shall endeavor to establish an alternate rate of interest to
the Eurocurrency Rate that gives due consideration to the then prevailing market convention for
determining a rate of interest for syndicated loans in the United States at such time, and shall enter into
an amendment to this Agreement to reflect such alternate rate of interest and such other related changes
to this Agreement as may be applicable (but for the avoidance of doubt, such related changes shall not
include a reduction of the Applicable Margin); provided that, if such alternate rate of interest as so
determined would be less than zero, such rate shall be deemed to be zero for the purposes of this
Agreement.”
(f) Each of Section 2.11(c) and Section 2.12 of the Credit Agreement is hereby amended to replace the
reference to “Section 8.07” appearing therein with a reference to “Section 9.07”.
(g) Section 5.01 of the Credit Agreement is hereby amended to replace each instance of the phrase “the
Company” appearing therein with the phrase “the Borrower”.
(h) Section 5.02(c) of the Credit Agreement is hereby amended to add the following proviso at the end
thereof:
“; provided that the Borrower may change its fiscal year-end to December 31 of each calendar
year in connection with the Transactions.”
(i) Section 5.03 of the Credit Agreement is hereby amended and restated in its entirety as follows:
SECTION 5.03. Financial Covenant. Consolidated Net Debt to Consolidated EBITDA. Beginning on
the later of (i) the last day of the first fiscal half year ending at least one full fiscal quarter after the Closing Date
(which, for the avoidance of doubt, shall be no later than March 31, 2020) and (ii)(A) if the fiscal year-end is
December 31, June 30, 2019 or (B) if the fiscal year-end is March 31, September 30, 2019 and on the last day of
each fiscal half year ending thereafter, the Borrower will not permit, as of the last day of any such fiscal half year
(each such date, the “Testing Date”), the ratio of (x) Consolidated Net Debt at such time to (y) Consolidated
EBITDA of the Borrower for the four consecutive fiscal quarter period ending as of such date to exceed the ratio
level set forth in the applicable table below for such applicable Testing Date:
Testing Date (if fiscal year-end is March 31)
September 30, 2019 (if the Closing Date occurs on or prior to
Ratio Level
June 30, 2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2020 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.95 to 1.00
5.35 to 1.00
Testing Date (if fiscal year-end is December 31)
Ratio Level
June 30, 2019 (if the Closing Date occurs on or prior to March 31,
2019) and December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2020 and thereafter
5.95 to 1.00
5.35 to 1.00
If a Testing Date would have occurred in the fiscal quarter in which the Borrower changed its fiscal
year-end to December 31 (the “Fiscal Year Change”) but does not because of such Fiscal Year Change, the last
day of such fiscal quarter shall be a Testing Date notwithstanding the Fiscal Year Change.
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For purposes of calculating the aggregate principal amount of the Consolidated Net Debt of the
Borrower on any such date, the currency exchange rate used for such calculation shall be the rate used in the
annual or semi-annual financial statements for such date; provided, however, that if the Borrower determines that
an average exchange rate is a more accurate reflection of the value of such currency over such four consecutive
fiscal quarter period, the currency exchange rate used may be, at the option of the Borrower, the currency
exchange rate used for the statement of income of the Borrower for such fiscal half year.
(j) Section 9.08(f) of the Credit Agreement is hereby amended and restated in its entirety as follows:
this Agreement,
“(f) subject to an agreement containing provisions substantially the same as those of this Section,
to (i) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights
its managers,
or obligations under
administrators,
trustees, partners, directors, officers, employees, agents, advisors and other
representatives) to any swap or derivative or similar transaction under which payments are to be made
by reference to the Borrower and its obligations, this Agreement or payments hereunder, (iii) any rating
agency, (iv) the CUSIP Service Bureau or any similar organization or (v) any Person to whom or for
whose benefit such Lender has created a security interest in all or any portion of its rights under this
Agreement pursuant to Section 9.07(g),”
(ii) any actual or prospective party (or
(k) Section 9.18(d) of the Credit Agreement
“Section 8.09” appearing therein with a reference to “Section 9.18”.
is hereby amended to replace the reference to
2. Conditions of Effectiveness. The effectiveness of this Amendment (the “Amendment No. 1 Effective
Date”) is subject to the following conditions precedent:
(a) The Administrative Agent shall have received counterparts of this Amendment duly executed by
the Company and each of the Lenders.
(b) The Administrative Agent shall have received payment of the Administrative Agent’s and its
affiliates’ fees and reasonable out-of-pocket expenses (including the reasonable fees, charges and disbursements
of counsel for the Administrative Agent) in connection with the Loan Documents to the extent invoiced at least
one (1) Business Day prior to the Amendment No. 1 Effective Date.
3. Representations and Warranties of the Company. The Company hereby represents and warrants that
this Amendment has been duly executed and delivered by the Company. This Amendment and the Credit
Agreement as modified hereby constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally and general principles of equity
(whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.
4. Reference to and Effect on the Credit Agreement.
(a) Upon the Amendment No. 1 Effective Date, each reference in the Credit Agreement to “this
Agreement”, “hereunder”, “hereof”, “herein”, or words of like import, and each reference to the Credit
Agreement in any other Loan Document shall be deemed a reference to the Credit Agreement as amended
hereby.
(b) Each Loan Document and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.
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(c) Except with respect to the subject matter hereof, the execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the
Lenders, nor constitute a waiver of any provision of the Credit Agreement, the Loan Documents or any other
documents, instruments and agreements executed and/or delivered in connection therewith.
(d) This Amendment is a Loan Document under (and as defined in) the Credit Agreement.
5. Governing Law. This Amendment shall be construed in accordance with and governed by the law of
the State of New York.
6. Headings. Section headings in this Amendment are included herein for convenience of reference
only and shall not constitute a part of this Amendment for any other purpose.
7. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number
of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the
same instrument. Signatures delivered by facsimile or PDF shall have the same force and effect as manual
signatures delivered in person.
[Signature Pages Follow]
5
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above
written.
CONFORMED COPY
TAKEDA PHARMACEUTICAL COMPANY
LIMITED, as the Company
/s/ Costa Saroukos
By:
Name: Costa Saroukos
Title: Chief Financial Officer
Signature Page to Amendment No. 1 to
364-Day Bridge Credit Agreement
CONFORMED COPY
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
/s/ Takasuke Sekine
By:
Name: Takasuke Sekine
Title: Managing Director
JPMORGAN CHASE BANK, N.A., TOKYO
BRANCH, as a Lender
/s/ Takasuke Sekine
By:
Name: Takasuke Sekine
Title: Managing Director
Signature Page to Amendment No. 1 to
364-Day Bridge Credit Agreement
CONFORMED COPY
SUMITOMO MITSUI BANKING CORPORATION,
as a Lender
/s/ Makoto Takashima
By:
Name: Makoto Takashima
Title: Representative Director
Signature Page to Amendment No. 1 to
364-Day Bridge Credit Agreement
CONFORMED COPY
MUFG BANK, LTD., as a Lender
/s/ Kanetsugu Mike
By:
Name: Kanetsugu Mike
Title: Representative of the Board of Directors
Signature Page to Amendment No. 1 to
364-Day Bridge Credit Agreement
Exhibit 10.7
CONFORMED COPY
$7,500,000,000
TERM LOAN CREDIT AGREEMENT
Dated as of June 8, 2018
among
TAKEDA PHARMACEUTICAL COMPANY LIMITED,
as Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as Lenders,
and
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
JPMORGAN CHASE BANK, N.A., SUMITOMO MITSUI BANKING CORPORATION, MUFG
BANK, LTD. and MIZUHO BANK, LTD,
as Lead Arrangers and Bookrunners
TABLE OF CONTENTS
CONFORMED COPY
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.01
Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.02
Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.03
Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.04
Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.05
Jersey Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.06
Currency Translations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.01
The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.02 Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.03
[Reserved]
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.04
Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.05
Termination or Reduction of the Commitments . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.06
Repayment of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.07
Interest on Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.08
Interest Rate Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.09
[Intentionally Omitted]
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.10
Optional Prepayments of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.11
Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.12
Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.13
Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.14
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.15
Sharing of Payments, Etc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.16
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.17
Evidence of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.18
[Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.19
Defaulting Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.20 Mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.01
Conditions Precedent to Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.02
Conditions Precedent to Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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SECTION 3.03
Conditions to Advances after the Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.04
Actions by Lenders During the Certain Funds Period . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.01
Representations and Warranties of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.02
Representations and Warranties of the Lenders and the Borrower . . . . . . . . . . . .
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.01
Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.02
Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.03
Financial Covenant
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VI EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.01
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VII THE AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.01
Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.02
Administrative Agent Individually . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.03
Duties of Administrative Agent; Exculpatory Provisions . . . . . . . . . . . . . . . . . . .
SECTION 7.04
Reliance by Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.05
Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.06
Resignation of Administrative Agent
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.07
Non-Reliance on Administrative Agent and Other Lenders . . . . . . . . . . . . . . . . .
SECTION 7.08
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.09
Other Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VIII [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.01
Amendments, Etc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.02
Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.03
No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.04
Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.05
Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.06
Binding Effect
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.07
Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.08
Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.09
Debt Syndication during the Certain Funds Period . . . . . . . . . . . . . . . . . . . . . . . .
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CONFORMED COPY
SECTION 9.10
Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.11
Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.12
Jurisdiction, Etc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.13
Patriot Act Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.14
No Advisory or Fiduciary Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.15 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.16
Conversion of Currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.17
Acknowledgement and Consent to Bail-In of EEA Financial Institutions . . . . . .
SECTION 9.18
Certain ERISA Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.19
Interest Rate Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.20
English Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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SCHEDULES
Schedule I
Schedule II
EXHIBITS
Exhibit A
Exhibit B
Exhibit C
-
-
-
-
-
Commitments
Administrative Agent’s Office; Certain Addresses for Notices
Form of Notice of Borrowing
Form of Assignment and Acceptance
Form of Compliance Certificate
iii
TERM LOAN CREDIT AGREEMENT
CONFORMED COPY
This Term Loan Credit Agreement (this “Agreement”) dated as of June 8, 2018 is among Takeda
Pharmaceutical Company Limited, a joint-stock company organized and existing under the laws of Japan (the
“Borrower”), the Lenders (as defined below) that are parties hereto, and JPMorgan Chase Bank, N.A., as
Administrative Agent (as defined below) for the Lenders.
RECITALS
WHEREAS, the Borrower intends to directly or indirectly acquire (the “Target Acquisition”) pursuant
to the Offer Documents or Scheme Documents, as applicable (each as defined below) all of the outstanding
shares of the Target which are subject to the Scheme or Takeover Offer (as the case may be), which acquisition
will be effected pursuant to a Scheme or a Takeover Offer (each as defined below).
WHEREAS, in connection with the Target Acquisition, the Borrower has requested that the Lenders
extend credit to the Borrower in the form of term loans in an aggregate principal amount not to exceed
$7,500,000,000 with the proceeds to be applied towards the Certain Funds Purposes (as defined below).
IN CONSIDERATION THEREOF the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01 Certain Defined Terms.
As used in this Agreement, the following terms shall have the following meanings (such meanings to
be equally applicable to both the singular and plural forms of the terms defined):
“Acceptance Condition” means, in respect of a Takeover Offer, the condition to the Takeover Offer
with respect to the number of acceptances to the Takeover Offer which must be secured to declare the
Takeover Offer unconditional as to acceptances (as set out in the Offer Press Announcement.
“Acquisition” means any acquisition (whether by purchase, merger, consolidation or otherwise) or
series of related acquisitions by the Parent or any Subsidiary after the Effective Date of (i) at least a majority
of the assets of (or at least a majority of the assets constituting a business unit, division, product line or line
of business of) any Person, or (ii) at least the majority of the Equity Interests in a Person or division or line
of business of a Person.
“Administrative Agent” means JPMorgan Chase Bank, N.A. (including its branches and affiliates), in
its capacity as administrative agent for the Lenders hereunder, together with any successor thereto appointed
pursuant to Article VII, the “Administrative Agent”.
“Administrative Agent’s Office” means the Administrative Agent’s address as set forth on Schedule II,
or such other address as the Administrative Agent may from time to time notify to the Borrower and the
Lenders.
“Administrative Questionnaire” means an administrative questionnaire in the form supplied by the
Administrative Agent.
“Advance” means an advance by a Lender pursuant to its Commitment to the Borrower as part of a
Borrowing.
1
“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, controls, is
controlled by or is under common control with such Person or is a director or officer of such Person. For
purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under
common control with”) of a Person means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of such Person, whether through the ownership of Voting
Stock, by contract or otherwise.
CONFORMED COPY
“Agent Parties” has the meaning set forth in Section 9.02(c).
“Agents” means, collectively, the Administrative Agent and the Arrangers.
“Agreed Currencies” means (i) Dollars and (ii) Euros.
“Agreement” has the meaning set forth in the introduction hereto.
“Agreement Currency” has the meaning set forth in Section 9.16.
“Agreement Value” means, with respect to any Hedge Agreement at any date of determination, the
amount, if any, that would be payable to any counterparty thereunder in respect of the “agreement value”
under such Hedge Agreement if such Hedge Agreement were terminated on such date, calculated as
provided in the International Swap Dealers Association, Inc. Code of Standard Wording, Assumptions and
Provisions for Swaps, 1986 Edition.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the
Borrower or any of its Subsidiaries from time to time concerning or relating to bribery or corruption.
“Anti-Social Conduct” means (i) a demand and conduct with force and arms; (ii) an unreasonable
demand and conduct having no legal cause; (iii) threatening or committing violent behavior relating to its
business transactions; (iv) an action to defame the reputation or interfere with the business of any Lender by
spreading rumor, using fraudulent means or resorting to force; or (v) other actions similar or analogous to
any of the foregoing in any jurisdiction.
“Anti-Social Group” means (i) an organized crime group (as defined in the Law relating to Prevention
of Unjustifiable Acts by Gang Members of Japan (Law No. 77 of 1991, as amended)); (ii) a member of an
organized crime group; (iii) a person who used to be a member of an organized crime group but has only
ceased to be a member of an organized crime group for a period of less than 5 years; (iv) quasi-member of
an organized crime group; (v) a related or associated company of an organized crime group; (vi) a corporate
racketeer or blackmailer advocating social cause or a special intelligence organized crime group; or (vii) a
member of any other criminal force similar or analogous to any of the foregoing in any jurisdiction.
“Anti-Social Relationship” means in relation a Person, (i) an Anti-Social Group controls its
management; (ii) an Anti-Social Group is substantively involved in its management; (iii) it has entered into
arrangements with an Anti-Social Group for the purpose of, or which have the effect of, unfairly benefiting
itself or a third party or prejudicing a third party; (iv) it is involved in the provision of funds or other
benefits to an Anti-Social Group; or (v) any of its directors or any other person who is substantively
involved in its management has a socially objectionable relationship with an Anti-Social Group.
“Applicable Creditor” has the meaning set forth in Section 9.16.
“Applicable Lending Office” means, with respect to any Lender, the office of such Lender specified as
its “Applicable Lending Office” or similar concept in its Administrative Questionnaire or in the Assignment
and Acceptance pursuant to which it became a Lender, or such other office, branch, Subsidiary or affiliate of
such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.
2
“Applicable Margin” means, as of any date, a percentage per annum determined by reference to the
Public Debt Rating in effect on such date as set forth below:
CONFORMED COPY
Public Debt Rating
S&P/Moody’s
Level 1: . . . . . .
Level 2: . . . . . .
Level 3: . . . . . .
Level 4: . . . . . .
Level 5: . . . . . .
Level 6: . . . . . .
A+/A1 or above
Less than Level 1 but at least A/A2
Less than Level 2 but at least A-/A3
Less than Level 3 but at least BBB+/Baa1
Less than Level 4 but at least BBB/Baa2
Less than Level 5
Applicable
Margin for
Advances
denominated in
Dollars
Applicable
Margin for
Advances
denominated in
Euros
0.750%
0.875%
1.00%
1.125%
1.25%
1.50%
0.750%
0.875%
1.00%
1.125%
1.25%
1.50%
“Applicable Percentage” means, in the case of the commitment fee paid pursuant to Section 2.04(a), as
of any date, a percentage per annum determined by reference to the Public Debt Rating in effect on such
date as set forth below:
Public Debt Rating
S&P/Moody’s
Applicable Percentage
Level 1: . . . . . . . . . .
Level 2: . . . . . . . . . .
Level 3: . . . . . . . . . .
Level 4: . . . . . . . . . .
Level 5: . . . . . . . . . .
Level 6: . . . . . . . . . .
A+/A1 or above
Less than Level 1 but at least A/A2
Less than Level 2 but at least A-/A3
Less than Level 3 but at least BBB+/Baa1
Less than Level 4 but at least BBB/Baa2
Less than Level 5
0.070%
0.080%
0.090%
0.100%
0.125%
0.175%
“Arrangers” means JPMorgan Chase Bank, N.A., Sumitomo Mitsui Banking Corporation, MUFG
Bank, Ltd and Mizuho Bank, Ltd.
“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an
Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit B hereto
(or such other form as is agreed upon by the Borrower and the Administrative Agent).
“Availability Period” means the period starting on the Closing Date and ending on the Commitment
Termination Date.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable
EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of
Directive 2014/59/EU of the European Parliament and of the Council of the European Union,
the
implementing law for such EEA Member Country from time to time which is described in the EU Bail-In
Legislation Schedule.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that
is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code to which Section 4975 of
the Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or
otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee
benefit plan” or “plan”.
“Board” means the Board of Governors of the Federal Reserve System of the United States of America.
“Borrowed Debt” means any Debt for money borrowed, including loans, hybrid securities, debt
convertible into Equity Interests and any Debt represented by notes, bonds, debentures or other similar
evidences of Debt for money borrowed.
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CONFORMED COPY
“Borrower” has the meaning set forth in the recitals of this Agreement.
“Borrower Materials” has the meaning specified in Section 5.01.
“Borrowing” means a borrowing consisting of simultaneous Advances of the same Type made by each
of the Lenders to the Borrower pursuant to Section 2.01.
“Borrowing Minimum” means $50,000,000 (or for any Borrowing in Euros, €50,000,000).
“Borrowing Multiple” means $5,000,000 (or for any Borrowing in Euros, €5,000,000).
“Bridge Credit Agreement” has the meaning specified in the definition of “Bridge Facility”.
“Bridge Facility” means the commitments and any advances made under the 364-Day Bridge Credit
Agreement, dated as of May 8, 2018 (the “Bridge Credit Agreement”), among Takeda Pharmaceutical
Company Limited, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.
“Bridge Facility Effective Date” means May 8, 2018.
“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks
are authorized to close under the laws of, or are in fact closed in, New York City, Tokyo or London and any
day on which dealings in the applicable Agreed Currency are conducted by and between banks in the
London interbank eurocurrency market (and, if the Borrowings which are the subject of a borrowing,
drawing, payment, reimbursement or rate selection are denominated in Euro, the term “Business Day” shall
also exclude any day on which the TARGET2 payment system is not open for the settlement of payments in
Euro).
“CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability
Information System maintained by the U.S. Environmental Protection Agency.
“Certain Funds Default” means an Event of Default arising from any of the following (other than in
respect of any Subsidiary of the Borrower, the Target or any Subsidiary of the Target, or a breach of a
procurement obligation with respect to any Subsidiary of the Borrower, the Target or any Subsidiary of the
Target):
(i) Section 6.01(a) (in so far as it relates to payment of principal and/or interest or payment of fees
pursuant to paragraphs 1(i) and (ii) of the Fee Letter only);
(ii) Section 6.01(b) as it relates to a Certain Funds Representation;
(iii) Section 6.01(c) as it relates to the failure to perform any of the following covenants: (A) Sections
5.01(d)(i) or (j) (other than paragraph (ix), (x) and (xii) thereof) or (B) Sections 5.02(a), (b) or (d);
(iv) Section 6.01(e) in relation to the Borrower, but excluding, in relation to involuntary proceedings
referenced therein, any Event of Default caused by a frivolous or vexatious action, proceeding or
petition in respect of which no order or decree in respect of such involuntary proceeding shall have
been entered; or
(v) Section 6.01(i).
“Certain Funds Period” means the period commencing on the Effective Date and ending on the earlier
of (i) the date on which a Mandatory Cancellation Event occurs, for the avoidance of doubt, on such date but
immediately after the relevant Mandatory Cancellation Event occurs or first exists or (ii) if the Borrower has
served written notice to the Administrative Agent in accordance with the definition of Commitment
Termination Date to extend the Commitment Termination Date to the date that is 60 days after the Closing
Date so that up to $2,100,000,000 Commitments remain outstanding until such date, the date that is 60 days
after the Closing Date.
4
CONFORMED COPY
“Certain Funds Purposes” means:
(i) where the Target Acquisition proceeds by way of a Scheme:
(a) payment (directly or indirectly) of the cash price payable by the Borrower to the holders of the
Scheme Shares in consideration of the acquisition of such Scheme Shares pursuant to the Scheme;
(b)
financing (directly or indirectly) the consideration payable to holders of options to acquire Target
Shares pursuant to any proposal in respect of those options as required by the City Code;
(c)
financing (directly or indirectly) the fees, costs and expenses in respect of the Transactions; and
(d)
repayment of certain Existing Target Indebtedness (which the Borrower may from time to time
elect); or
(ii) where the Target Acquisition proceeds by way of a Takeover Offer:
(a) payment (directly or indirectly) of all or part of the cash price payable by the Borrower to the
holders of the Target Shares subject to the Takeover Offer in consideration of the acquisition of
such Target Shares pursuant to the Takeover Offer;
(b) payment (directly or indirectly) of the cash consideration payable to the holders of Target Shares
pursuant to the operation by Borrower of the procedures contained in Articles 117 and 121 of the
Jersey Companies Law;
(c)
financing (directly or indirectly) the consideration payable to holders of options to acquire Target
Shares pursuant to any proposal in respect of those options as required by the City Code;
(d)
financing (directly or indirectly) the fees, costs and expenses in respect of the Transactions; and
(e)
repayment of certain Existing Target Indebtedness (which the Borrower may from time to time
elect).
“Certain Funds Representations” means each of the following: (1) Sections 4.01(a), (b)(i), (b)(ii) and
(b)(iii); (2) Section 4.01(c) and (d); (3) Section 4.01(q); and (4) Section 4.01(t), (u)(ii) and (v) (but only to
the extent they relate to the then current actual method of the Target Acquisition), in each case only insofar
as it relates to the Borrower (excluding, for the avoidance of doubt, any Subsidiary of the Borrower, Target
or any Subsidiary of Target).
“Charges” has the meaning specified in Section 9.19.
“City Code” means the City Code on Takeovers and Mergers applicable, inter alia, to takeovers of
listed companies in the United Kingdom and to Jersey listed companies pursuant to the Companies
(Takeovers and Mergers Panel) (Jersey) Law 2009.
“Clean-up Date” has the meaning set forth in Section 6.01.
“Closing Date” means the date on which each of the conditions set forth in Section 3.02 have been
satisfied (or waived in accordance with Section 9.01).
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Commitment” means, as to any Lender, the commitment of such Lender to make an Advance pursuant
to Section 2.01(a), as such commitment may be reduced from time to time pursuant to the terms hereof. The
is (a) the amount set forth in the column labeled
initial amount of each Lender’s Commitment
“Commitment” opposite such Lender’s name on Schedule I hereto, or (b) if such Lender has entered into
any Assignment and Acceptance, the amount set forth for such Lender in the Register maintained by the
Administrative Agent pursuant to Section 9.07(d), as such amount may be reduced pursuant to Section 2.05.
As of the Effective Date, the aggregate amount of the Commitments is $7,500,000,000 as such amount may
be reduced in accordance with Section 2.05 or 6.01.
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CONFORMED COPY
“Commitment Termination Date” means the earlier of (a) the date on which a Mandatory Cancellation
Event occurs, for the avoidance of doubt, on such date but immediately after the relevant Mandatory
Cancellation Event occurs or first exists; provided that, if the Closing Date has occurred prior to the date
described in this clause (a), up to $2,100,000,000 of Commitments shall remain outstanding until the date
that is 60 days after the Closing Date if so elected by the Borrower by written notice to the Administrative
Agent prior to the Closing Date and (b) the date on which the Commitments are terminated in full in
accordance with Section 2.05 or, subject to Section 3.04, Section 6.01.
“Consolidated” refers to the consolidation of accounts in accordance with IFRS.
“Consolidated EBITDA” means, for any fiscal period, the Consolidated net profit of the Consolidated
Group for such period determined in accordance with IFRS plus the following, to the extent deducted in
calculating such Consolidated net profit: (a) the provision for Federal, state, local and foreign taxes based on
income, profits, revenue, business activities, capital or similar measures payable by the Consolidated Group
in each case, as set forth on the financial statements of the Consolidated Group, (b) share of loss of
investments accounted for using the equity method, (c) Consolidated Interest Expense and dividend
expense, (d) any losses (including all fees and expenses or charges relating thereto) on the retirement of
debt, (e) any extraordinary, unusual, nonrecurring or non-cash impairments, charges, expenses or losses
(including impairments, charges, fees, expenses and losses incurred in connection with the Transactions or
any issuance of Debt or equity, acquisitions, investments, restructuring activities, asset sales or divestitures
permitted hereunder, purchase accounting effects, derivatives transactions and other finance expenses and
other operating expenses), (f) non-cash stock option expenses, non-cash equity-based compensation and/or
non-cash expenses related to stock-based compensation, (g) any foreign currency exchange losses, (h) losses
(including all fees and expenses or charges relating thereto) on sales of assets outside of the ordinary course
of business and losses from discontinued operations and (i) depreciation and amortization expense and
minus, to the extent included in calculating such Consolidated net profit for such period, the sum of (i) share
of profit of investments accounted for using the equity method, (ii) interest and dividend income, (iii) any
gains (less all fees and expenses or charges relating thereto) on the retirement of debt, (iv) any
extraordinary, unusual, nonrecurring or non-cash income (including other finance income ), (v) gains (less
all fees and expenses or charges relating thereto) on the sales of assets outside of the ordinary course of
business and gains from discontinued operations (without duplication of any amounts added back in clause
(a) of this definition) and (vi) any foreign currency exchange gains, all as determined on a Consolidated
basis. Consolidated EBITDA will be calculated on a pro forma basis as if the Transactions and any related
incurrence or repayment of Debt by any member of the Consolidated Group had occurred on the first day of
the relevant period, but shall not take into account any cost savings or synergies projected to be realized as a
result of such acquisition or disposition other than cost savings or cost synergies that are factually
supportable and quantifiable pro forma cost savings or expense reductions related to operational efficiencies
(including the entry into any material contract or arrangement), strategic initiatives or purchasing
improvements and other cost savings, improvements or cost synergies, in each case, that have been realized,
or are reasonably expected to be realized, by any member of the Consolidated Group based upon actions to
be taken within 12 months after the consummation of the action as if such cost savings, expense reductions,
improvements and cost synergies occurred on the first day of the relevant period; provided that the
aggregate amount of such cost savings and cost synergies, together with any cost savings and cost synergies
included in the calculation of Consolidated EBITDA pursuant to the immediately succeeding sentence, shall
not exceed, for any such fiscal period, ten percent (10%) of Consolidated EBITDA for such period (as
calculated without giving effect this sentence or the immediately succeeding sentence). In addition, in the
event that any member of the Consolidated Group acquired or disposed of any Person, business unit or line
of business or made any investment during the relevant period, Consolidated EBITDA will be determined
giving pro forma effect to such acquisition, disposition or investment as if such acquisition, disposition or
investment and any related incurrence or repayment of Debt had occurred on the first day of the relevant
period, but shall not take into account any cost savings or synergies projected to be realized as a result of
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CONFORMED COPY
such acquisition or disposition other than cost savings or cost synergies that are factually supportable and
quantifiable pro forma cost savings or expense reductions related to operational efficiencies (including the
entry into any material contract or arrangement), strategic initiatives or purchasing improvements and other
cost savings, improvements or cost synergies, in each case, that have been realized, or are reasonably
expected to be realized, by any member of the Consolidated Group based upon actions to be taken within
12 months after the consummation of the action as if such cost savings, expense reductions, improvements
and cost synergies occurred on the first day of the relevant period; provided that the aggregate amount of
such cost savings and cost synergies, together with any cost savings and cost synergies included in the
calculation of Consolidated EBITDA pursuant to the immediately preceding sentence, shall not exceed, for
any such fiscal period, ten percent (10%) of Consolidated EBITDA for such period (as calculated without
giving effect this sentence or the immediately preceding sentence).
“Consolidated Group” means, prior to the consummation of the Target Acquisition, the Borrower and
its Subsidiaries (excluding the Target and its Subsidiaries) and thereafter, the Borrower and its Subsidiaries
(including the Target and its Subsidiaries).
“Consolidated Interest Expense” means, for any fiscal period,
interest expense of the
Consolidated Group on a Consolidated basis determined in accordance with IFRS, including the imputed
interest component of capitalized lease obligations during such period, and all commissions, discounts and
other fees and charges owed with respect to letters of credit, if any, and net costs under Hedge Agreements;
provided that if any member of the Consolidated Group acquired or disposed of any Person or line of
business during the relevant period (including for the avoidance of doubt the Transactions), Consolidated
Interest Expense will be determined giving pro forma effect to any incurrence or repayment of Debt related
to such acquisition or disposition as if such incurrence or repayment of Debt had occurred on the first day of
the relevant period.
the total
“Consolidated Net Assets” means the aggregate amount of assets (less applicable reserves and other
properly deductible items) after deducting therefrom all current liabilities, as set forth on the Consolidated
balance sheet of
to
Section 5.01(i)(ii) prior to the time as of which Consolidated Net Assets shall be determined.
recently furnished to the Lenders pursuant
the Consolidated Group most
“Consolidated Net Debt” means, as of any date of determination, the aggregate amount of Borrowed
Debt of the Consolidated Group determined on a Consolidated basis as of such date, minus all unrestricted
cash and cash equivalents of the Consolidated Group.
“Consolidated Tangible Assets” means, as of any date of determination thereof, Consolidated Total
Assets minus, without duplication, (x) the Intangible Assets of the Consolidated Group and (y) goodwill of
the Consolidated Group, in each case on such date.
“Consolidated Total Assets” means, as of the date of any determination thereof, total assets of the
Consolidated Group calculated in accordance with IFRS on a consolidated basis as of such date.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of
the management or policies of a Person, whether through the ability to exercise voting power, by contract or
otherwise. The terms “Controlling” and “Controlled” have meanings correlative thereto.
“Conversion”, “Convert”, or “Converted” each refers to a conversion of Advances of one Type into
Advances of the other Type pursuant to Section 2.08 or 2.12.
“Cost of Funds Rate Advance” means an Advance that bears interest as provided in Section 2.07(a)(i).
“Cost of Funds Rate” means the weighted average of the rates notified to the Administrative Agent by
each Lender as soon as practicable and in any event not later than 10:00 A.M. (Tokyo time) one Business
Day prior to the first day of the Interest Period applicable to a Cost of Funds Advance (or, if earlier,
10:00 A.M. (Tokyo time) in the date falling one Business Day before the date on which interest is due to be
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paid in respect of such Advance), to be that which expresses as a percentage rate per annum the cost to the
relevant Lender of funding its Advance from whatever source it may reasonably select; provided that if any
Lender does not supply a quotation by the time specified in this definition, the Cost of Funds Rate shall be
calculated on the basis of the quotations of the other Lenders that have so supplied a quotation.
“Court” means the Royal Court of Jersey.
“Court Meeting” means the meeting or meetings of Scheme Shareholders (or any adjournment thereof)
to be convened by order of the Court under Article 125(1) of the Jersey Companies Law for the purposes of
considering and, if thought fit, approving the Scheme.
“Court Order” means the Act of Court sanctioning the Scheme under Article 125(2) of the Jersey
Companies Law.
“Credit Party” means the Administrative Agent or any Lender.
“Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed
money, (b) all obligations of such Person for the deferred purchase price of property or services that would
appear as a liability on the balance sheet of such Person prepared in accordance with IFRS (other than trade
payables incurred in the ordinary course of such Person’s business), (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such Person
created or arising under any conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or lender under such agreement
in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person
as lessee under leases that have been or should be, in accordance with IFRS, recorded as capital leases,
(f) all obligations, contingent or otherwise, of such Person in respect of acceptances, letters of credit or
similar extensions of credit, (g) all obligations of such Person in respect of Hedge Agreements, (h) all Debt
of others referred to in clauses (a) through (g) above or clause (i) below directly guaranteed in any manner
by such Person, or the payment of which is otherwise provided for by such Person, and (i) all Debt referred
to in clauses (a) through (h) above secured by any Lien on property (including, without limitation, accounts
and contract rights) owned by such Person, even though such Person has not assumed or become liable for
the payment of such Debt; provided, however, that the amount of such Debt will be the lesser of (x) the fair
market value of such asset at such date of determination and (y) the amount of such other Debt.
“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other
liquidation,
creditors, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or
other applicable jurisdictions from time to time in effect.
conservatorship, bankruptcy,
the benefit of
assignment
for
“Default” means any Event of Default or any event that would constitute an Event of Default but for
the requirement specified in Article VI that notice be given or time elapse or both.
“Default Interest” has the meaning specified in Section 2.07(b).
“Defaulting Lender” means, subject to Section 2.19(b), any Lender that (a) has failed to (i) fund all or
any portion of its Advances within two Business Days of the date such Advances were required to be funded
hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such
failure is the result of such Lender’s determination that one or more conditions precedent to funding (each
of which conditions precedent, together with any applicable default, shall be specifically identified in such
writing) has not been satisfied, or (ii) pay to the Administrative Agent or any other Lender any other amount
required to be paid by it hereunder within two Business Days of the date when due, (b) has notified the
Borrower or the Administrative Agent in writing that it does not intend to comply with its funding
obligations hereunder, or has made a public statement to that effect (unless such writing or public statement
relates to such Lender’s obligation to fund an Advance hereunder and states that such position is based on
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such Lender’s determination that a condition precedent to funding (which condition precedent, together with
any applicable default, shall be specifically identified in such writing or public statement) cannot be
satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the
Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its
prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender
pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the
Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a
proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee,
administrator, assignee for the benefit of creditors or similar Person charged with reorganization or
liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state
or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-in Action;
provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of
any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental
Authority so long as such ownership interest does not result in or provide such Lender with immunity from
the jurisdiction of courts within the United States or from the enforcement of judgments or writs of
attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate,
disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the
Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d)
above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a
Defaulting Lender (subject to Section 2.19(b)) upon delivery of written notice of such determination to the
Borrower and each Lender.
“Disclosure Letter” means that certain Disclosure Letter dated as of the Effective Date from the
Borrower to the Arrangers.
“Dollar Equivalent” means, at any time, (a) with respect to any amount denominated in Dollars, such
amount, and (b) with respect to any amount in any currency other than Dollars, the equivalent in Dollars of
such amount, calculated on the basis of the Exchange Rate pursuant to Section 1.06 using the Exchange
Rate with respect to such currency at the time in effect pursuant to the provisions of such Section 1.06.
“Dollars” and the “$” sign each means lawful currency of the United States.
“EEA Financial Institution” means (a) any institution established in any EEA Member Country which
is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member
Country which is a parent of an institution described in clause (a) of this definition, or (c) any institution
established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b)
of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of
the member states of
the European Union, Iceland,
Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with
public administrative authority of any EEA Member Country (including any delegee) having responsibility
for the resolution of any EEA Financial Institution.
“Effective Date” means the date on which the conditions set forth in Section 3.01 are satisfied (or
waived in accordance with Section 9.01).
“Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; (c) a commercial bank organized
under the laws of the United States, or any State thereof, and having total assets in excess of
$10,000,000,000; (d) a commercial bank organized under the laws of any other country that is a member of
the Organization for Economic Cooperation and Development or has concluded special
lending
arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or
a political subdivision of any such country, and having total assets in excess of $10,000,000,000, so long as
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such bank is acting through a branch or agency located in the country in which it is organized or another
country that is described in this clause (d); and (e) any other Person approved by the Administrative Agent
and, so long as no Event of Default has occurred and is continuing, by the Borrower, such approval not to be
unreasonably withheld or delayed; provided, however, that no Defaulting Lender (or Person who would be a
Defaulting Lender upon becoming a Lender) nor the Borrower nor any Affiliate of the Borrower shall
qualify as an Eligible Assignee.
“Environmental Action” means any action,
suit, demand, demand letter, claim, notice of
noncompliance or violation, notice of liability or potential liability, investigation, proceeding, consent order
or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous
Materials or arising from alleged injury or threat of injury to health, safety or the environment, including,
without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any
third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.
“Environmental Law” means any applicable federal, state, local or foreign statute; law (including
common law); ordinance; rule; regulation; code; final and binding court order, judgment, decree or judicial
or agency interpretation, policy or guidance; or agency order relating to pollution or protection of the
environment, health, safety or natural resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.
“Environmental Permit” means any permit, approval,
identification number,
license or other
authorization required under any Environmental Law.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a
limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and
any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity
interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
time, and the applicable regulations promulgated thereunder.
“ERISA Affiliate” means any trade or business (whether or not incorporated) that is a member of the
Borrower’s controlled group, or under common control with the Borrower, within the meaning of
Section 414 of the Code.
“ERISA Event” means:
(a) (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with
respect to any Single Employer Plan unless the 30-day notice requirement with respect to such event
has been waived by the PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA
(without regard to subsection (2) of such Section) are being met with a contributing sponsor, as defined
in Section 4001(a)(13) of ERISA, of a Single Employer Plan, and an event described in paragraph (9),
(10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to
such Plan within the following 30 days unless the 30-day notice requirement has been waived by the
PBGC;
(b) the application for a minimum funding waiver with respect to a Single Employer Plan;
(c) the termination of or provision of a notice of intent to terminate any Plan pursuant to
Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to
in Section 4041(e) of ERISA) or otherwise so as to incur liability of the Borrower or any ERISA
Affiliate under Title IV of ERISA (other than premiums due to the PBGC);
(d) the cessation of operations at a facility of the Borrower or any ERISA Affiliate in the
circumstances described in Section 4062(e) of ERISA;
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(e) the withdrawal by the Borrower or any ERISA Affiliate from a Multiple Employer Plan
during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(f) the conditions for the imposition of a lien under Section 303(k) of ERISA shall have been met
with respect to any Plan; or
(g) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of
ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that could
constitute grounds for the termination of a Plan, or the appointment of a trustee to administer a Single
Employer Plan or Multiple Employer Plan.
“Escrow Account” means any account established for the purpose of depositing funds prior to their
being applied towards Certain Funds Purposes.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan
Market Association (or any successor Person), as in effect from time to time.
“Euro” and/or “EUR” means the single currency of the Participating Member States.
“Eurocurrency Liabilities” has the meaning specified in Regulation D of the Board, as in effect from
time to time.
“Eurocurrency Rate” means the London interbank offered rate as administered by the ICE Benchmark
Administration (or any other Person that takes over the administration of such rate) for the applicable
Agreed Currency for a period equal in length to such Interest Period as displayed on pages LIBOR01 or
LIBOR02 of the Reuters Screen that displays such rate (or, in the event such rate does not appear on a
Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the
appropriate page of such other information service that publishes such rate from time to time as selected by
the Administrative Agent in its reasonable discretion; in each case, the “Screen Rate”) at approximately
11:00 A.M., London time on the Quotation Day for such Agreed Currency and Interest Period; provided that
if the Screen Rate shall be less than zero, such rate shall be deemed to be zero for the purposes of this
Agreement; provided further that, if the Screen Rate shall not be available at such time for such Interest
Period (an “Impacted Interest Period”) with respect to the applicable currency, then the Eurocurrency Rate
shall be the Interpolated Rate at such time; provided that if any Interpolated Rate shall be less than zero,
such rate shall be deemed to be zero for purposes of this Agreement. “Interpolated Rate” means, at any time,
the rate per annum determined by the Administrative Agent (which determination shall be conclusive and
binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis
between: (a) the Screen Rate for the longest period (for which that Screen Rate is available in the applicable
currency) that is shorter than the Impacted Interest Period and (b) the Screen Rate for the shortest period (for
which that Screen Rate is available for the applicable currency) that exceeds the Impacted Interest Period, in
each case, at such time; provided further that if no Screen Rate is available for the applicable currency, the
Eurocurrency Rate shall be the Reference Bank Rate.
“Eurocurrency Rate Advance” means an Advance that bears interest as provided in Section 2.07(a)(ii).
“Eurocurrency Rate Reserve Percentage” means a fraction (expressed as a decimal), the numerator of
which is the number one and the denominator of which is the number one minus the aggregate of the
maximum reserve, liquid asset, fees or similar requirements (including any marginal, special, emergency or
supplemental reserves or other requirements) established by any central bank, monetary authority, the
Board, the Financial Conduct Authority, the Prudential Regulation Authority, the European Central Bank or
other Governmental Authority for any category of deposits or liabilities customarily used to fund loans in
the applicable currency, expressed in the case of each such requirement as a decimal. Such reserve, liquid
include those imposed pursuant to Eurocurrency Liabilities.
asset, fees or similar requirements shall
Eurocurrency Rate Advances shall be deemed to be subject to such reserve, liquid asset, fee or similar
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requirements without benefit of or credit for proration, exemptions or offsets that may be available from
time to time to any Lender under any applicable law, rule or regulation, including Eurocurrency Liabilities.
The Eurocurrency Rate Reserve Percentage shall be adjusted automatically on and as of the effective date of
any change in any reserve, liquid asset or similar requirement.
“Euro Equivalent” means, at any time, (a) with respect to any amount denominated in Euros, such
amount, and (b) with respect to any amount in any currency other than Euros, the equivalent in Euros of
such amount, calculated on the basis of the Exchange Rate pursuant to Section 1.06 using the Exchange
Rate with respect to such currency at the time in effect pursuant to the provisions of such Section 1.06.
“Euro Sublimit” means the Euro Equivalent of $3,500,000,000.
“Events of Default” has the meaning specified in Section 6.01.
“Exchange Rate” means on any day, for purposes of determining the Dollar Equivalent or Euro
Equivalent of any other currency, the rate at which such other currency may be exchanged into Dollars or
Euros, as applicable, at
the time of determination on such day as quoted by Bloomberg on
www.bloomberg.com/markets/currencies/fxc.html (and applying the Currency Converter set forth on such
webpage), or as displayed on such other information service which publishes that rate of exchange from
time to time in place of Bloomberg. In the event that such rate is not displayed by Bloomberg on the
webpage specified in the immediately preceding sentence, the Exchange Rate shall be determined by
reference to such other publicly available service for displaying exchange rates as may be agreed upon by
the Administrative Agent and the Borrower, or, in the absence of such an agreement, such Exchange Rate
shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the
market where its foreign currency exchange operations in respect of such currency are then being
conducted, at or about such time as the Administrative Agent shall elect after determining that such rates
shall be the basis for determining the Exchange Rate, on such date for the purchase of Euros or Dollars for
delivery two Business Days later; provided that if at the time of any such determination, for any reason, no
such spot rate is being quoted, the Administrative Agent may use any reasonable method, in consultation
with the Borrower, it deems appropriate to determine such rate, and such determination shall be conclusive
absent manifest error.
“Excluded Taxes” has the meaning specified in Section 2.14(a).
“Existing Target Indebtedness” means indebtedness of the Target existing on the Closing Date.
“FATCA” means (a) Sections 1471 to 1474 of the Code or any associated regulations, (b) any treaty,
law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the
United States and any other jurisdiction, which (in either case) facilitates the implementation of any law or
regulation referred to in paragraph (a) above; or (c) any agreement pursuant to the implementation of any
treaty, law or regulation referred to in paragraphs (a) or (b) above with the U.S. Internal Revenue Service,
the United States government or any governmental or taxation authority in any other jurisdiction.
“Fee Letter” means that certain Senior Unsecured Permanent Term Loan Facility Fee Letter, dated as
of May 8, 2018, by and among the Borrower and JPMorgan Chase Bank, N.A.
“FIEA” means the Financial Instruments and Exchange Act of Japan (Law No. 25 of 1948, as
amended).
“Foreign Exchange Act” means the Foreign Exchange and Foreign Trade Act of Japan (Law No. 59 of
2009, as amended).
“GAAP” means generally accepted accounting principles as in effect in the United States from time to
time.
“General Meeting” means the extraordinary general meeting of the holders of Target Shares (or any
adjournment thereof) to be convened in connection with the implementation of a Scheme.
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“Governmental Authority” means the government of Japan, the United States of America, or any other
nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government.
“Hazardous Materials” means (a) petroleum and petroleum products, byproducts or breakdown
products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and
(b) any other chemicals, materials or substances designated, classified or regulated as “hazardous” or
“toxic” or as a “pollutant” or “contaminant” or for which liability may be imposed, under any
Environmental Law.
“Hedge Agreements” means interest rate swap, cap or collar agreements, interest rate future or option
contracts, currency swap agreements, currency future or option contracts and other similar agreements.
“IFRS” means the International Financial Reporting Standards, as promulgated by the International
Accounting Standards Board (or any successor board or agency), as in effect on the Effective Date.
“Impacted Interest Period” has the meaning provided in the definition of “Eurocurrency Rate”.
“Indemnified Party” has the meaning specified in Section 9.04(b).
“Information” has the meaning specified in Section 9.08.
“Initial Lender” has the meaning specified in the definition of “Lenders”.
“Intangible Assets” means the aggregate amount, for the Consolidated Group on a consolidated basis,
of all assets classified as intangible assets under IFRS, including, without limitation, customer lists, acquired
technology, computer software, trademarks, patents, copyrights, organization expenses, franchises, licenses,
trade names, brand names, mailing lists, catalogs, unamortized debt discount and capitalized research and
development costs.
“Interest Period” means, for each Advance comprising part of the same Borrowing, the period
commencing on the date of such Advance and ending on the last day of the period selected by the Borrower
pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the period selected by the Borrower
pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six
months (or, with respect to any Borrowing made less than one month prior to the Maturity Date, the period
commencing on the date of such Borrowing and ending on the Maturity Date (subject to availability)), as the
Borrower may, upon written notice received by the Administrative Agent not later than 9:00 A.M. (Tokyo
time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that:
(h) the Borrower may not select any Interest Period that ends after the Maturity Date;
(i)
Interest Periods commencing on the same date for Eurocurrency Rate Advances comprising
part of the same Borrowing shall be of the same duration (it being understood that the Borrower shall
be permitted to make multiple Borrowings consisting of Eurocurrency Rate Advances on the same
date, each of which may be of different durations);
(j) whenever the last day of any Interest Period would otherwise occur on a day other than a
Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding
Business Day, provided, however, that, if such extension would cause the last day of such Interest
Period to occur in the next succeeding calendar month, the last day of such Interest Period shall occur
on the immediately preceding Business Day; and
(k) whenever the first day of any Interest Period occurs on a day of an initial calendar month for
which there is no numerically corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such succeeding calendar month.
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“Interpolated Rate” has the meaning specified in the definition of “Eurocurrency Rate”.
“Jersey Companies Law” means the Companies (Jersey) Law 1991.
“Judgment Currency” has the meaning set forth in Section 9.16.
“Lenders” means, collectively, (a) each bank, financial institution and other institutional lender listed
on the signature pages hereof (each, an “Initial Lender”) and (b) each Eligible Assignee that shall become a
party hereto pursuant to Section 9.07(a), (b) and (c). Each Lender shall have a license required to engage in
the business of lending money in Japan.
“Lien” means any lien, security interest or other charge or encumbrance of any kind, or any other type
of preferential arrangement, intended as a security interest, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of way or other encumbrance on title to real
property.
“Loan Documents” means this Agreement and any amendments, notes or notices entered into in
connection herewith.
“Long Stop Date” means the date falling 12 months after the Bridge Facility Effective Date; provided
that such date may be extended if and to the extent that (i) any condition in paragraphs 4(c) to (j) in Part A
of Appendix 1 to the Original Scheme Press Release (or the equivalent provision in any Offer Press
Announcement) has not been satisfied by the date falling 12 months after the Bridge Facility Effective Date;
(ii) the Long Stop Date (as defined in the Original Scheme Press Release) has also been extended (with the
Target having consented, to the extent required, to any such extension) and (iii) such date shall not be
extended beyond the date falling 15 months after the Bridge Facility Effective Date.
“Losses” has the meaning specified in Section 9.04(b).
“Mandatory Cancellation Event” means the occurrence of any of the following conditions or events:
(i) where the Target Acquisition proceeds by way of a Scheme:
(a) the Court Meeting is held (and not adjourned or otherwise postponed) to approve the Scheme
at which a vote is held to approve the Scheme, but the Scheme is not so approved in accordance with
Article 125(2) of the Jersey Companies Law by the requisite majority of the Scheme Shareholders at
such Court Meeting;
(b) the General Meeting is held (and not adjourned or otherwise postponed) to pass the Scheme
Resolutions at which a vote is held on the Scheme Resolutions, but the Scheme Resolutions are not
passed by the requisite majority of the shareholders of Target at such General Meeting;
(c) an application for the issuance of the Court Order is made to the Court (and not adjourned or
otherwise postponed) but the Court (in its final judgment) refuses to grant the Court Order;
(d) either the Scheme lapses or it is withdrawn with the consent of the Panel or by order of the
Court; or
(e) the date which is 15 days after the Scheme Effective Date;
unless, in respect of paragraphs (a) to (d) inclusive above, for the purpose of switching from a
Scheme to a Takeover Offer, within 5 Business Days of such event the Borrower has notified the
Administrative Agent that the Borrower intends to issue, and then within 10 Business Days after
delivery of such notice the Borrower does issue, an Offer Press Announcement and provides a copy to
the Administrative Agent (in which case no Mandatory Cancellation Event shall have occurred);
(ii) where the Target Acquisition proceeds by way of a Takeover Offer:
(a) such Takeover Offer lapses, terminates or is withdrawn unless, for the purpose of switching
from a Takeover Offer to a Scheme, within 5 Business Days of such event the Borrower has notified
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the Administrative Agent that the Borrower intends to issue, and then within 10 Business Days after
delivery of such notice the Borrower does issue, a Scheme Press Release and provides a copy to the
Administrative Agent (in which case no Mandatory Cancellation Event shall have occurred); or
(b) the date which is six weeks after the date (or to the extent necessary to address a minority
shareholder’s application to Court
thereof and written notice is provided to the
Administrative Agent on or prior to the end of such initial six week period, twelve weeks after the date)
that the Borrower serves notice under Article 117 of the Jersey Companies Law to buy out minority
shareholders;
in protest
(iii) the date upon which all payments made or to be made for Certain Funds Purposes have been paid in
full in cleared funds; or
(iv) the date which is 15 days after the Long Stop Date.
“Margin Stock” has the meaning provided in Regulation U.
“Maximum Rate” has the meaning specified in Section 9.19.
“Material Adverse Effect” means a material adverse effect on (a) the financial condition or results of
operations of the Borrower or the Consolidated Group taken as a whole, (b) the rights and remedies of the
Administrative Agent or any Lender under this Agreement, taken as a whole, or (c) the ability of the
Borrower to perform its or their payment obligations under this Agreement.
“Maturity Date” means the date that is five years following the Closing Date.
“Moody’s” means Moody’s Investors Service, Inc. (or any successor thereof).
“Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to
which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an obligation to make contributions.
“Multiple Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA,
that (a) is maintained for employees of the Borrower or any ERISA Affiliate and at least one Person other
than the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower
or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has
been or were to be terminated.
“Non-Consenting Lender” has the meaning specified in Section 9.01(c).
“Non-Defaulting Lender” means, at any time, a Lender that is not a Defaulting Lender.
“Notice” has the meaning specified in Section 9.02(d).
“Notice of Borrowing” has the meaning specified in Section 2.02(a).
“NPL” means the National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
“OFAC” means the U.S. Treasury Department’s Office of Foreign Assets Control.
“Offer Documents” means the Takeover Offer Document and the Offer Press Announcement.
“Offer Press Announcement” means a press announcement released by or on behalf of the Borrower in
accordance with Rule 2.7 of the City Code announcing that the Target Acquisition is to be effected by a
Takeover Offer and setting out the terms and conditions of the Takeover Offer.
“Original Scheme Press Release” means the Scheme Press Release released by the Borrower on May 8,
2018.
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“Other Connection Taxes” means, with respect to the Administrative Agent or any Lender, Taxes
imposed as a result of a present or former connection between the Administrative Agent or such Lender and
the jurisdiction imposing such Tax (other than connections arising from the Administrative Agent or such
Lender having executed, delivered, become a party to, performed its obligations under, received payments
under, received or perfected a security interest under, engaged in any other transaction pursuant to, or
enforced, any Loan Document, or sold or assigned an interest in any Loan Document).
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“Other Taxes” has the meaning specified in Section 2.14(b).
“Panel” means the Panel on Takeovers and Mergers.
“Participant Register” has the meaning specified in Section 9.07(e).
“Participating Member State” means any member state of the European Union that adopts or has
adopted the Euro as its lawful currency in accordance with legislation of the European Union relating to
economic and monetary union.
“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, signed into law October 26, 2001.
“PBGC” means the Pension Benefit Guaranty Corporation (or any successor thereto).
“Person” means an individual, partnership, corporation (including a business trust),
joint stock
company, trust, unincorporated association, joint venture, limited liability company or other entity, or a
government or any political subdivision or agency thereof.
“Plan” means a Single Employer Plan or a Multiple Employer Plan.
“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA,
as amended from time to time.
“Platform” has the meaning specified in Section 5.01(i).
“Pro Forma Financials” has the meaning provided in Section 3.02(g).
“Projections” means any projections and any forward looking statements (including statements with
respect to booked business) of the Consolidated Group furnished to the Lenders or the Administrative Agent
by or on behalf of the Borrower prior to the Closing Date.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any
such exemption may be amended from time to time.
“Public Debt Rating” means, as of any date and subject to the provisions of the next succeeding
sentence, the lowest rating that has been most recently announced by each of S&P or Moody’s, as the case
may be, for any class of non-credit enhanced long-term senior unsecured debt issued by the Borrower. For
purposes of the foregoing: (a) if only one of S&P and Moody’s shall have in effect a Public Debt Rating, the
Applicable Percentage and the Applicable Margin shall be determined by reference to the available rating;
(b) if neither S&P nor Moody’s shall have in effect a Public Debt Rating, the Applicable Percentage and the
Applicable Margin shall be set in accordance with Level 6 under the definition of Applicable Percentage or
Applicable Margin, as the case may be; (c) if the ratings established by S&P and Moody’s shall fall within
different levels, the Applicable Percentage and the Applicable Margin shall be based upon the higher of
such ratings, except that, in the event that the lower of such ratings is more than one level below the higher
of such ratings, the Applicable Percentage and the Applicable Margin shall be based upon the level
immediately above the lower of such ratings; (d) if any rating established by S&P or Moody’s shall be
changed, such change shall be effective as of the date on which such change is first announced publicly by
the rating agency making such change; and (e) if S&P or Moody’s shall change the basis on which ratings
are established, each reference to the Public Debt Rating announced by S&P or Moody’s, as the case may
be, shall refer to the then equivalent rating by S&P or Moody’s, as the case may be.
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“Public Lender” has the meaning set forth in Section 5.01.
“Quotation Day” means with respect to the applicable currency for any Interest Period, (i) if the
currency is Euro, the day that is two (2) TARGET2 Days before the first day of such Interest Period and
(iii) for any other currency, two Business Days prior to the first day of such Interest Period, unless market
practice differs in the London interbank market for the applicable currency, in which case the Quotation Day
shall be determined by the Administrative Agent in accordance with market practice in the London
interbank market (and if quotations would normally be given by leading banks in the London interbank
market on more than one day, the Quotation Day shall be the last of those days.
“Reference Bank Rate” means the arithmetic mean of the rates (rounded upwards to four decimal
places) supplied to the Administrative Agent at its request by the Reference Banks (as the case may be) as of
the applicable time on the Quotation Day for Advances in the applicable currency and the applicable Interest
Period as the rate at which the relevant Reference Bank could borrow funds in the London (or other
applicable) interbank market in the relevant currency and for the relevant period, were it to do so by asking
for and then accepting interbank offers in reasonable market size in that currency and for that period.
“Reference Banks” means such banks as may be appointed by the Administrative Agent (and agreed by
such bank) in consultation with the Borrower.
“Register” has the meaning specified in Section 9.07(d).
“Registrar” means the Registrar of Companies for Jersey.
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners,
directors, officers, employees, agents, trustees and advisors of such Person and of such Person’s Affiliates.
“Repayment Date” means each of (i) the date falling 15 months after the Closing Date and (ii) the last
day of each three-month period thereafter.
“Required Lenders” means, at any time, Lenders holding more than 50% of the unused Commitments
and aggregate outstanding principal amount of Advances at such time; provided that the Commitment of,
and the Advances held or deemed held by, any Defaulting Lender shall be excluded for purposes of making
a determination of Required Lenders.
“Resignation Effective Date” has the meaning provided in Section 7.06(a).
“Responsible Officer” means, with respect to the Borrower, the Chief Executive Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Head of Corporate Law, Japan
Legal and the General Counsel of the Borrower (or other executive officer of the Borrower performing
similar functions) or any other officer of the Borrower responsible for overseeing or reviewing compliance
with this Agreement.
“Restricted Margin Stock” means Margin Stock owned by the Consolidated Group the value of which
(determined as required under clause 2(i) of the definition of “Indirectly Secured” set forth in Regulation U)
represents not more than 25% of the aggregate value (determined as required under clause (2)(i) of the
definition of “Indirectly Secured” set forth in Regulation U), on a consolidated basis, of the property and
assets of the Consolidated Group (excluding any Margin Stock) that is subject to the provisions of
Section 5.02(a) or (b).
“S&P” means Standard & Poor’s Financial Services LLC (or any successor thereof).
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or
target of comprehensive Sanctions (at the time of this Agreement, Crimea, Cuba, Iran, North Korea, Sudan
and Syria).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of
designated Persons maintained by OFAC, the U.S. Department of State, the Ministry of Finance of Japan,
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the United Nations Security Council, the European Union, Her Majesty’s Treasury of the United Kingdom,
any relevant and applicable European Union member state or other relevant sanctions authority, (b) any
Person operating, organized or resident in a Sanctioned Country, (c) any Person owned or controlled by any
such Person or Persons described in the foregoing clauses (a) or (b) or (d) any Person otherwise the subject
of any Sanctions.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or
enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S.
Department of State, (b) the Japanese government, including those imposed under the Foreign Exchange
Act and the Import Trade Control Order of Japan (Cabinet Order No. 414 of 1949, as amended) or (c) the
United Nations Security Council, the European Union, Her Majesty’s Treasury of the United Kingdom or
any relevant and applicable European Union member state or other relevant sanctions authority.
“Scheme” means a scheme of arrangement to be effected under Article 125 of the Jersey Companies
Law between Target and the Scheme Shareholders pursuant to which the Borrower will become the holder
of all of the Scheme Shares in accordance with the Scheme Documents, subject to such changes and
amendments to the extent not prohibited by the Loan Documents.
“Scheme Circular” means the document issued by or on behalf of Target to the Scheme Shareholders
setting out the terms and conditions of and an explanatory statement in relation to the Scheme, stating the
recommendation of the Target Acquisition and the Scheme to the Scheme Shareholders by the board of
directors of Target and setting out the notices of the Court Meeting and the General Meeting as such
document may be amended from time to time to the extent such amendment is not prohibited by the Loan
Documents.
“Scheme Documents” means, collectively (a) the Scheme Press Release, (b) the Scheme Circular,
(c) the Scheme Resolutions and (d) any other document issued by or on behalf of Target to its shareholders
in respect of the Scheme and any other document designated as a “Scheme Document” by the
Administrative Agent and the Borrower.
“Scheme Effective Date” means the date on which the Court Order sanctioning the Scheme is duly
delivered on behalf of Target to the Registrar in accordance with Article 125(3) of the Jersey Companies
Law.
“Scheme Press Release” means a press announcement released by the Borrower in accordance with
Rule 2.7 of the City Code announcing that the Target Acquisition is to be effected by a Scheme and setting
out the terms and conditions of the Scheme.
“Scheme Resolutions” means the resolutions of the shareholders of Target which are required to
implement the Scheme and which are referred to and substantially in the form set out in the Scheme Circular
and which are to be proposed at the General Meeting.
“Scheme Shareholders” means the registered holders of Scheme Shares at the relevant time.
“Scheme Shares” means the Target Shares which are subject to the Scheme in accordance with its
terms.
“Screen Rate” has the meaning set forth in the definition of “Eurocurrency Rate”.
“Service of Process Agent” means CT Corporation Systems, 111 Eighth Avenue, 13th Floor, New
York, New York 10011.
“Significant Subsidiary” means any Subsidiary of the Borrower that constitutes a “significant
subsidiary” under Regulation S-X promulgated by the Securities and Exchange Commission, as in effect
from time to time.
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“Single Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA,
that (a) is maintained for employees of the Borrower or any ERISA Affiliate and no Person other than the
Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any
ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were
to be terminated.
“Subsidiary” means, with respect to any Person, any corporation, partnership, joint venture, limited
liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding
capital stock having ordinary voting power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of
such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or
estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or
more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.
“Takeover Offer” means a “takeover offer” within the meaning of Article 116(1) of the Jersey
Companies Law proposed to be made by the Borrower to acquire (directly or indirectly) Target Shares,
substantially on the terms and conditions set out in an Offer Press Announcement (as such offer may be
amended in any way which is not prohibited by the terms of the Loan Documents).
“Takeover Offer Document” means the document
issued by or on behalf of the Borrower and
dispatched to shareholders of Target in respect of a Takeover Offer containing the terms and conditions of
the Takeover Offer reflecting the Offer Press Announcement in all material respects as such document may
be amended from time to time to the extent such amendment is not prohibited by the Loan Documents.
“Target” means Shire plc.
“Target Acquisition” means the direct or indirect acquisition, pursuant to the Offer Documents or
Scheme Documents, as applicable, of the Target Shares, which acquisition will be effected pursuant to a
Scheme or Takeover Offer.
“Target Shares” means all of the issued and to be issued ordinary shares in the capital of the Target
(including any issued pursuant to the exercise of any options or awards or other instruments convertible into
or exchangeable for shares of the Target).
“TARGET2” means the Trans-European Automated Real-time Gross Settlement Express Transfer
(TARGET2) payment system (or, if such payment system ceases to be operative, such other payment system
(if any) reasonably determined by the Administrative Agent to be a suitable replacement) for the settlement
of payments in Euro.
“TARGET2 Day” means a day that TARGET2 is open for the settlement of payments in Euro.
“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, withholdings
(including back-up withholdings), assessments, fees or other like charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable thereto.
“Transactions” means the Target Acquisition, the entry into this Agreement and the transactions
contemplated hereby, the borrowings by the Borrower under the Commitments, and in each case, related
fees costs and expenses.
“Type” refers to a Cost of Funds Rate Advance or a Eurocurrency Rate Advance.
“United States” and “U.S.” each means the United States of America.
“Unrestricted Margin Stock” means any Margin Stock owned by the Consolidated Group which is not
Restricted Margin Stock.
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“Voting Stock” means shares of capital stock issued by a corporation, or equivalent interests in any
other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such Person, even if the right so to vote
has been suspended by the happening of such a contingency.
“Withdrawal Liability” has the meaning specified in Part I of Subtitle E of Title IV of ERISA.
“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the
write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In
Legislation for the applicable EEA Member Country, which write-down and conversion powers are
described in the EU Bail-In Legislation Schedule.
SECTION 1.02 Computation of Time Periods. In this Agreement, in the computation of periods of time
from a specified date to a later specified date, the word “from” means “from and including”, the word “through”
means “through and including” and each of the words “to” and “until” mean “to but excluding”.
SECTION 1.03 Accounting Terms. Except as otherwise expressly provided herein, all accounting
terms not specifically defined herein shall be construed in accordance with, and all financial data (including
financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with,
IFRS, as in effect from time to time. If at any time any change in IFRS would affect the calculation of any
covenant set forth herein and either the Borrower or the Required Lenders shall so request, the Administrative
Agent, the Lenders and the Borrower shall negotiate in good faith to amend such covenant to preserve the
original intent thereof in light of such change in IFRS (subject to the approval of the Required Lenders); provided
that, until so amended, (i) such covenant shall continue to be calculated in accordance with IFRS prior to such
change and (ii) the Borrower shall provide to the Administrative Agent and the Lenders, concurrently with the
delivery of any financial statements or reports with respect
to such covenant, statements setting forth a
reconciliation between calculations of such covenant made before and after giving effect to such change in IFRS.
Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein
shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving
effect to (i) any election under applicable accounting standards to value any Debt or other liabilities of the
Borrower or any Subsidiary at “fair value” or similar term and (ii) any treatment of Debt in respect of convertible
debt instruments under applicable accounting standards to value any such Debt in a reduced or bifurcated
manner, and such Debt shall at all times be valued at the full stated principal amount thereof.
SECTION 1.04 Terms Generally. The definitions of terms herein shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same
meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to
any agreement,
instrument or other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, restated, supplemented or otherwise modified
(subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein), (b)
any definition of or reference to any statute, rule or regulation shall be construed as referring thereto as from time
to time amended, supplemented or otherwise modified (including by succession of comparable successor laws),
(c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject
to any restrictions on assignment set forth herein and (d) the words “herein”, “hereof” and “hereunder”, and
words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular
provision hereto.
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SECTION 1.05 Jersey Terms. In each Loan Document, where it relates to a person incorporated or
formed or having its centre of main interests in Jersey, a reference to:
(a)
a winding up, administration or dissolution includes, without limitation, bankruptcy (as that term is
interpreted pursuant to Article 8 of the Interpretation (Jersey) Law 1954), any procedure or process
referred to in Part 21 of the Jersey Companies Law, and any other similar proceedings affecting the
rights of creditors generally under Jersey law, and shall be construed so as to include any equivalent or
analogous proceedings; or
(b) a receiver, administrative receiver, administrator or the like includes, without limitation, the Viscount
of the Royal Court of Jersey, autorisés or any other person performing the same function of each of the
foregoing.
SECTION 1.06 Currency Translations.
(a) The Administrative Agent shall determine the Dollar Equivalent of each Advance denominated in
Euros as of the date of the making of any Advance using the Exchange Rate for such currency in relation to
Dollars in effect at 11:00 A.M. (Tokyo time) on the date that is three Business Days prior to such calculation date
and such amount shall be used in calculating any applicable fees payable hereunder, the amount the applicable
Commitments are reduced upon such Advance and other amounts to which the Dollar Equivalent applies
pursuant to the terms hereof.
(b) For purposes of (i) determining the amount of Borrowed Debt incurred, outstanding or proposed to
be incurred or outstanding under Section 5.02(e), (ii) determining the amount of obligations secured by Liens
incurred, outstanding or proposed to be incurred or outstanding under Section 5.02(a) or (iii) determining the
amount of Debt, the net assets of a Person or judgments outstanding under Section 6.01(d), (e) or (f), all amounts
incurred, outstanding or proposed to be incurred or outstanding in currencies other than Dollars shall be
translated into Dollars at the Exchange Rate on the applicable date; provided that no Default shall arise as a result
of any limitation set forth in Dollars in Section 5.02(a) or (e) being exceeded solely as a result of changes in
Exchange Rates from those rates applicable at the time or times Debt or obligations secured by Liens were
initially consummated or acquired in reliance on the exceptions under such Sections.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01 The Advances. Each Lender severally and not jointly agrees, on the terms and
conditions hereinafter set forth to make Advances denominated in Dollars and/or Euros to the Borrower from
time to time on any Business Day during the Availability Period in an amount not to exceed such Lender’s
outstanding Commitment immediately prior to the making of the Advance; provided that no Lender shall be
obligated to make Advances denominated in Euros if, after giving effect to such proposed Advance, the
aggregate amount of Advances denominated in Euros made hereunder would exceed the Euro Sublimit. Each
Borrowing shall be in an aggregate amount equal to the Borrowing Minimum or a Borrowing Multiple in excess
thereof and shall initially consist of Eurocurrency Rate Advances made on the same day by the Lenders ratably
according to their respective relevant Commitments. Upon the making of any Advance by a Lender such
Lender’s relevant Commitment will be permanently reduced by the Dollar Equivalent of the aggregate principal
amount of such Advance. The Borrower may prepay Advances pursuant to Section 2.10, provided that Advances
may not be reborrowed once repaid.
SECTION 2.02 Making the Advances. (a) Each Borrowing shall be made on notice by the Borrower,
given not later than 9:00 A.M. (Tokyo time) on the third Business Day prior to the date of the proposed
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Borrowing, to the Administrative Agent, which shall give to each Lender prompt notice thereof by telecopier or
other electronic communication. Each notice of a Borrowing (a “Notice of Borrowing”) shall be by telephone,
confirmed immediately in writing, including by telecopier (or other electronic communication) in substantially
the form of Exhibit A hereto, specifying therein the requested (i) date of such Borrowing (which shall be a
Business Day), (ii) whether such Borrowing is to be denominated in Dollars or Euros (provided that if the
Borrower fails to specify a currency in any Notice of Borrowing, then the Advances so requested shall be made
in Dollars, it being understood that Dollars shall be the base currency for this Agreement), (iii) aggregate amount
of such Borrowing, (iv) initial Interest Period for such Advance, if such Borrowing is to consist of Eurocurrency
Rate Advances, and (v) account or accounts in which the proceeds of the Borrowing should be credited. Each
Lender shall, before 11:00 A.M. (Tokyo time) on the date of such Borrowing make available for the account of
its Applicable Lending Office to the Administrative Agent at the applicable Administrative Agent’s Office, in
same day funds, such Lender’s ratable portion of such Borrowing. After the Administrative Agent’s receipt of
such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will
make such funds available to the Borrower in immediately available funds to the account or accounts specified
by the Borrower to the Administrative Agent in the Notice of Borrowing relating to the applicable Borrowing.
Notwithstanding anything to the contrary herein, there shall not be more than ten separate Borrowings of
Advances.
(b) Anything in Section 2.02(a) to the contrary notwithstanding, (i) the Borrower may not select
Eurocurrency Rate Advances if the obligation of the Lenders to make Eurocurrency Rate Advances shall then be
suspended pursuant to Section 2.08 or 2.12 and (ii) the Eurocurrency Rate Advances may not be outstanding as
part of more than ten separate Borrowings.
(c) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any
Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurocurrency Rate Advances, the
Borrower shall indemnify each Lender against any reasonable loss, cost or expense incurred by such Lender as a
result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article III, including, without limitation, any reasonable loss (excluding loss of
anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other
funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when
such Advance, as a result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice from a Lender prior to the time of any
Borrowing that such Lender will not make available to the Administrative Agent such Lender’s ratable portion of
such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the
Administrative Agent on the date of such Borrowing in accordance with Section 2.02(a) and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding
amount. If and to the extent that any Lender shall not have so made such ratable portion available to the
Administrative Agent, such Lender and the Borrower severally agree to pay or to repay to the Administrative
Agent forthwith on demand such corresponding amount and to pay interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is paid or repaid to the Administrative
Agent, at (i) in the case of the Borrower, the higher of (A) the interest rate applicable at the time to Advances
comprising such Borrowing and (B) the cost of funds incurred by the Administrative Agent in respect of such
amount and (ii) in the case of such Lender, the greater of the Cost of Funds Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank compensation. If the Borrower and
such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the
Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for
such period. If such Lender shall pay to the Administrative Agent such corresponding principal amount, such
amount so paid shall constitute such Lender’s Advance as part of such Borrowing for all purposes of this
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Agreement. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have
against a Lender that shall have failed to make such payment to the Administrative Agent.
(e) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not
relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such
other Lender on the date of any Borrowing.
(f) If any Lender makes available to the Administrative Agent funds for any Advance to be made by
such Lender as provided herein, and such funds are not made available to the Borrower by the Administrative
Agent because the conditions to such Borrowing are not satisfied or waived in accordance with the terms hereof,
the Administrative Agent shall promptly return such funds (in like funds as received from such Lender) to such
Lender, without interest.
(g) Each Lender at its option may make any Advance by causing any domestic or foreign branch or
Affiliate of such Lender to make such Advance (and in the case of an Affiliate, the provisions of Sections 2.08,
2.11 and 2.14 shall apply to such Affiliate to the same extent as to such Lender); provided that any exercise of
such option shall not affect the obligation of the Borrower to repay such Advance in accordance with the terms of
this Agreement.
SECTION 2.03 [Reserved].
SECTION 2.04 Fees.
(a) Commitment Fee. As part of
the consideration for each Lender’s
Commitment hereunder, the Borrower agrees to pay to the Administrative Agent, for the account of each Lender
(other than a Defaulting Lender for such time as such Lender is a Defaulting Lender), a non-refundable
commitment fee from (and excluding) the Effective Date and from time to time through and including the date of
termination of the Commitments in full, at a rate per annum (x) equal to 0.10% until the receipt of a Public Debt
Rating (after giving effect to the Target Acquisition) and (y) thereafter, equal to the Applicable Percentage per
annum, on the aggregate daily amount of such Lender’s Commitments during such period, such fee to be earned
and payable in arrears quarterly on the last Business Day of each March, June, September and December, and on
the date the Commitment terminates in full or is otherwise reduced to zero.
(b) [Reserved].
(c) Additional Fees. The Borrower shall pay to the Administrative Agent and Arrangers for their
account (or that of their applicable Affiliate) such fees as may from time to time be agreed between any of the
Consolidated Group and the Administrative Agent and/or Arrangers.
(d) Calculation of Commitment. For the avoidance of doubt, with respect
to the definition of
“Mandatory Cancellation Event” and the ability thereunder for the Borrower to provide notices and issue
documents to facilitate a switch from a Scheme to a Takeover Offer and vice versa, the Commitment shall be
deemed to be in effect until the end of the day on which the applicable notice or issuance is required to but does
not occur for the purposes of calculating any fees under this Agreement or any fee letters related hereto.
SECTION 2.05 Termination or Reduction of the Commitments. (a) Unless previously terminated, the
Commitments shall terminate in full at 5:00 p.m. (Tokyo time) on the earlier of (i) the date on which all of the
Certain Funds Purposes have been achieved without the making of any Advances and (ii) the date on which the
Certain Funds Period terminates. Additionally, each Lender’s Commitment will be permanently reduced upon
such Lender making any Advance under such Commitment by an amount equal to the Dollar Equivalent of such
Advance. Any termination or reduction of the Commitments shall be permanent.
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(b) Ratable Reduction or Termination. The Borrower shall have the right, upon at least three Business
Days’ notice to the Administrative Agent, to terminate in whole or permanently reduce ratably in part the unused
portions of Commitments of the Lenders; provided that each partial reduction shall be in an aggregate amount of
not less than $50,000,000 and an integral multiple of $5,000,000 in excess thereof; provided further that any such
notice may state that such notice is conditioned upon the effectiveness of other credit facilities or the
consummation of a specific transaction, in which case such notice may be revoked by the Borrower if such
condition is not satisfied.
SECTION 2.06 Repayment of Advances.
(a) The Borrower shall repay the Advances in installments, together with accrued interest to the date of
such repayment on the principal amount repaid, on each Repayment Date, which installments shall each be in an
amount equal to (x) for the first eight of such payments, 1.25% of the aggregate principal amount of the
Advances actually funded on or prior to the last day of the Availability Period and (y) for each other payment,
2.50% of the aggregate principal amount of the Advances actually funded on or prior to the last day of the
Availability Period.
(b) The Borrower shall repay on the Maturity Date to the Administrative Agent for the ratable account
of the Lenders, the aggregate principal amount of all Advances made to the Borrower outstanding on such date.
SECTION 2.07 Interest on Advances. (a) Scheduled Interest. The Borrower shall pay interest on the
unpaid principal amount of each Advance made to it from the date of such Advance until such principal amount
shall be paid in full, at the following rates per annum:
(i) Cost of Funds Rate Advances. During such periods as such Advance is a Cost of Funds Rate
Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum
of (A) the Cost of Funds Rate for such Interest Period for such Advance and (B) the Applicable Margin
for the currency in which such Advance is denominated, payable in arrears on (x) the last day of such
Interest Period and, if such Interest Period has a duration of more than three months, on each day that
occurs during such Interest Period every three months from the first day of such Interest Period, (y) if
applicable, each Repayment Date and (z) on the date such Cost of Funds Rate Advance shall be
Converted or paid in full; provided that, in the event of any payment of interest pursuant to clauses
(y) or (z) above, accrued but unpaid interest shall only be payable in respect of the principal amount of
Advances prepaid or Converted on such date.
(ii) Eurocurrency Rate Advances. During such periods as such Advance is a Eurocurrency Rate
Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum
of (A) the Eurocurrency Rate for such Interest Period for such Advance, and (B) the Applicable Margin
for the currency in which such Advance is denominated, payable in arrears on (x) the last day of such
Interest Period and, if such Interest Period has a duration of more than three months, on each day that
occurs during such Interest Period every three months from the first day of such Interest Period, (y) if
applicable, each Repayment Date and (z) on the date such Eurocurrency Rate Advance shall be
Converted or paid in full; provided that, in the event of any payment of interest pursuant to clauses
(y) or (z) above, accrued but unpaid interest shall only be payable in respect of the principal amount of
Advances prepaid or Converted on such date.
(b) Default Interest. Upon the occurrence and during the continuance of an Event of Default pursuant to
Section 6.01(a), the Administrative Agent shall, upon the request of the Required Lenders, require the Borrower
to pay interest (“Default Interest”), which amount shall accrue as of the date of occurrence of the Event of
Default, on (i) amounts that are overdue, payable in arrears on the dates referred to in Section 2.07(a)(i) or
2.07(a)(ii), at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid
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on such overdue amount pursuant to Section 2.07(a)(i) or 2.07(a)(ii) and (ii) to the fullest extent permitted by
law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date
such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall
be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid on Advances pursuant to Section 2.07(a)(ii) (or, if all Advances have been Converted to Cost
of Funds Rate Advances pursuant to Section 2.07(a)(i)), provided, however, that following acceleration of the
Advances pursuant to Section 6.01, Default Interest shall accrue and be payable hereunder whether or not
previously required by the Administrative Agent.
(c) Additional Interest on Eurocurrency Rate Advances. The Borrower shall pay to each Lender, so
long as and to the extent such Lender shall be subject to, under applicable law, rules or regulations to reserves,
liquid asset, fees or similar requirements (as further described in the definition of Eurocurrency Rate Reserve
Percentage) with respect to deposits or liabilities (as so described), additional interest on the unpaid principal
amount of each Advance of such Lender made to the Borrower that is a Eurocurrency Rate Advance, from the
date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to
the remainder obtained by subtracting (a) the Eurocurrency Rate for the applicable Interest Period for such
Advance from (b) the rate obtained by dividing such Eurocurrency Rate by a percentage equal to 100% minus the
Eurocurrency Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which
interest
is payable on such Advance. Such Lender shall as soon as practicable provide notice to the
Administrative Agent and the Borrower of any such additional interest arising in connection with such Advance,
which notice shall be conclusive and binding, absent demonstrable error.
SECTION 2.08 Interest Rate Determination. (a) The Administrative Agent shall give prompt notice to
the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes
of Section 2.07(a)(i) or 2.07(a)(ii).
(b) If, with respect to any Eurocurrency Rate Advances, (i) the Administrative Agent shall have
determined (which determination shall be conclusive and binding absent manifest error) that adequate and
reasonable means (including, without limitation, by means of an Interpolated Rate) do not exist for ascertaining
the Eurocurrency Rate for such Interest Period or (ii) the Required Lenders notify the Administrative Agent that
(x) they are unable to obtain matching deposits in the London inter-bank market at or about 11:00 A.M. (London
time) on the second Business Day before the making of a Borrowing in sufficient amounts to fund their
respective Advances as a part of such Borrowing during its Interest Period or (y) the Eurocurrency Rate for any
Interest Period for such Advances will not adequately and fairly reflect the cost to the Required Lenders of
making, funding or maintaining their respective Eurocurrency Rate Advances for such Interest Period, the
Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon (A) (x) the Borrower
will, on the last day of the then existing Interest Period therefor prepay such Advances or (y) any such Advance
shall automatically, on the last day of the then existing Interest Period therefor, be Converted to a Cost of Funds
Rate Advance with an Interest Period of the same duration and (B) the obligation of the Lenders to make
Eurocurrency Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer exist.
(c) If at any time the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that (i) the circumstances set forth in clause (b)(i) have arisen and such circumstances are
unlikely to be temporary or (ii) the circumstances set forth in clause (b)(i) have not arisen but either (w) the
supervisor for the administrator of the Screen Rate has made a public statement that the administrator of the
Screen Rate is insolvent (and there is no successor administrator that will continue publication of the Screen
Rate), (x) the administrator of the Screen Rate has made a public statement identifying a specific date after which
the Screen Rate will permanently or indefinitely cease to be published by it (and there is no successor
administrator that will continue publication of the Screen Rate), (y) the supervisor for the administrator of the
Screen Rate has made a public statement identifying a specific date after which the Screen Rate will permanently
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or indefinitely cease to be published or (z) the supervisor for the administrator of the Screen Rate or a
Governmental Authority having jurisdiction over the Administrative Agent has made a public statement
identifying a specific date after which the Screen Rate may no longer be used for determining interest rates for
loans, then the Administrative Agent and the Borrower shall endeavor to establish an alternate rate of interest to
the Eurocurrency Rate that gives due consideration to the then prevailing market convention for determining a
rate of interest for syndicated loans in the United States at such time, and shall enter into an amendment to this
Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be
applicable (but for the avoidance of doubt, such related changes shall not include a reduction of the Applicable
Margin); provided that, if such alternate rate of interest as so determined would be less than zero, such rate shall
be deemed to be zero for the purposes of this Agreement. Notwithstanding anything to the contrary in
Section 9.01, such amendment shall become effective without any further action or consent of any other party to
this Agreement so long as the Administrative Agent shall not have received, within five Business Days of the
date notice of such alternate rate of interest is provided to the Lenders, a written notice from the Required
Lenders stating that such Required Lenders object to such amendment. Until an alternate rate of interest shall be
determined in accordance with this clause (c) (but, in the case of the circumstances described in clause (ii) of the
first sentence of this Section 2.08(c), only to the extent the Screen Rate for the applicable currency and such
Interest Period is not available or published at such time on a current basis), (x) any request from the Borrower to
continue any Advance as a Eurocurrency Rate Advance shall be ineffective and any such Advance shall
automatically, on the last day of the then existing Interest Period therefor, be Converted to a Cost of Funds Rate
Advance with an Interest Period of the same duration and (y) the obligation of the Lenders to make Eurocurrency
Rate Advances shall be suspended.
(d) If the Borrower shall fail to select the duration of any Interest Period for any Eurocurrency Rate
Advances made to the Borrower in accordance with the provisions contained in the definition of “Interest Period”
in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such
Eurocurrency Rate Advances will automatically, on the last day of the then existing Interest Period therefor, be
continued as a Eurocurrency Advance with an Interest Period of one month.
SECTION 2.09 [Intentionally Omitted].
SECTION 2.10 Optional Prepayments of Advances. The Borrower may, upon written notice to the
Administrative Agent stating the proposed date and aggregate principal amount of the proposed prepayment,
given not later than 10:00 A.M. (Tokyo time) one Business Day prior to the date (which date shall be a Business
Day) of such proposed prepayment, in the case of a Borrowing consisting of Cost of Funds Rate Advances, and
not later than 10:00 A.M. (Tokyo time) at least two Business Days prior to the date of such proposed
prepayment, in the case of a Borrowing consisting of Eurocurrency Rate Advances, and if such notice is given,
the Borrower shall, prepay the outstanding principal amount of the Advances comprising part of the same
Borrowing made to the Borrower in whole or ratably in part, and together with accrued interest to the date of
such prepayment on the principal amount prepaid; provided, however, that (i) each partial prepayment shall be in
an aggregate principal amount of the Borrowing Minimum or a Borrowing Multiple in excess thereof and (ii) if
any prepayment of a Eurocurrency Rate Advance is made on a date other than the last day of an Interest Period
for such Eurocurrency Rate Advance, the Borrower shall also pay any amount owing pursuant to Section 9.04(c);
and provided, further, that, subject to clause (ii) of the immediately preceding proviso, any such notice may state
that such notice is conditioned upon the effectiveness of other credit facilities or the consummation of a specific
transaction, in which case such notice may be revoked by the Borrower if such condition is not satisfied.
Notwithstanding anything in this Agreement to the contrary, the Borrower shall not optionally prepay any
Advances while any Tranche 4 Advances (as defined under the Bridge Credit Agreement as in effect on the
Effective Date) under the Bridge Facility are outstanding.
SECTION 2.11 Increased Costs. (a) If, due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance with any directive, guideline or request from any
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central bank or other Governmental Authority including, without limitation, any agency of the European Union
or similar monetary or multinational authority (whether or not having the force of law), in each case after the date
hereof (or with respect to any Lender (or the Administrative Agent), if later, the date on which such Lender (or
the Administrative Agent) becomes a Lender (or the Administrative Agent)), there shall be any increase in the
cost to any Lender or the Administrative Agent of agreeing to make or making, funding or maintaining Advances
(excluding for purposes of this Section 2.11 any such increased costs resulting from (i) Taxes as to which such
Lender is indemnified under Section 2.14, (ii) Excluded Taxes, or (iii) Other Taxes), then the Borrower shall
from time to time, upon demand by such Lender or the Administrative Agent (with a copy of such demand to the
Administrative Agent, if applicable), pay to the Administrative Agent for the account of such Lender (or for its
own account, if applicable) additional amounts sufficient to compensate such Lender or the Administrative Agent
for such increased cost as reasonably determined by such Lender or the Administrative Agent (which
determination shall be made in good faith (and not on an arbitrary or capricious basis) and consistent with
similarly situated customers of the applicable Lender or the Administrative Agent under agreements having
provisions similar to this Section 2.11 after consideration of such factors as such Lender or the Administrative
Agent then reasonably determines to be relevant). A certificate describing such increased costs in reasonable
detail delivered to the Borrower shall be conclusive and binding for all purposes, absent demonstrable error.
(b) If any Lender reasonably determines that compliance with any law or regulation or any directive,
guideline or request from any central bank or other Governmental Authority including, without limitation, any
agency of the European Union or similar monetary or multinational authority (whether or not having the force of
law), in each case promulgated or given after the date hereof (or with respect to any Lender, if later, the date on
which such Lender becomes a Lender), affects or would affect the amount of capital, insurance or liquidity
required or expected to be maintained by such Lender or any corporation controlling such Lender and that the
amount of such capital, insurance or liquidity is increased by or based upon the existence of such Lender’s
commitment to lend hereunder and other commitments of this type, the Borrower shall, from time to time upon
demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative
Agent for the account of such Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances as reasonably determined by such Lender (which determination
shall be made in good faith (and not on an arbitrary or capricious basis) and consistent with similarly situated
customers of the applicable Lender under agreements having provisions similar to this Section 2.11 after
consideration of such factors as such Lender then reasonably determines to be relevant), to the extent that such
Lender reasonably determines such increase in capital, insurance or liquidity to be allocable to the existence of
such Lender’s Advances or commitment to lend hereunder. A certificate as to such amounts submitted to the
Borrower and the Administrative Agent by such Lender shall be conclusive and binding for all purposes, absent
demonstrable error.
(c) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall
not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall
not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred
more than six months prior to the date that such Lender notifies the Borrower of the change or circumstance
giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor;
provided further that, if the change or circumstance giving rise to such increased costs or reductions is
retroactive, then the six-month period referred to above shall be extended to include the period of retroactive
effect thereof. Any Lender making a claim for compensation under this Section 2.11 may be required to assign
all of its rights and obligations hereunder upon a request by the Borrower in accordance with Section 9.07.
(d) Notwithstanding anything in this Section 2.11 to the contrary, for purposes of this Section 2.11, (A)
the Dodd Frank Wall Street Reform and Consumer Protection Act and the rules and regulations issued thereunder
or in connection therewith or in implementation thereof, and (B) all requests, rules, guidelines and directions
promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any
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similar or successor agency, or the United States or foreign regulatory authorities, in each case, pursuant to Basel
III) shall be deemed to have been enacted following the date hereof (or with respect to any Lender, if later, the
date on which such Lender becomes a Lender); provided that no Lender shall demand compensation pursuant to
this Section 2.11(c) unless such Lender is making corresponding demands on similarly situated borrowers in
comparable credit facilities to which such Lender is a party.
SECTION 2.12 Illegality. Notwithstanding any other provision of this Agreement, with respect to
Dollar denominated Advances, (a) if any Lender shall notify the Administrative Agent that the introduction of or
any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other
Governmental Authority, including without limitation, any agency of the European Union or similar monetary or
multinational authority, asserts that it is unlawful, for such Lender or its Eurocurrency Lending Office to perform
its obligations hereunder to make Eurocurrency Rate Advances or to fund or maintain Eurocurrency Rate
Advances hereunder, (i) each Eurocurrency Rate Advance of such Lender will automatically, upon such
notification, be Converted into a Cost of Funds Rate Advance with an Interest Period of one month and (ii) the
obligation of such Lender to make Eurocurrency Rate Advances or to Convert Advances into Eurocurrency Rate
Advances shall be suspended until the Administrative Agent shall notify the Borrower and such Lender that the
circumstances causing such suspension no longer exist and (b) if Lenders constituting the Required Lenders so
notify the Administrative Agent, (i) each Eurocurrency Rate Advance of each Lender will automatically, upon
such notification, Convert into a Cost of Funds Rate Advance with an Interest Period of one month and (ii) the
obligation of each Lender to make Eurocurrency Rate Advances or to Convert Advances into Eurocurrency Rate
Advances shall be suspended until the Administrative Agent shall notify the Borrower and each Lender that the
circumstances causing such suspension no longer exist. Any Lender that is prohibited from performing its
obligations to make Advances or to continue to fund or maintain Advances may be required to assign all of its
rights and obligations hereunder upon a request by the Borrower in accordance with Section 9.07.
SECTION 2.13 Payments and Computations. (a) The Borrower shall make each payment required to be
made by it under this Agreement not later than 11:00 A.M. (Tokyo time) on the day when due in Dollars (or
(i) with respect to principal, interest or breakage indemnity due in respect of Advances denominated in Euros and
(ii) with respect to other payments required to be made pursuant to Section 2.11 or 9.04 that are invoiced in
Euros shall be payable in Euros) to the Administrative Agent at the applicable Administrative Agent’s Office in
same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to
the payment of principal or interest or commitment fees ratably (other than amounts payable pursuant to
Section 2.02(c), 2.07(c), 2.11, 2.12(a) (or if applicable the last sentence of Section 2.12), 2.14, 2.15 or 9.04(c)) to
the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment
of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in
each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment
and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(c),
from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall
make all payments hereunder in respect of the interest assigned thereby to the assignor for amounts which have
accrued to but excluding the effective date of such assignment and to the assignee for amounts which have
accrued from and after the effective date of such assignment. All payments to be made by the Borrower shall be
made without condition or deduction for any counterclaim, defense, recoupment or setoff.
(b) The Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender by
the Borrower is not made when due hereunder, to charge from time to time against any or all of the Borrower’s
accounts with such Lender any amount so due, unless otherwise agreed between the Borrower and such Lender.
(c) All computations of interest hereunder shall be made by the Administrative Agent on the basis of a
year of 360 days and in each case for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest or such fees are payable. Each determination by the
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Administrative Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent
demonstrable error.
(d) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case
be included in the computation of payment of interest or commitment fee, as the case may be; provided,
however, that, if such extension would cause payment of interest on or principal of Eurocurrency Rate Advances
to be made in the next following calendar month, such payment shall be made on the immediately preceding
Business Day.
the Administrative Agent may assume that
(e) Unless the Administrative Agent shall have received written notice from the Borrower prior to the
date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in
full,
to the
Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause
to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to
the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender
shall repay to the Administrative Agent, following prompt notice thereof, forthwith on demand such amount
distributed to such Lender, together with interest thereon, for each day from the date such amount is distributed
to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Cost of Funds
Rate.
the Borrower has made such payment
in full
SECTION 2.14 Taxes. (a) Any and all payments by or on behalf of the Borrower under any Loan
Document shall be made, in accordance with Section 2.13, free and clear of and without deduction for any Taxes,
excluding, in the case of each Lender and the Administrative Agent, (i) taxes imposed on (or measured by) its
overall net income (however denominated), franchise taxes, and branch profits taxes, in each case (A) imposed
by the jurisdiction under the laws of which such Lender or the Administrative Agent, as the case may be, is
organized or any political subdivision thereof, by the jurisdiction of the Administrative Agent’s principal office
or such Lender’s Applicable Lending Office, as the case may be, or any political subdivision thereof or (B) that
are Other Connection Taxes, (ii) with respect to a Lender that is not a Japanese tax resident or a Japanese branch
of a non-Japanese tax resident and is not entitled to a full exemption on Japanese withholding tax on interest
payments under a tax treaty entered into by Japan and that is in effect on the date specified in this clause (ii)(A)-
(B) below, any Japanese withholding Taxes imposed by a Governmental Authority pursuant to a law in effect on
the date on which (A) a Lender acquires such interest in an Advance or Commitment or, with respect to the
Administrative Agent, the date that the Administrative Agent becomes a party to a Loan Document or (B) a
Lender changes its Applicable Lending Office, except in each case to the extent that, pursuant to Section 2.14,
amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such
Lender became a party hereto or to such Lender immediately before it changed its Applicable Lending Office,
(iii) any Tax that is imposed (for the avoidance of doubt, including any Tax that is imposed at higher effective
tax rate) by reason of such Lender’s or the Administrative Agent’s failure to comply with Section 2.14(f), and
(iv) any withholding taxes imposed under FATCA (all such excluded Taxes in respect of payments under any
Loan Document being hereinafter referred to as “Excluded Taxes”). If any Taxes from or in respect of any sum
payable under any Loan Document to any Lender or the Administrative Agent shall be required to be deducted or
withheld under applicable law, (A) the Borrower shall be entitled to make such deductions or withholdings and
(B) the Borrower shall pay the full amount deducted or withheld to the relevant taxation authority or other
Governmental Authority in accordance with applicable law. If any Taxes other than Excluded Taxes shall be
required to be deducted from or in respect of any sum payable under any Loan Document to any Lender or the
Administrative Agent, the sum payable by the Borrower shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional sums payable under this
Section 2.14) such Lender or the Administrative Agent, as the case may be, receives an amount equal to the sum
it would have received had no such deductions been made.
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(b) In addition, without duplication of any other obligation set forth in this Section 2.14, the Borrower
agrees to pay to the relevant taxing authority or Governmental Authority any present or future stamp and
documentary Taxes and any other excise or property Taxes, charges or similar levies that arise from any payment
made by it under any Loan Document or from the execution, delivery or registration of, or performance under, or
otherwise with respect to, any Loan Document other than any such Taxes, charges or similar levies that are Other
Connection Taxes imposed with respect to an assignment or the designation of a new Applicable Lending Office
(other than an assignment or designation pursuant to a request by the Borrower) (such Taxes, charges or similar
levies, hereinafter referred to as “Other Taxes”).
(c) Without duplication of any other obligation set forth in this Section 2.14, the Borrower shall
indemnify each Lender and the Administrative Agent for the full amount of Taxes (other than Excluded Taxes)
and Other Taxes (except to the extent such Other Taxes are Other Connection Taxes imposed solely as a result of
an assignment or the designation of a new Applicable Lending Office (other than an assignment or designation
pursuant to a request by the Borrower)) imposed on or paid by such Lender or the Administrative Agent, as the
case may be, in respect of Advances made to the Borrower and any liability (including, without limitation,
penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made
within 30 days from the date such Lender or the Administrative Agent, as the case may be, makes written
demand therefor. Such Lender or the Administrative Agent shall deliver to the Borrower a certificate describing
in reasonable detail the amount of such payment or liability.
(d) Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand
therefor, for (i) any Taxes attributable to such Lender (but only to the extent that the Borrower has not already
indemnified the Administrative Agent for such Taxes and without limiting the obligation of the Borrower to do
so) and (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.07(e)
relating to the maintenance of a Participant Register, in either case, that are payable or paid by the Administrative
Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant governmental
authority. A certificate describing in reasonable detail the amount of such payment or liability delivered to any
Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the
Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan
Document or otherwise payable by the Administrative Agent to the Lender from any other source against any
amount due to the Administrative Agent under this paragraph (d).
(e) As soon as practical after the date of any payment of Taxes or Other Taxes for which the Borrower
is responsible under this Section 2.14, the Borrower shall furnish to the Administrative Agent, at its address as
specified in Schedule II, the original or a certified copy of a receipt evidencing payment thereof.
(f) (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect
to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the
time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and
executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such
payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if
reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation
prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable
the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup
withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding
two sentences, the completion, execution and submission of such documentation (other than such documentation
set forth in Section 2.14(f)(ii) below) shall not be required if in the Lender’s reasonable judgment such
completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or
would materially prejudice the legal or commercial position of such Lender.
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(ii) Without limiting the generality of the foregoing:
(1) Any Lender that is a “United States person” within the meaning of Section 7701(a)(30) of
the Code shall deliver to the Borrower and the Administrative Agent executed originals of IRS
Form W-9 (and any applicable successor form) and such other documentation or information
prescribed by applicable Laws or reasonably requested by the Borrower or the Administrative
Agent certifying that such Lender is exempt from U.S. federal backup withholding tax. The forms
described in this Section 2.14(f)(ii)(1) shall be provided by each Lender to the Borrower and the
Administrative Agent at the time such Lender becomes a party to this Agreement, at the time or
times prescribed by applicable Laws, when reasonably requested by the Borrower or the
Administrative Agent, and promptly upon the obsolescence, invalidity or expiration of any form
previously provided by such Lender;
(2) Any Lender that is neither a Japanese tax resident nor a Japanese branch of a non-
Japanese tax resident shall provide, to the extent it is legally entitled to do so, the applicable
documentation to claim the benefits of a tax treaty entered into by Japan, at the time or times
the
prescribed by applicable Laws and when reasonably requested by the Borrower or
Administrative Agent;
(3) Any Lender that is a Japanese branch of a non-Japanese tax resident shall present, to the
extent it is legally entitled to do so, a Certificate of Exemption for Withholding Tax for Foreign
Corporations issued by the relevant tax authority in Japan pursuant to Article 180 of the Income
Tax Act of Japan (shotokuzeihou) at the time or times prescribed by applicable Laws and when
reasonably requested by the Borrower or the Administrative Agent.
(iii) If a payment made to a Lender under any Loan Document would be subject to withholding
tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of
FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall
deliver to the Borrower and the Administrative Agent, at the time or times prescribed by law and at such time or
times reasonably requested by the Borrower or the Administrative Agent, such documentation prescribed by
applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional
documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the
Borrower or the Administrative Agent to comply with its obligations under FATCA, to determine that such
Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and
withhold from such payment. Solely for the purposes of this clause 2.14(f)(ii), “FATCA” shall include any
amendments made to FATCA after the date of this Agreement.
(iv) Each Lender agrees that if any form or certification it previously delivered expires or
becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the
Borrower and the Administrative Agent in writing of its legal inability to do so.
(v) Notwithstanding the foregoing, any Japanese Taxes resulting from the failure or legal
inability of a Lender to provide any tax forms pursuant to Section 2.14(f)(i)-(ii) or (iv) shall be considered
Excluded Taxes unless (x) such Taxes are imposed as a result of a change in law or treaty occurring after the date
the Lender became a party to this Agreement or acquired its interest in a Loan or Commitment and would
otherwise have not been treated as an Excluded Tax under Section 2.14(a) but for this Section 2.14(f)(v) or
(y) such Taxes were grossed up with respect to the Lender’s assignor immediately before such Lender became a
party.
(g) In the event that an additional payment is made under Section 2.14(a) or 2.14(c) for the account of
the Administrative Agent or any Lender and the Administrative Agent or such Lender, in its sole discretion
exercised in good faith, determines that it has received a refund of any tax paid or payable by it in respect of or
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calculated with reference to the deduction or withholding giving rise to such additional payment (including by
the payment of additional amounts pursuant to this Section 2.14), the Administrative Agent or such Lender shall
pay to the Borrower such amount equal to such refund as the Administrative Agent or such Lender shall, in its
reasonable discretion exercised in good faith, have determined is attributable to such deduction or withholding
and will leave the Administrative Agent or such Lender (after such payment) in no worse position than it would
have been had the Borrower not been required to make such deduction or withholding. The Borrower, upon the
request of the Administrative Agent or such Lender, shall repay to the Administrative Agent or such Lender the
amount paid over pursuant to this paragraph (g) (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) in the event that the Administrative Agent or such Lender is required to repay
such refund to such Governmental Authority. Nothing contained in this Section 2.14(g) shall (i) interfere with the
right of a Lender to arrange its tax affairs in whatever manner it thinks fit or (ii) oblige the Administrative Agent
or any Lender to disclose any information relating to its tax returns, tax affairs or any computations in respect
thereof or (iii) require any Lender to take or refrain from taking any action that would prejudice its ability to
benefit from any other credits, reliefs, remissions or repayments to which it may be entitled.
(h) Each party’s obligations under this Section 2.14 shall survive the resignation or replacement of the
Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the
Commitments and the repayment, satisfaction or discharge of all obligations under the Loan Documents.
(i) For purposes of this Section 2.14, the term “applicable law” includes FATCA.
SECTION 2.15 Sharing of Payments, Etc. Subject to Section 2.19 in the case of a Defaulting Lender, if
any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff,
or otherwise) on account of the Advances owing to it (other than pursuant to Section 2.02(c), 2.07(c), 2.11,
2.12(a), 2.14 or 9.04(c)) in excess of its ratable share of payments on account of the Advances obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances owing
to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of
them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such
Lender’s ratable share (according to the proportion of (a) the amount of such Lender’s required repayment to
(b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.15 may, to the fullest extent permitted
by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of such participation. The provisions of
this Section 2.15 shall not be construed to apply to (A) any payment made by the Borrower pursuant to and in
accordance with the express terms of this Agreement (including the application of funds arising from a
Defaulting Lender) as in effect from time to time or (B) any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Advances to any assignee or participant permitted
hereunder.
SECTION 2.16 Use of Proceeds. The proceeds of the Advances shall be available, and the Borrower
agrees that it shall apply such proceeds, solely towards Certain Funds Purposes.
SECTION 2.17 Evidence of Debt. (a) The Register maintained by the Administrative Agent pursuant to
Section 9.07(d) shall include (i) the date and amount of each Borrowing made hereunder by the Borrower, the
Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the
terms of each Assignment and Acceptance delivered to and accepted by it, (iii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iv) the
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amount of any sum received by the Administrative Agent from the Borrower hereunder and each Lender’s share
thereof.
(b) Entries made reasonably and in good faith by the Administrative Agent in the Register pursuant to
subsection (a) above shall be prima facie evidence of the amount of principal and interest due and payable or to
become due and payable from the Borrower to each Lender under this Agreement, absent manifest error;
provided, however, that the failure of the Administrative Agent to make an entry, or any finding that an entry is
incorrect, in the Register or such account or accounts shall not limit, expand or otherwise affect the obligations of
the Borrower under this Agreement.
SECTION 2.18 [Reserved].
SECTION 2.19 Defaulting Lenders.
(a) Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a
Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender (it
being understood that the determination of whether a Lender is no longer a Defaulting Lender shall be made as
described in Section 2.19(b)):
(i)
such Defaulting Lender will not be entitled to any fees accruing during such period pursuant
to Section 2.04(a);
(ii) [reserved];
(iii) to the fullest extent permitted by applicable law, such Lender will not be entitled to vote in
respect of amendments and waivers hereunder, and the Commitment and the outstanding Advances of
such Lender hereunder will not be taken into account in determining whether the Required Lenders or
all of the Lenders, as required, have approved any such amendment or waiver (and the definition of
“Required Lenders” will automatically be deemed modified accordingly for the duration of such
period); provided that any such amendment or waiver that would increase or extend the term of the
Commitment of such Defaulting Lender, extend the date fixed for the payment of principal or interest
owing to such Defaulting Lender hereunder, reduce the principal amount of any obligation owing to
such Defaulting Lender, reduce the amount of or the rate or amount of interest on any amount owing to
such Defaulting Lender or of any fee payable to such Defaulting Lender hereunder, or alter the terms of
this proviso, will require the consent of such Defaulting Lender; and
(iv) the Borrower may, at its sole expense and effort, require such Defaulting Lender to assign and
delegate its interests, rights and obligations under this Agreement pursuant to Section 9.07.
(b) If the Borrower and the Administrative Agent agree in writing in their discretion that a Lender is no
longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the
effective date specified in such notice and subject to any conditions set forth therein, such Lender will cease to be
a Defaulting Lender and will be a Non-Defaulting Lender; provided that no adjustments will be made
retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender
was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the
affected parties, no change hereunder from Defaulting Lender to Non-Defaulting Lender will constitute a waiver
or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.
(c) Any payment of principal, interest, fees or other amounts received by the Administrative Agent
hereunder for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to
Section 6.01 or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to
Section 9.05 shall be applied at such time or times as follows: first, to the payment of any amounts owing by
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such Defaulting Lender to the Administrative Agent hereunder; second as the Borrower may request (so long as
no Default or Event of Default exists), to the funding of any Advance in respect of which such Defaulting Lender
has failed to fund its portion thereof as required by this Agreement, as reasonably determined by the
Administrative Agent; third, as the Borrower may request, to be held in a deposit account and released pro rata in
order to satisfy such Defaulting Lender’s potential future funding obligations with respect to Advances under this
Agreement; fourth, to the payment of any amounts owing to the Lenders as a result of any judgment of a court of
competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such Defaulting
Lender’s breach of its obligations under this Agreement; fifth, so long as no Default or Event of Default exists, to
the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent
jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s
breach of its obligations under this Agreement; and sixth, to such Defaulting Lender or as otherwise directed by a
court of competent jurisdiction. Any payments, prepayments or other amounts paid or payable to a Defaulting
Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or otherwise pursuant to this
Section 2.19(c) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably
consents hereto.
SECTION 2.20 Mitigation. (a) Each Lender shall promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge that will result in, and will use reasonable commercial efforts
available to it (and not, in such Lender’s good faith judgment, otherwise disadvantageous to such Lender) to
mitigate or avoid, (i) any obligation by the Borrower to pay any amount pursuant to Section 2.11 or 2.14 or
(ii) the occurrence of any circumstance described in Section 2.12 (and, if any Lender has given notice of any such
event described in clause (i) or (ii) above and thereafter such event ceases to exist, such Lender shall promptly so
notify the Borrower and the Administrative Agent). In furtherance of the foregoing, each Lender will designate a
different funding office if such designation will avoid (or reduce the cost to the Borrower of) any event described
in clause (i) or (ii) of the preceding sentence and such designation will not, in such Lender’s good faith judgment,
be otherwise disadvantageous to such Lender.
(b) Notwithstanding any other provision of this Agreement, if any Lender fails to notify the Borrower
of any event or circumstance which will entitle such Lender to compensation pursuant to Section 2.11 within 180
days after such Lender obtains knowledge of such event or circumstance, then such Lender shall not be entitled
to compensation from the Borrower for any amount arising prior to the date which is 180 days before the date on
which such Lender notifies the Borrower of such event or circumstance.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01 Conditions Precedent to Effective Date. This Agreement shall become effective on and
as of the first date on which the following conditions precedent have been satisfied (with the Administrative
Agent acting reasonably in assessing whether the conditions precedent are satisfactory) (or waived in accordance
with Section 9.01):
(a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a
counterpart of this Agreement and the other Loan Documents signed on behalf of such party or (ii) written
evidence reasonably satisfactory to the Administrative Agent (which may include .pdf or facsimile
transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this
Agreement.
(b) All fees and other amounts then due and payable by the Consolidated Group to the Administrative
Agent, the Arrangers and the Lenders under the Loan Documents or pursuant to any fee or similar letters
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relating to the Loan Documents shall be paid, to the extent invoiced by the relevant person at least one
Business Day prior to the Effective Date and to the extent such amounts are payable on or prior to the
Effective Date.
(c) The Administrative Agent shall have received on or before the Effective Date, each dated on or
about such date:
(i) Certified copies of the resolutions or similar authorizing documentation of the governing
bodies of the Borrower authorizing such Person to enter into and perform its obligations under the
Loan Documents to which it is a party;
(ii) Certified copies of the Borrower’s articles of incorporation, certificate of incorporation and
bylaws (or comparable organizational documents) and any amendments thereto;
(iii) A certificate of the Borrower attaching a certificate of commercial registry (rireki jikou zenbu
shomeisho) of the Borrower issued by a Legal Affairs Bureau and certifying that all information
required to be registered under the laws of Japan has been registered in the commercial registry;
(iv) A customary certificate of the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign this Agreement and the other documents to be delivered by
it hereunder; and
(v) A favorable opinion letter of each of (i) Linklaters LLP and (ii) Gaikokuho Kyodo-Jigyo
in each case in form and substance reasonably satisfactory to the
Horitsu Jimusho Linklaters,
Administrative Agent.
(d) The Administrative Agent shall have received satisfactory evidence of the Borrower’s Public Debt
Rating as of a reasonably recent date prior to the Effective Date.
(e) The Administrative Agent shall have received a copy, certified by the Borrower, of the Original
Scheme Press Release.
(f) The Administrative Agent shall have received, at least 3 Business Days prior to the Effective Date,
so long as requested no less than 10 Business Days prior to the Effective Date, all documentation and other
information required by regulatory authorities under applicable “know your customer” and anti-money
laundering rules and regulations, including the Criminal Proceeds Transfer Prevention Act of Japan (Law
No. 22 of 2007, as amended) and the Patriot Act, in each case relating to the Borrower and its Subsidiaries,
including the Borrower.
(g) The Administrative Agent shall have received a letter from the Service of Process Agent indicating
its consent to its appointment by the Borrower as its agent to receive service of process as specified in this
Agreement, and confirming that such appointment is in full force and effect and applies to this Agreement in
all respects.
(h) The Arrangers shall have received a copy of the Disclosure Letter, it being acknowledged that
neither the Administrative Agent nor any Lender shall have any approval right as regards the form or
contents of the Disclosure Letter.
The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date in writing
promptly upon such conditions precedent being satisfied (or waived in accordance with Section 9.01), and such
notice shall be conclusive and binding.
SECTION 3.02 Conditions Precedent to Closing Date. Subject to Section 3.04, the obligation of each
Lender to make an Advance on the Closing Date is subject to the satisfaction (or waiver in accordance with
Section 9.01) of the following conditions:
(a) The Effective Date shall have occurred.
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(b) If the Target Acquisition is effected by way of a Scheme, the Administrative Agent shall have
received:
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(i) a certificate of the Borrower signed by a director certifying:
(1) the date on which the Scheme Circular was posted to the shareholders of the Target;
(2) the date on which the Court has sanctioned the Scheme and that the Court Order has been
duly delivered to the Registrar in accordance with Article 125(3) of the Jersey Companies Law;
(3) confirmation as to the satisfaction of each condition set forth in clauses (d) and (e) below;
(4) the Target Acquisition shall have been, or, within the time period permitted by the City
Code, shall be, consummated in all material respects in accordance with the terms and conditions
of the Scheme Documents except to the extent not prohibited by the Loan Documents; and
(5) each copy of the documents specified in paragraph (ii) below is correct and complete and
has not been amended or superseded on or prior to the Closing Date, except to the extent such
changes thereto have been required pursuant to the City Code or required by the Panel or by a
court of competent jurisdiction or to the extent not prohibited by the Loan Documents; and
(ii) a copy of the Scheme Circular which is consistent in all material respects with the terms and
conditions in the Scheme Press Release and the Scheme Resolutions, in each case, except to the extent
changes thereto have been required pursuant to the City Code or required by the Panel or by a court of
competent jurisdiction or are not prohibited by the Loan Documents.
(c) If the Target Acquisition is effected by way of a Takeover Offer, the Administrative Agent shall
have received:
(i) a certificate of the Borrower signed by a director certifying:
(1) the date on which the Takeover Offer Document was posted to the shareholders of the
Target;
(2) confirmation as to the satisfaction of each condition set forth in clauses (d) and (e) below;
(3) each copy of the documents specified in paragraph (ii) below is correct and complete and
has not been amended or superseded on or prior to the Closing Date, except to the extent such
changes thereto have been required pursuant to the City Code or required by the Panel or are not
prohibited by the Loan Documents; and
(4) that the Takeover Offer has been declared unconditional in all respects without any
material amendment, modification or waiver of the conditions to the Takeover Offer or of the
Acceptance Condition except to the extent not prohibited by the Loan Documents; and
(ii) a copy of the Takeover Offer Document which is consistent in all material respects with the
terms and conditions in the Offer Press Announcement, except to the extent changes thereto have been
required pursuant to the City Code or required by the Panel or a court of competent jurisdiction or are
permitted under the Loan Documents.
(d) On the date of the applicable borrowing request and on the proposed date of such borrowing (x) no
Certain Funds Default is continuing or would result from the proposed Borrowing and (y) all the Certain
Funds Representations are true or, if a Certain Funds Representation does not include a materiality concept,
true in all material respects.
(e) All fees due and payable by the Borrower to the Arrangers, the Administrative Agent and the
Lenders pursuant to paragraphs 1(i) and (ii) of the Fee Letter shall be paid or satisfied from the proceeds of
the proposed Advance, to the extent invoiced at least one Business Day prior to the Closing Date by the
relevant person and to the extent such amounts are payable on or prior to the Closing Date.
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(f) The Administrative Agent shall have received a Notice of Borrowing in accordance with
Section 2.02.
(g) The Administrative Agent shall have received a pro forma consolidated balance sheet and related
pro forma consolidated statement of income of the Borrower and its Subsidiaries as of and for the twelve-
month period ending on the last day of the most recently completed four- fiscal quarter period ended at least
45 days prior to the Closing Date, prepared after giving effect to the Transactions as if the Transactions had
occurred as of such date (in the case of such balance sheet) or at the beginning of such period (in the case of
such statement of income)
it being acknowledged that neither the
Administrative Agent nor any Lender shall have any approval right as regards the form or contents of the
Pro Forma Financials).
(the “Pro Forma Financials”),
(h) It is not illegal for any Lender to lend and there is no injunction, restraining order or equivalent
prohibiting any Lender from lending its portion of the Advances or restricting the application of the
proceeds thereof; provided that such Lender has used commercially reasonable efforts to make the Loans
through an Affiliate of such Lender not subject
the
occurrence of such event in relation to one Lender shall not relieve any other Lender of its obligations to
make Advances hereunder.
to such legal restriction; provided further,
that
The Administrative Agent shall notify the Borrower and the Lenders of the Closing Date as soon as
practicable upon its occurrence, and such notice shall be conclusive and binding.
SECTION 3.03 Conditions to Advances after the Closing Date. The obligation of each Lender to make
an Advance on any date after the Closing Date and during the Availability Period is subject to the satisfaction (or
waiver in accordance with Section 9.01) of the following conditions:
(a) Each of the Effective Date and the Closing Date shall have occurred.
(b) The Administrative Agent shall have received a Notice of Borrowing in accordance with
Section 2.02.
(c) On the date of the applicable borrowing request and on the proposed date of such borrowing (i) no
Certain Funds Default is continuing or would result from the proposed Borrowing and (ii) all the Certain
Funds Representations are true or, if a Certain Funds Representation does not include a materiality concept,
true in all material respects.
(d) [Reserved].
(e) It is not illegal for any Lender to lend and there is no injunction, restraining order or equivalent
prohibiting any Lender from lending its portion of the Advances or restricting the application of the
proceeds thereof; provided that such Lender has used commercially reasonable efforts to make the Loans
through an Affiliate of such Lender not subject
the
occurrence of such event in relation to one Lender shall not relieve any other Lender of its obligations to
make Advances hereunder.
to such legal restriction; provided further,
that
SECTION 3.04 Actions by Lenders During the Certain Funds Period. During the Certain Funds Period
and notwithstanding (i) any provision to the contrary in the Loan Documents or (ii) that any condition set out in
Sections 3.01, 3.02 or 3.03 may subsequently be determined to not have been satisfied or any representation
given was incorrect in any material respect, none of the Lenders nor the Administrative Agent shall, unless a
Certain Funds Default has occurred and is continuing or would result from a proposed borrowing or a Certain
Funds Representation remains incorrect or, if a Certain Funds Representation does not include a materiality
concept, incorrect in any material respect, be entitled to:
(i)
cancel any of its Commitments;
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(ii)
rescind, terminate or cancel the Loan Documents or the Commitments or exercise any similar right or
remedy or make or enforce any claim under the Loan Documents it may have to the extent to do so
would prevent or limit (A) the making of an Advance for Certain Funds Purposes or (B) the application
of amounts standing to the credit of an Escrow Account for Certain Funds Purposes;
(iii) refuse to participate in the making of an Advance for Certain Funds Purposes unless the conditions set
forth in Section 3.02 or, after the Closing Date, 3.03, as applicable, have not been satisfied;
(iv) exercise any right of set-off or counterclaim in respect of an Advance to the extent to do so would
prevent or limit (A) the making of an Advance for Certain Funds Purposes or (B) the application of
amounts standing to the credit of an Escrow Account for Certain Funds Purposes; or
(v) cancel, accelerate or cause repayment or prepayment of any amounts owing under any Loan Document
to the extent to do so would prevent or limit (A) the making of an Advance for Certain Funds Purposes
or (B) the application of amounts standing to the credit of an Escrow Account for Certain Funds
Purposes;
provided that immediately upon the expiry of the Certain Funds Period all such rights, remedies and
entitlements shall be available to the Lenders and the Administrative Agent notwithstanding that they may not
have been used or been available for use during the Certain Funds Period.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Borrower. The Borrower represents and
warrants on the Effective Date and the date of the making of each Advance (it being understood the conditions to
the Effective Date are solely those set out in Section 3.01 and the conditions to each Advance are solely those set
out in Sections 3.02 and 3.03, as applicable) as follows:
(a) The Borrower is duly organized, validly existing and in good standing (to the extent that such
concept exists) under the laws of its jurisdiction of organization.
(b) The execution, delivery and performance by the Borrower of this Agreement and the other Loan
Documents to which it is a party, and the consummation of the transactions contemplated hereby and
thereby, (i) are within the Borrower’s organizational powers, (ii) have been duly authorized by all necessary
organizational action, (iii) do not contravene (A) the Borrower’s charter, articles of incorporation or by-laws
or other organizational documents or (B) any law, regulation or contractual restriction binding on or
affecting the Borrower and (iv) will not result in or require the creation or imposition of any Lien upon or
with respect to any of the properties of the Consolidated Group (other than Liens created or required to be
created pursuant to the terms hereof), except, in the case of clause (iii)(B) and (iv), as would not be
reasonably expected to have a Material Adverse Effect.
(c) No authorization or approval or other action by, and no notice to or filing with, any Governmental
Authority or regulatory body is required for the due execution, delivery and performance by the Borrower of
this Agreement and the consummation of the transactions contemplated hereby, other than (i) the Panel, as
directed by the Panel pursuant to the requirements of the City Code, anti-trust regulators, as directed by anti-
trust regulators, as contemplated by the Scheme Documents or (as the case may be) the Takeover Offer
Documents or as is obtained by the time required and (ii) the Bank of Japan with respect to post-facto filings
that may be required under the Foreign Exchange Act
in connection with the performance of this
Agreement.
(d) This Agreement and the other Loan Documents have been duly executed and delivered by the
Borrower. This Agreement and the other Loan Documents are legal, valid and binding obligations of the
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Borrower, enforceable against the Borrower in accordance with its terms, except as affected by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and
general principles of equity (whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
(e) The Borrower has heretofore furnished to the Lenders (i) its consolidated balance sheet at
March 31, 2017 and the related consolidated statements of operations, shareholders’ equity and cash flows
for the fiscal year ended March 31, 2017, in each case reported on by KPMG AZSA LLC, independent
public accountants and (ii) the consolidated balance sheet of the Target as December 31, 2017 and the
related consolidated statements of operations, shareholders’ equity and cash flows for the fiscal year ended
December 31, 2017. Such financial statements (to the Borrower’s knowledge with respect to the financial
statements of the Target) present fairly, in all material respects, the consolidated financial position and
results of operations and cash flows of the Borrower and the Target, as applicable, and their respective
consolidated Subsidiaries as of such dates and for such periods in accordance with IFRS and GAAP, as
applicable, except as may be indicated in the notes thereto and subject to year-end audit adjustments and the
absence of footnotes in the case of unaudited financial statements.
(f) There is no action, suit, investigation, litigation or proceeding (including, without limitation, any
Environmental Action), affecting the Consolidated Group pending or, to the knowledge of the Borrower,
threatened before any court, governmental agency or arbitrator that would reasonably be expected to be
adversely determined, and if so determined, (a) would reasonably be expected to have a material adverse
effect on the financial condition or results of operations of the Consolidated Group taken as a whole (other
than the litigation set forth in the Disclosure Letter) or (b) would adversely affect the legality, validity and
enforceability of any material provision of this Agreement in any material respect.
(g) Following application of the proceeds of each Advance, not more than 25 percent of the value of
the assets of the Borrower and of the Consolidated Group, on a Consolidated basis, subject to the provisions
of Section 5.02(a) will be Margin Stock. No part of the proceeds of any Advance have been used or will be
used for any purpose that entails a violation of any of the regulations of the Board, including Regulations T,
U and X of the Board.
(h) All written information (other than the Projections) concerning the Borrower, the Target and their
Subsidiaries and the transactions contemplated hereby or otherwise prepared by or on behalf of the
Borrower and its Subsidiaries and furnished to the Agents or the Lenders in connection with the negotiation
of, or pursuant to the terms of, this Agreement when taken as a whole (and with respect to information
regarding the Target Group, to the Borrower’s knowledge), was true and correct in all material respects as of
the date when furnished by such Person to the Agents or the Lenders and did not, taken as a whole, when so
furnished contain any untrue statement of a material fact as of any such date or omit to state a material fact
necessary in order to make the statements contained therein, taken as a whole, not misleading in light of the
circumstances under which such statements were made. The Projections and estimates and information of a
general economic nature prepared by or on behalf of the Borrower or its Subsidiaries and that have been
furnished by such Person to any Lenders or the Administrative Agent in connection with the transactions
contemplated hereby have been prepared in good faith based upon assumptions believed by such Person to
be reasonable as of the date of such Projections (it being understood that actual results may vary materially
from the Projections).
(i) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan which
would reasonably be expected to have a Material Adverse Effect.
(j) [reserved].
(k) Neither the Borrower nor any ERISA Affiliate (i) is reasonably expected to incur any Withdrawal
Liability to any Multiemployer Plan or has incurred any Withdrawal Liability that has not been satisfied in
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full or (ii) has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization (within the meaning of Section 4241 of ERISA) or has been determined to be in
“endangered” or “critical’ status (within the meaning of Section 432 of the Code or Section 305 of ERISA),
and no such Multiemployer Plan is reasonably expected to be in reorganization or in “endangered” or
“critical” status.
(l)
(i) The operations and properties of the Consolidated Group comply, and have complied for the
previous three years, in all respects with all applicable Environmental Laws and Environmental Permits
except to the extent that the failure to so comply, either individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect; (ii) all past non-compliance with such
Environmental Laws and Environmental Permits has been resolved without any ongoing obligations or costs
except to the extent that such non-compliance, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect; and (iii) to the Borrower’s knowledge, no circumstances exist
that would be reasonably expected to (A) form the basis of an Environmental Action against a member of
the Consolidated Group or any of its properties that, either individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect or (B) cause any such property to be subject to
any restrictions on ownership, occupancy, use or transferability under any Environmental Law that, either
individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
(m) (i) None of the properties currently or formerly owned or operated by a member of the
Consolidated Group is listed or formally proposed for listing on the NPL or on the CERCLIS or any
analogous foreign, state or local list; (ii) to the Borrower’s knowledge, there are no, and never have been
any, underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or
lagoons in which Hazardous Materials are being or have been treated, stored or disposed of on any property
currently owned or operated by any member of the Consolidated Group or, to the Borrower’s knowledge, on
any property formerly owned or operated by a member of the Consolidated Group that, either individually
or in the aggregate, would reasonably be expected to have a Material Adverse Effect; (iii) to the Borrower’s
knowledge, there is no asbestos or asbestos-containing material on any property currently owned or operated
by a member of the Consolidated Group the mitigation of which, either individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect; and (iv) to the Borrower’s knowledge, no
Hazardous Materials have been released, discharged or disposed of on any property currently or formerly
owned, leased or operated by a member of the Consolidated Group for which a member of the Consolidated
Group could be expected to be made liable to remediate under Environmental Law except in each case as
would not have a Material Adverse Effect.
(n) No member of the Consolidated Group is undertaking either individually or together with other
potentially responsible parties, any investigation or assessment or remedial or response action relating to
any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or
operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the
requirements of any Environmental Law that, either individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect; and, to the Borrower’s knowledge, all Hazardous Materials
generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly
owned or operated by a member of the Consolidated Group, or any offsite locations to which a member of
the Consolidated Group sent Hazardous Materials for treatment or disposal, have been disposed of in a
manner that, either individually or in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect.
(o) The Borrower is not an “investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940, as amended.
(p) The Advances and all related obligations of the Borrower under this Agreement rank pari passu
with all other unsecured obligations of the Borrower that are not, by their terms, expressly subordinate to the
obligations of the Borrower hereunder.
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(q) The proceeds of the Advances will be used in accordance with Section 2.16.
(r) The Borrower has implemented and maintains in effect policies and procedures reasonably designed
to promote compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees
and agents with Anti-Corruption Laws and applicable Sanctions, and the Borrower, its Subsidiaries and their
respective officers and directors and to the knowledge of the Borrower its employees and agents, are in
compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (i) the
Borrower, any Subsidiary, any of their respective directors or officers or to the knowledge of the Borrower
or such Subsidiary employees, or (ii) to the knowledge of the Borrower, any agent of the Borrower or any
agent of any Subsidiary that will act in any capacity in connection with or benefit from the credit facility
established hereby, is a Sanctioned Person.
(s) No Borrowing or use of proceeds thereof or the Transactions will violate any applicable Anti-
Corruption Law or applicable Sanctions.
(t) The Borrower has delivered to the Administrative Agent a complete and correct copy of the Scheme
Documents (if and when issued) or, as the case may be, the Offer Documents (if and when issued),
including all schedules and exhibits thereto. The release of the Offer Press Announcement and the posting of
the Takeover Offer Documents if a Takeover Offer is pursued has been or will be, prior to their release or
posting (as the case may be) duly authorized by the Borrower. Each of the material obligations of the
Borrower under the Takeover Offer Documents is or will be, when entered into and delivered, the legal,
valid and binding obligation of the Borrower, enforceable against such Persons in accordance with its terms
in each case, except as may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws
affecting the rights and remedies of creditors generally and (ii) general principles of equity.
(u) The Scheme Press Release and the Scheme Circular (in each case if and when issued) when taken
as a whole: (i) except for the information that relates to the Target or the Target Group, do not (or will not if
and when issued) contain (to the best of its knowledge and belief (having taken all reasonable care to ensure
that such is the case)) any statements which are not in accordance with the material facts, or where
appropriate, do not omit anything likely to affect the import of such information and (ii) contain all the
material terms of the Scheme.
(v) If the Target Acquisition is effected by way of a Scheme, each of the Scheme Documents complies
in all material respects with the Jersey Companies Law and the City Code, subject to any applicable waivers
by or requirements of the Panel.
(w) The Borrower is not an EEA Financial Institution.
SECTION 4.02 Representations and Warranties of the Lenders and the Borrower. Each of the
Borrower and each Lender represents and warrants on the Effective Date and the date of the making of each
Advance (it being understood the conditions to the Effective Date are solely those set out in Section 3.01 and the
conditions to each Advance are solely those set out in Sections 3.02 and 3.03, as applicable) that it is not
classified, does not belong to nor is it associated with an Anti-Social Group, does not have an Anti-Social
Relationship and has not engaged in Anti-Social Conduct, whether directly or indirectly through a third party.
ARTICLE V
COVENANTS
SECTION 5.01 Affirmative Covenants. So long as any Advance shall remain unpaid or any Lender
shall have any Commitment hereunder, the Borrower will:
(a) Compliance with Laws, Etc. (i) Comply, and cause each member of the Consolidated Group to
comply, with all applicable laws, rules, regulations and orders (such compliance to include, without
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limitation, compliance with ERISA and Environmental Laws), except to the extent that the failure to so
comply, either individually or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect, and (ii) maintain in effect and enforce policies and procedures reasonably designed to
promote compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and
agents with Anti-Corruption Laws and applicable Sanctions.
(b) Payment of Taxes, Etc. Pay and discharge, or cause to be paid and discharged, before the same shall
become delinquent, all taxes, assessments and governmental charges levied or imposed upon a member of
the Consolidated Group or upon the income, profits or property of a member of the Consolidated Group, in
each case except to the extent that (i) the amount, applicability or validity thereof is being contested in good
faith and by proper proceedings and with respect to which reserves in conformity with applicable accounting
standards have been provided or (ii) the failure to pay such taxes, assessments and charges, either
individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
(c) Maintenance of Insurance. Except where the failure to do so would reasonably be expected to result
in a Material Adverse Effect, maintain, and cause each member of the Consolidated Group to maintain,
insurance with responsible and reputable insurance companies or associations (or pursuant to self-insurance
arrangements) in such amounts (after giving effect to any self-insurance which the Borrower believes (in the
good faith judgement of management of the Borrower) is reasonable and prudent in light of the size and
nature of its business) and covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which any member of the
Consolidated Group operates.
(d) Preservation of Existence, Etc. Do, or cause to be done, all things necessary to preserve and keep in
full force and effect its (i) existence and (ii) rights (charter and statutory) and franchises; provided, however,
that the Borrower may consummate any merger or consolidation permitted under Section 5.02(b); and
provided further that the Borrower shall not be required to preserve any such right or franchise if the
management of the Borrower shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Borrower and that the loss thereof is not disadvantageous in any material
respect to the Lenders.
(e) Visitation Rights. At any reasonable time and from time to time during normal business hours (but
not more than once annually if no Event of Default has occurred and is continuing), upon no less than ten
(10) days’ prior notice to the Borrower, permit the Administrative Agent or any of the Lenders, or any
agents or representatives thereof coordinated through the Administrative Agent, to examine and make
copies of and abstracts from the records and books of account, and visit the properties, of the Consolidated
Group, and to discuss the affairs, finances and accounts of the Consolidated Group with any of the members
of the senior treasury staff of the Borrower.
(f) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and
account, in which full and correct entries shall be made of all financial transactions and the assets and
business of the Consolidated Group sufficient
the preparation of financial statements in
accordance with IFRS.
to permit
(g) Maintenance of Properties, Etc. Cause all of its properties that are used or useful in the conduct of
its business or the business of any member of the Consolidated Group to be maintained and kept in good
condition, repair and working order (ordinary wear and tear excepted) and supplied with all necessary
replacements, betterments and
equipment, and cause to be made all necessary repairs,
improvements thereof, all as in the judgment of the Borrower may be necessary so that the business carried
on in connection therewith may be properly and advantageously conducted at all times, except, in each case,
where the failure to do so would not reasonably be expected to result in a Material Adverse Effect.
renewals,
(h) [Reserved].
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(i) Reporting Requirements. Furnish to the Administrative Agent for further distribution to the Lenders:
(i)
as soon as available and in any event within 60 days after the end of each of the first three
quarters of each fiscal year of the Borrower, a Consolidated balance sheet of the Consolidated Group as
of the end of such quarter and Consolidated statements of income and cash flows of the Consolidated
Group for the period commencing at the end of the previous fiscal year and ending with the end of such
quarter, duly certified by the Chief Financial Officer or the Treasurer of the Borrower as having been
prepared in accordance with IFRS (subject to the absence of footnotes and year end audit adjustments);
(ii)
as soon as available and in any event within 120 days after the end of each fiscal year of the
Borrower, a copy of the annual audit report for such year for the Consolidated Group, containing a
Consolidated balance sheet of the Consolidated Group as of the end of such fiscal year and
Consolidated statements of income and cash flows of the Consolidated Group for such fiscal year, in
each case accompanied by an unqualified opinion or an opinion reasonably acceptable to the Required
Lenders by KPMG AZSA LLC or other independent public accountants of recognized national
standing;
(iii)
simultaneously with each delivery of the financial statements referred to in subclauses (i)(i)
and (i)(ii) of this Section 5.01, a certificate of the Chief Executive Officer, Chief Financial Officer or
the Treasurer of the Borrower in substantially the form of Exhibit C hereto certifying that no Default or
Event of Default has occurred and is continuing (or if such event has occurred and is continuing the
actions being taken by the Borrower to cure such Default or Event of Default), including, if such
covenant
the calculations necessary to
demonstrate compliance with Section 5.03;
is tested at such time, setting forth in reasonable detail
(iv) as soon as possible and in any event within five days after any Responsible Officer of the
Borrower shall have obtained knowledge of the occurrence of each Default continuing on the date of
such statement, a statement of a Responsible Officer of the Borrower setting forth details of such
Default and the action that the Borrower has taken and proposes to take with respect thereto;
(v)
promptly after the sending or filing thereof, copies of all reports that the Borrower sends to
any of its securityholders, in their capacity as such, and copies of all reports and registration statements
that members of the Consolidated Group file with the Prime Minister of Japan through the Financial
Services Agency of Japan,
the Securities and Exchange Commission or any national securities
exchange;
(vi) promptly after a Responsible Officer of
the
commencement thereof, notice of all actions, suits, investigations, litigations and proceedings before
any court, governmental agency or arbitrator affecting the Consolidated Group of the type described in
Section 4.01(f)(b) subject, in each case, to any confidentiality, legal or regulatory restrictions relating
to the supply of such information; and
the Borrower obtains knowledge of
(vii) such other information respecting the Consolidated Group as any Lender through the
Administrative Agent may from time to time reasonably request.
The Borrower shall be deemed to have delivered the financial statements and other information
referred to in paragraphs (i), (ii) and (v) above when such financial statements and other information
have been posted on the Borrower’s internet website or the website of the Financial Services Agency of
Japan, the Securities and Exchange Commission or any national securities exchange (in each case, to
the extent such website is accessible by the Lenders without charge) and the Borrower has notified the
Administrative Agent by electronic mail of such posting. If the Administrative Agent requests hard
copies of such financial statements and other information, the Borrower shall furnish these to the
Administrative Agent provided that no request shall affect that delivery has deemed to occur in
accordance with the immediately preceding sentence.
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(j) The Scheme and Related Matters. To the extent applicable, the Borrower shall or it shall procure
that the applicable members of the Consolidated Group shall:
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(i)
[reserved].
(ii)
Provide evidence that a Scheme Circular is issued and dispatched as soon as is reasonably
practicable and in any event within 28 days (or such longer period as may be agreed with the Panel)
after the issuance of the Original Scheme Press Release unless, during that period the Borrower has
elected to convert the Target Acquisition from a Scheme to a Takeover Offer, in which case the
Takeover Offer Document shall be issued and dispatched as soon as reasonably practicable and in any
event within 28 days (or such longer period as may be agreed with the Panel) after the issuance of the
Offer Press Announcement.
(iii) Comply in all material respects with the City Code (subject to any waivers or dispensations
granted by the Panel or the Court) and all other applicable laws and regulations in relation to any
Takeover Offer or Scheme.
(iv) Except as consented to by the Arrangers in writing (such consent not to be unreasonably
withheld, delayed or conditioned) and save to the extent that following the issue of a Scheme Press
Release or an Offer Press Announcement the Borrower elects to proceed with the Target Acquisition
by way of Takeover Offer or Scheme respectively, ensure that (i) if the Target Acquisition is effected
by way of a Scheme, the Scheme Circular corresponds in all material respects to the terms and
conditions of the Scheme as contained in the Scheme Press Release to which it relates or (ii) if the
Target Acquisition is effected by way of a Takeover Offer, the Takeover Offer Document corresponds
in all material respects to the terms and conditions of the Takeover Offer as contained in the
corresponding Offer Press Announcement, subject to any variation required by the Court and to any
variations required by the Panel or which are not materially adverse to the interests of the Lenders (or
where the prior written consent of the Arrangers has been given).
(v) Ensure that the Scheme Documents or, if the Target Acquisition is effected by way of a
Takeover Offer, the Offer Documents, provided to the Arrangers contain all the material terms and
conditions of the Scheme or Takeover Offer, as at that date, as applicable.
(vi) Not make or approve any increase in the proposed amount of cash consideration payable per
Target Share or make any other acquisition of any Target Share (including pursuant to a Takeover
Offer) at a price that results in an increase in the cash consideration payable per Target Share stated in
the Original Scheme Press Release, unless such modification in price is not materially adverse to the
interests of the Lenders (or where the prior written consent of the Arrangers has been given).
(vii) Except as consented to by the Arrangers in writing in the event that the matter is material to
the interests of the Lenders (such consent not to be unreasonably withheld, delayed, or conditioned),
not (i) amend or waive any term of the Scheme Documents or the Takeover Offer Documents, as
applicable, in a manner materially adverse to the interests of the Lenders from those in the Original
Scheme Press Release, or (ii) if the Target Acquisition is proceeding as a Takeover Offer, amend or
waive the Acceptance Condition, save for, (A) in the case of clause (i), any amendment or waiver
required by the Panel, the City Code, a court or any other applicable law, regulation or regulatory body,
(B) in the case of clause (ii), a waiver of the Acceptance Condition to permit the Takeover Offer to
become unconditional with acceptance of Target Shares (excluding any shares held in treasury) which,
when aggregated with all Target Shares owned by the Borrower (directly or indirectly), represent not
less than 75% of all Target Shares (excluding any shares held in treasury) as at the date on which the
Takeover Offer is declared unconditional as to acceptances, (C) in the case of clause (i) and any
condition detailed in the Original Scheme Press Release, any waiver of a condition, which such
condition would not have entitled the Borrower to lapse the Scheme or Takeover Offer (as the case
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may be) under rule 13.5(a) of the Takeover Code or (D) an extension of the Long Stop Date (as defined
in the Original Scheme Press Release) in the event that any condition in paragraphs 4(c) to (j) in Part A
of Appendix 1 to the Original Scheme Press Release (or the equivalent provision in any Offer Press
Announcement) has not been satisfied by the date falling 12 months after the Bridge Facility Effective
Date.
(viii) Not take any action which would require the Borrower to make a mandatory offer for the
Target Shares in accordance with Rule 9 of the City Code.
(ix) Provide the Administrative Agent with copies of each Offer Document or Scheme
Document (as applicable) and such information as it may reasonably request regarding, in the case of a
Takeover Offer, the current level of acceptances subject to any confidentiality, legal, regulatory or
other restrictions relating to the supply of such information.
(x)
Promptly deliver to the Administrative Agent the receiving agent certificate issued under
Rule 10 of the City Code (if the Target Acquisition is being pursued pursuant to a Takeover Offer), any
written agreement between the Borrower or its Affiliates and Target to the extent material to the
interests of the Lenders (as reasonably determined by the Borrower) in relation to the consummation of
the Target Acquisition (in each case, upon such documents or agreements being entered into by a
member of the Consolidated Group), and all other material announcements and documents published
by the Borrower or delivered by the Borrower to the Panel pursuant to the Takeover Offer or Scheme
(other than the cash confirmation) and all legally binding agreements entered into by the Borrower in
connection with a Takeover Offer or Scheme, in each case to the extent the Borrower, acting
reasonably, anticipates they will be material to the interests of the Lenders in connection with the
Transactions, except to the extent it is prohibited by legal (including contractual) or regulatory
obligations from doing so.
(xi)
In the event that a Scheme is switched to a Takeover Offer or vice versa, (which the
Borrower shall be entitled to do on multiple occasions provided that it complies with the terms of this
Agreement), (i) within the applicable time periods provided in the definition of “Mandatory
Cancellation Event”, procure that an Offer Press Announcement or Scheme Press Release, as the case
may be, is issued, and (ii) except as consented to by the Arrangers in writing where such matters are
material to the interests of the Lenders (such consent not to be unreasonably withheld, delayed or
conditioned), ensure that (A) where the Target Acquisition is then proceeding by way of a Takeover
Offer, the terms and conditions contained in the Offer Document include the Acceptance Condition and
(B) except for any reference in the Scheme Documents to the recommendation of the Target
Acquisition and the Scheme to the Scheme Shareholders by the board of directors of the Target, the
conditions to be satisfied in connection with the Target Acquisition and contained in the Offer
Documents or the Scheme Documents (whichever is applicable) are otherwise consistent in all material
respects with those contained in the Offer Documents or Scheme Documents (whichever applied to the
immediately preceding manner in which it was proposed that the Target Acquisition would be effected)
(to the extent applicable for the legal form of a Takeover Offer or Scheme, as the case may be), in each
case other than (i) in the case of clause (B), any changes permitted or required by the Panel or the City
Code or any court of competent jurisdiction or are required to reflect the change in legal form to a
Takeover Offer or Scheme or (ii) changes that could have been made to the Scheme or a Takeover
Offer in accordance with the relevant provisions of this Agreement or which reflect the requirements of
the terms of this Agreement and the manner in which the Target Acquisition may be effected,
including, without limitation, changes to the price per Target Share which are made in accordance with
the relevant provisions of this Agreement or any other agreement between the Borrower and the
Arrangers.
(xii) In the case of a Takeover Offer, (i) not declare the Takeover Offer unconditional as to
acceptances until the Acceptance Condition has been satisfied and (ii) promptly upon the Borrower
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acquiring Target Shares which represent not less than 90% in nominal value of the Target Shares to
which the Takeover Offer relates or, if the Takeover Offer relates to Target Shares of different classes,
not less than 90% in nominal value of the shares of any class to which the Takeover Offer relates,
ensure that notices under Article 117 of the Jersey Companies Law in respect of Target Shares that the
Borrower has not yet agreed to directly or indirectly acquire are issued.
(xiii) In the case of a Scheme, within 90 days of the Scheme Effective Date, and in relation to a
Takeover Offer, within 90 days after the later of (i) the Closing Date and (ii) the date upon which the
Borrower (directly or indirectly) owns and/or has agreed to own or acquire and has received valid
acceptances (which have not been withdrawn or cancelled) of Target Shares (excluding any shares held
in treasury) in respect of, which, when aggregated with all other Target Shares owned by the Borrower
(directly or indirectly), represent not less than 75% of all Target Shares (excluding any shares held in
treasury), procure that such action as is necessary is taken to de-list the Target Shares from the Official
List of the Financial Conduct Authority and to cancel trading in the Target Shares on the main market
for listed securities of the London stock exchange and as soon as reasonably practicable thereafter, and
subject always to the Jersey Companies Law and any applicable listing rules, use its reasonable
endeavors to re-register Target as a private limited company.
(xiv) Except as consented by the Arrangers in writing, not give its consent with respect to any
frustrating action of the Target pursuant to Rule 21.1(c)(ii) of the City Code.
(k) Use of Proceeds. The proceeds of the Advances will be used in accordance with the provisions of
Section 2.16. No part of the proceeds of any Advance will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. The
Borrower will not request any Borrowing, and the Borrower shall not use, and the Borrower shall procure
that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the
proceeds of any Borrowing (i) for payments to any Person in violation of any Anti-Corruption Laws, (ii) for
the purpose of funding, financing or facilitating any activities, business or transaction of or with any
Sanctioned Person, or in any Sanctioned Country, to the extent such activities, businesses or transaction
would be prohibited by Sanctions if conducted by a corporation incorporated in the United States, Japan, the
United Kingdom or in a European Union member state or (iii) in any other manner that would result in the
violation of any Sanctions applicable to any party hereto.
(l) Anti-Social Conduct; Anti-Social Groups. Each party hereto shall ensure that (i) it is not classified
as an Anti-Social Group, nor shall any such party have any Anti-Social Relationship nor engage in any Anti-
Social Conduct, whether directly or indirectly through a third party and (ii) it shall not make any claim
against any other party hereto for any damages or losses suffered or incurred as a result of such other party
this clause (l) or any
exercising its rights under
misrepresentation in connection with Section 4.02.
this Agreement as a result of any breach of
The Borrower hereby acknowledges that the Administrative Agent and/or the Arrangers will make available to
the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively,
“Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar secure electronic
system (the “Platform”).
Certain of the Lenders (each, a “Public Lender”) may have personnel who do not wish to receive material non-
public information with respect to the Borrower or its respective Affiliates, or the respective securities of any of
the foregoing, and who may be engaged in investment and other market-related activities with respect to such
Persons’ securities. The Borrower hereby agrees that (w) all Borrower Materials that are to be made available to
Public Lenders shall be clearly and conspicuously marked “PUBLIC”; (x) by marking Borrower Materials
“PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent and the Lenders to treat
the Borrower Materials as not containing any material non-public information with respect to the Borrower or its
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securities for purposes of the FIEA or United States Federal and state securities laws (provided, however, that to
the extent the Borrower Materials constitute Information, they shall be treated as set forth in Section 9.08); (y) all
Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform
designed “Public Side Information”; and (z) the Administrative Agent and the Arrangers shall be entitled to treat
any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the
Platform not designated “Public Side Information.” Notwithstanding the foregoing, the Borrower shall be under
no obligation to mark any Borrower Materials “PUBLIC.”
For purposes of the foregoing paragraph, with respect to the Borrower or its affiliates or securities, the term
“material non-public information” shall include, without limitation (i) “material facts” (juyo jijitsu) as prescribed
in Paragraph 2, Article 166 (Prohibited Acts of Corporate Insiders) of the FIEA and/or (iii) “issuer related
information” (hojin kankei jyouho) as defined in Item 14, Paragraph 4, Article 1 of the Cabinet Office Ordinance
on Financial Instruments Business, etc. (Cabinet Office Ordinance No. 52 of August 6, 2007), meaning any
information relating to the operation, business or asset of the Borrower which is material non-public information
and, if it were made public, would likely to have an effect on the investment decision of the investors and any
non-public information in relation to a launch or a cancellation of a TOB of shares of common stock of the
Borrower.
SECTION 5.02 Negative Covenants. So long as any Advance shall remain unpaid or any Lender shall
have any Commitment hereunder, the Borrower will not:
(a) Liens, Etc. Incur, issue, assume or guarantee, or permit any member of the Consolidated Group to
incur, issue, assume or guaranty, at any time, any Borrowed Debt secured by a Lien on any property or asset
now owned or hereafter acquired by the Borrower or any member of the Consolidated Group (other than
Unrestricted Margin Stock), without effectively providing that the Advances outstanding at such time
(together with, if the Borrower shall so determine, any other Borrowed Debt of the Borrower or such
member of the Consolidated Group existing at such time or thereafter created that is not subordinate to the
Advances) shall be secured equally and ratably with (or prior to) such secured Borrowed Debt, so long as
such secured Borrowed Debt shall be so secured, unless, after giving effect thereto, the aggregate amount of
all such secured Borrowed Debt would not exceed $2,500,000,000; provided, however,
this
Section 5.02(a) shall not apply to, and there shall be excluded from secured Borrowed Debt in any
computation under this Section 5.02(a), Borrowed Debt secured by:
that
(i)
Liens on property of, or on any shares of stock or Borrowed Debt of, any Person existing at
the time such Person becomes a member of the Consolidated Group;
(ii) Liens in favor of any member of the Consolidated Group;
(iii) Liens incurred in the ordinary course of business to secure the performance of tenders,
statutory or regulatory obligations, surety, stay, customs and appeal bonds, statutory bonds, bids,
leases, government contracts, trade contracts, performance and return of money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) Liens on property of a member of the Consolidated Group in favor of the United States or
any State thereof, or any department, agency or instrumentality or political subdivision of the United
States or any State thereof, or in favor of any other country, or any political subdivision thereof, to
secure partial, progress, advance or other payments pursuant to any contract or statute;
(v) Liens on property (including that of the Target and its Subsidiaries), shares of stock or
Borrowed Debt existing at the time of acquisition thereof (including acquisition through merger or
consolidation) or to secure the payment of all or any part of the purchase price or construction or
improvement cost thereof or to secure any Debt incurred prior to, at the time of, or within 180 days
after, the acquisition of such property or shares or Borrowed Debt or the completion of any such
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construction or improvement for the purpose of financing all or any part of the purchase price or
construction or improvement cost thereof;
(vi) Liens existing on the Effective Date;
(vii) (x) bankers’ Liens, rights of setoff, revocation, refund, chargeback or overdraft protection,
and other similar Liens existing solely with respect to cash and cash equivalents on deposit in one or
more accounts maintained by the Borrower or any member of the Consolidated Group, in each case
granted in the ordinary course of business in favor of the bank or banks with which such accounts are
maintained, securing amounts owing to such bank with respect to cash management and operating
account arrangements,
including those involving pooled accounts and netting arrangements and
(y) Liens or rights of setoff against credit balances of the Borrower or any member of the Consolidated
Group with credit card issuers or credit card processors or amounts owing by payment card issuers or
payment card processors to Borrower or any member of the Consolidated Group in the ordinary course
of business;
(viii) Liens arising from any monetization, securitization or other financing of accounts receivable
or other receivables (including any related rights or claims) or in connection with factoring programs
entered into in the ordinary course of business and consistent with past practice and on a non-recourse
basis to the Borrower and its Subsidiaries; provided, that such Liens do not encumber any property or
assets other than the accounts receivable or other receivables (including any related rights or claims)
subject to such monetization, securitization, financing or factoring arrangement and any proceeds of
the foregoing; provided, further, that the aggregate principal amount of the obligations secured by such
Liens shall not exceed (x) prior to the Closing Date, $750,000,000 or (y) on or after the Closing Date,
$1,500,000,000.
(ix) Liens incurred in connection with pollution control, industrial revenue or similar financing;
(x)
survey exceptions and such matters as an accurate survey would disclose, easements,
trackage rights, leases, licenses, special assessments, rights of way covenants, conditions, restrictions
and declarations on or with respect to the use of real property, servicing agreements, development
agreements, site plan agreements and other similar encumbrances incurred in the ordinary course of
business and title defects or irregularities that are of a minor nature and that, in the aggregate, do not
interfere in any material respect with the ordinary conduct of the business of the Borrower or any
member of the Consolidated Group; and
(xi) any extension, renewal or replacement (or successive extensions, renewals or replacements),
as a whole or in part, of any Borrowed Debt secured by any Lien referred to in subclauses (i) through
(x) of this Section 5.02(a); provided, that (i) such extension renewal or replacement Lien shall be
limited to all or a part of the same property, shares of stock or Debt that secured the Lien extended,
renewed or replaced (plus improvements on such property) and (ii) the Borrowed Debt secured by such
Lien at such time is not increased.
(b) Mergers, Etc. Merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or substantially all of its assets (other than
Unrestricted Margin Stock) (whether now owned or hereafter acquired) to, any Person, or permit any
member of the Consolidated Group to do so, except that:
(i)
any member of (x) the Consolidated Group other than the Borrower may merge or
consolidate with or into or (y) the Consolidated Group may dispose of assets to, in each case, any other
member of the Consolidated Group;
(ii)
the Borrower may merge with any other Person so long as (A) the Borrower is the surviving
entity or (B) the surviving entity shall succeed, by agreement reasonably satisfactory in form and
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substance to the Required Lenders, to all of the businesses and operations of the Borrower and shall
assume all of the rights and obligations of the Borrower under this Agreement and the other Loan
the consummation of the
Documents (it being understood that notwithstanding the foregoing,
Transactions shall not be prohibited by this Section 5.02(b) or otherwise pursuant hereto);
(iii) any member of the Consolidated Group (other than the Borrower) may merge or consolidate
with or into another Person, convey, transfer, lease or otherwise dispose of all or any portion of its
assets so long as (A) the consideration received in respect of such merger, consolidation, conveyance,
transfer, lease or other disposition is at least equal to the fair market value of such assets and (B) no
Material Adverse Effect would reasonably be expected to result from such merger, consolidation,
conveyance, transfer, lease or other disposition;
provided, in the cases of clause (i), (ii) and (iii) hereof, that no Default or Event of Default (or, during the
Certain Funds Period, no Certain Funds Default) shall have occurred and be continuing at the time of such
proposed transaction or would result therefrom.
(c) Accounting Changes. Change the Borrower’s fiscal year-end from March 31 of each calendar year;
provided that the Borrower may change its fiscal year-end to December 31 of each calendar year in
connection with the Transactions.
(d) Change in Nature of Business. Make any material change in the nature of the business of the
Consolidated Group, taken as a whole, from that carried out by the Borrower and its Subsidiaries (other than
the Target and its Subsidiaries) on the Effective Date and by Target and its Subsidiaries on the Closing
Date; it being understood that this Section 5.02(d) shall not prohibit (i) the Transactions or (ii) members of
the Consolidated Group from conducting any business or business activities incidental or related to such
business as carried on as of the Effective Date (in the case of the Borrower and its Subsidiaries other than
the Target and its Subsidiaries) or as of the Closing Date (in the case of the Target and its Subsidiaries) or
any business or activity that is reasonably similar or complementary thereto or a reasonable extension,
development or expansion thereof or ancillary thereto.
(e) Subsidiary Debt. Permit any of its Subsidiaries to create or suffer to exist any Borrowed Debt other
than:
(i)
Borrowed Debt existing on the Effective Date and disclosed to the Lenders prior to the date
hereof (the “Existing Debt”);
(ii) Borrowed Debt of any Person (including the Target or any of its Subsidiaries) that becomes
a Subsidiary after the date hereof; provided that such Borrowed Debt exists at the time such Person
becomes a Subsidiary of the Borrower and is not created in contemplation of or in connection with
such Person becoming a Subsidiary of the Borrower;
(iii) Borrowed Debt of any Subsidiary owed to any member of the Consolidated Group;
(iv) Borrowed Debt secured by Liens of the type described in and to the extent permitted by
Sections 5.02(a)(iii), (iv), (v), (ix) and (xi) (to the extent it applies to Borrowed Debt secured by Liens
referred to in Sections 5.02(a)(iii), (iv), (v) or (ix));
(v) Borrowed Debt under ordinary course working capital or overdraft facilities;
(vi) Borrowed Debt consisting of commercial paper;
(vii) Borrowed Debt consisting of purchase money indebtedness; and
(viii) Borrowed Debt in an aggregate outstanding principal amount at any time not exceeding the
greater of (x) $2,500,000,000 and (y) 15% of Consolidated Tangible Assets (determined by reference
to the financial statements most recently delivered pursuant to Section 5.01(i) (or prior to the first such
delivery, the financial statements referred to in Section 4.01(e)));
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For purposes of calculating the aggregate principal amount of the Consolidated Tangible Assets of the
Borrower on any date, the currency exchange rate used for such calculation shall be the rate used in the annual or
semi-annual financial statements for such date; provided, however, that if the Borrower determines that an
average exchange rate is a more accurate reflection of the value of such currency over such four consecutive
fiscal quarter period, the currency exchange rate used may be, at the option of the Borrower, the currency
exchange rate used for the statement of income of the Borrower for such fiscal half year.
SECTION 5.03 Financial Covenant. Consolidated Net Debt to Consolidated EBITDA. Beginning on
the later of (i) the last day of the first fiscal half year ending at least one full fiscal quarter after the Closing Date
(which, for the avoidance of doubt, shall be no later than March 31, 2020) and (ii)(A) if the fiscal year-end is
December 31, June 30, 2019 or (B) if the fiscal year-end is March 31, September 30, 2019 and on the last day of
each fiscal half year ending thereafter, the Borrower will not permit, as of the last day of any such fiscal half year
(each such date, the “Testing Date”), the ratio of (x) Consolidated Net Debt at such time to (y) Consolidated
EBITDA of the Borrower for the four consecutive fiscal quarter period ending as of such date to exceed the ratio
level set forth in the applicable table below for such applicable Testing Date:
Testing Date (if fiscal year-end is March 31)
September 30, 2019 (if the Closing Date occurs on or prior to
June 30, 2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 2020 and September 30, 2020 . . . . . . . . . . . . . . . . . . . . .
March 31, 2021 and September 30, 2021 . . . . . . . . . . . . . . . . . . . . .
March 31, 2022 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Testing Date (if fiscal year-end is December 31)
June 30, 2019 (if the Closing Date occurs on or prior to March 31,
2019) and December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2020 and December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2021 and December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2022 and thereafter
Ratio Level
5.95 to 1.00
5.35 to 1.00
4.30 to 1.00
4.00 to 1.00
Ratio Level
5.95 to 1.00
5.35 to 1.00
4.30 to 1.00
4.00 to 1.00
If a Testing Date would have occurred in the fiscal quarter in which the Borrower changed its fiscal
year-end to December 31 (the “Fiscal Year Change”) but does not because of such Fiscal Year Change, the last
day of such fiscal quarter shall be a Testing Date notwithstanding the Fiscal Year Change.
Notwithstanding the foregoing, in the event that the Borrower incurs indebtedness in an amount no less
than $5,000,000,000 in connection with an Acquisition and the Borrower’s Public Debt Rating is equal to or
higher than each of (x) Baa3 from Moody’s and (y) BBB- from S&P, then the Borrower shall be permitted on
one (1) occasion during the term of this Agreement to allow the maximum ratio of Consolidated Net Debt to
Consolidated EBITDA permitted pursuant this Section 5.03 to be increased to 5.00 to 1.00 (if the then applicable
required ratio level is lower than 5.00 to 1.00); provided that on the second Testing Date after the Testing Date
the maximum ratio permitted under this
on which such maximum ratio was increased to 5.00 to 1.00,
Section 5.03 shall be 4.50 to 1.00 and on the fourth Testing Date after the Testing Date on which such maximum
ratio was increased to 5.00 to 1.00, the maximum ratio permitted under this Section 5.03 shall be 4.00 to 1.00.
For purposes of calculating the aggregate principal amount of the Consolidated Net Debt of the
Borrower on any such date, the currency exchange rate used for such calculation shall be the rate used in the
annual or semi-annual financial statements for such date; provided, however, that if the Borrower determines that
an average exchange rate is a more accurate reflection of the value of such currency over such four consecutive
fiscal quarter period, the currency exchange rate used may be, at the option of the Borrower, the currency
exchange rate used for the statement of income of the Borrower for such fiscal half year.
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01 Events of Default. If any of the following events (“Events of Default”) shall occur and
be continuing:
(a) The Borrower shall fail (i) to pay any principal of any Advance when the same becomes due and
payable or (ii) to pay any interest on any Advance or make any payment of fees or other amounts payable
under this Agreement within five Business Days after the same becomes due and payable; or
(b) Any representation or warranty made by the Borrower herein or in any other Loan Document (or
any of its officers or directors) in connection with this Agreement or in any certificate or other document
furnished pursuant to or in connection with this Agreement, if any, in each case shall prove to have been
incorrect in any material respect when made or deemed made; or
(c) (i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in
Section 5.01(d)(i), 5.01(i)(iv), 5.01(j), 5.02(a), 5.02(b), 5.02(d), 5.03 or (ii) the Borrower shall fail to
perform or observe any term, covenant or agreement contained in Section 5.01(e) or clauses (i)-(iii) or
(v)-(vii) of Section 5.01(i) if such failure shall remain unremedied for 10 Business Days after written notice
thereof shall have been given to the Borrower by the Administrative Agent or any Lender, or (iii) the
Borrower shall fail
to perform or observe any other term, covenant or agreement contained in this
Agreement, if any, in each case on its part to be performed or observed if such failure shall remain
unremedied for 30 days after written notice thereof shall have been given to the Borrower by the
Administrative Agent or any Lender; or
(d) The Borrower or any Significant Subsidiary shall fail to pay any principal of or premium or interest
on any Debt that is outstanding in a principal amount, or, in the case of any Hedge Agreement, having a
maximum Agreement Value, of at least $200,000,000 in the aggregate (but excluding Debt outstanding
hereunder) of the Borrower or such Significant Subsidiary, when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure
shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to
such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating
to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid or
redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased,
or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior
to the stated maturity thereof; it being understood and agreed that notwithstanding the foregoing, the
delivery of a notice of prepayment by one or more lenders under the Existing Target Indebtedness as a result
of the occurrence of the Target Acquisition will not result in an Event of Default under this clause (d);
provided that this clause (d) will apply to the extent there is a failure to make any such prepayment when the
same becomes due and payable; or
(e) The Borrower or any Significant Subsidiary shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any Significant
Subsidiary seeking to adjudicate it as bankrupt or
insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial
part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), such
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proceeding shall remain undismissed or unstayed for a period of 60 days; or the Borrower or any Significant
Subsidiary shall
take any corporate action to authorize any of the actions set forth above in this
Section 6.01(e). With respect to the Borrower or any Significant Subsidiary organized under the laws of
Japan, the following shall constitute an Event of Default: if (i) the Borrower makes an express declaration or
implicit declaration of its inability to pay its debts to its creditors generally (shiharai teishi); (ii) a bank
clearinghouse refuses to process the Borrower’s checks (tegata torihiki teishi shobun); or densai.net Co.,
Ltd. (iii) an order is issued by a court for the attachment (whether preliminary or otherwise) or preservation
of the Borrower’s material property, estate or other right and is not discharged within sixty (60) days; (iv) a
receiver or trustee is appointed for all or a portion of the property or estate of the Borrower; (v) an
involuntary petition for commencement of bankruptcy (hasan), corporate reorganization (kaisha kosei), civil
rehabilitation (minji saisei), special liquidation (tokubetsu seisan) or similar proceedings are filed against
the Borrower and are not discharged within sixty (60) days; (vi) the Borrower files a voluntary petition
(including a petition filed by a director of the Borrower) to commence, or a court of competent jurisdiction
approves an involuntary petition with respect to and commences the procedure of, any of the proceedings
specified in subparagraph (v) above; (vii) a voluntary petition to commence a special conciliation
proceeding (tokutei choutei); or (viii) the Borrower adopts a resolution for liquidation at a meeting of its
shareholders; or
(f) Any one or more judgments or orders for the payment of money in excess of $200,000,000 shall be
rendered against a member of the Consolidated Group and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 60
consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; provided, however, that, for purposes of determining whether an
Event of Default has occurred under this Section 6.01(f), the amount of any such judgment or order shall be
reduced to the extent that (A) such judgment or order is covered by a valid and binding policy of insurance
between the defendant and the insurer covering payment thereof and (B) such insurer, which shall be rated
at least “A” by A.M. Best Company, has been notified of, and has not disputed the claim made for payment
of, such judgment or order; or
(g) Any Person shall become an owner (hoyusha) or two or more Persons shall become joint owners
(kyodo hoyusha) (in each case within the meaning of Articles 27-23 of the FIEA) of Voting Stock of the
Borrower (or other securities convertible into or exchangeable for such Voting Stock) representing 50% or
more of the combined voting power of all Voting Stock of the Borrower (as calculated pursuant to Article
27-23, Paragraph 4 of the FIEA); or
(h) One or more of the following shall have occurred or is reasonably expected to occur, which in each
case would reasonably be expected to result in a Material Adverse Effect: (i) any ERISA Event; (ii) the
partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan; or
(iii) the termination of a Multiemployer Plan; or
(i) This Agreement shall cease to be valid and enforceable against the Borrower (except to the extent it
is terminated in accordance with its terms) or the Borrower shall so assert in writing;
then, and in any such event (subject to Section 3.04), the Administrative Agent (i) shall at the request, or may
with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Lender to
make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the consent, of the Required Lenders, by notice to the Borrower, declare the Advances, all interest
thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the
Advances, all such interest and all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, (but for the avoidance of doubt, always subject to Section 3.04) that in the event of
an Event of Default under Section 6.01(e), (A) the Commitment of each Lender shall automatically be terminated
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and (B) the Advances, all such interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the
Borrower.
Notwithstanding anything in this Agreement to the contrary, for a period commencing on the Closing Date
and ending on the date falling 180 days after the Closing Date (the “Clean-up Date”), notwithstanding any other
provision of any Loan Document, any breach of covenants, misrepresentation or other default which arises with
respect to the Target Group will be deemed not to be a breach of representation or warranty, a breach of covenant
or an Event of Default, as the case may be, if:
(i)
it is capable of remedy and reasonable steps are being taken to remedy it;
(ii)
the circumstances giving rise to it have not knowingly been procured by or approved by the Borrower;
and
(iii) it is not reasonably likely to have a Material Adverse Effect.
If the relevant circumstances are continuing on or after the Clean-up Date,
there shall be a breach of
representation or warranty, breach of covenant or Event of Default, as the case may be, notwithstanding the
above.
ARTICLE VII
THE AGENTS
SECTION 7.01 Authorization and Action. Each Lender hereby irrevocably appoints JPMorgan Chase
Bank, N.A. (or any branch or Affiliate thereof designated by it) to act on its behalf as the Administrative Agent
hereunder and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers
as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are
reasonably incidental thereto. The provisions of this Article VII (other than the third sentence of Section 7.04)
are solely for the benefit of the Administrative Agent and the Lenders, and the Borrower shall not have rights as a
third party beneficiary of any of such provisions (other than the third sentence of Section 7.04).
SECTION 7.02 Administrative Agent Individually. The Person serving as the Administrative Agent
hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise
the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless
otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the
Administrative Agent hereunder in its individual capacity as a Lender. Such Person and its Affiliates may accept
deposits from, own securities of, lend money to, act as the financial advisor or in any other advisory capacity for
and generally engage in any kind of business with any member of the Consolidated Group or other Affiliate
thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor
to the Lenders.
SECTION 7.03 Duties of Administrative Agent; Exculpatory Provisions.
(a) The Administrative Agent’s duties hereunder and under the other Loan Documents are solely
ministerial and administrative in nature, and the Administrative Agent shall not have any duties or obligations
except those expressly set forth herein or in any other Loan Document. Without limiting the generality of the
foregoing, the Administrative Agent shall not have any duty to take any discretionary action or exercise any
discretionary powers but shall be required to act or refrain from acting (and shall be fully protected in so acting
or refraining from acting) upon the written direction of the Required Lenders (or such other number or
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percentage of the Lenders as shall be expressly provided for herein or in any other Loan Document); provided
that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its
counsel, may expose the Administrative Agent or any of its Affiliates to liability or that is contrary to any Loan
Document or applicable law, including for the avoidance of doubt, any action that may be in violation of the
automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of
property of a Defaulting Lender in violation of any Debtor Relief Law.
(b) The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the
consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be
necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances
as provided in Section 9.01 or 6.01) or (ii) in the absence of its own gross negligence or willful misconduct. The
Administrative Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until
the Borrower or any Lender shall have given notice to the Administrative Agent describing such Default or Event
of Default.
(c) The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty, representation or other information made or supplied in or in connection with this
Agreement or any other Loan Document or the information memorandum distributed in connection with the
syndication of the Commitments and Advances hereunder, (ii) the contents of any certificate, report or other
document delivered hereunder or thereunder or in connection herewith or therewith or the adequacy, accuracy
and/or completeness of the information contained therein, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default,
(iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any
other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article III or
elsewhere herein, other than (but subject to the foregoing clause (ii)) to confirm receipt of items expressly
required to be delivered to the Administrative Agent.
(d) Nothing in this Agreement or any other Loan Document shall require the Administrative Agent or
any of its Related Parties to carry out any “know your customer” or other checks in relation to any person on
behalf of any Lender, and each Lender confirms to the Administrative Agent that it is solely responsible for any
such checks it is required to carry out and that it may not rely on any statement in relation to such checks made
by the Administrative Agent or any of its Related Parties.
SECTION 7.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely
upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement,
instrument, document or other writing (including any electronic message, Internet or intranet website posting or
other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the
proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In
determining compliance with any condition hereunder to the Effective Date, the making of any Advance or the
Closing Date that by its terms must be fulfilled to the satisfaction of a Lender, each Lender shall be deemed to
have consented to, approved or accepted such condition unless (i) an officer of the Administrative Agent
responsible for the transactions contemplated hereby shall have received notice to the contrary from such Lender
prior to the occurrence of the Effective Date, the making of such Advance or the Closing Date, as applicable, and
(ii) in the case of a condition to the making of an Advance, such Lender shall not have made available to the
Administrative Agent such Lender’s ratable portion of such Borrowing. The Administrative Agent may consult
with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected
by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
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SECTION 7.05 Delegation of Duties. The Administrative Agent may perform any and all of its duties
and exercise its rights and powers hereunder by or through any one or more sub agents appointed by the
Administrative Agent. The Administrative Agent and any such sub agent may perform any and all of its duties
and exercise its rights and powers by or through their respective Related Parties. Each such sub agent and the
Related Parties of the Administrative Agent and each such sub agent shall be entitled to the benefits of all
provisions of this Article VII and Section 9.04 (as though such sub-agents were the “Administrative Agent”
under this Agreement) as if set forth in full herein with respect thereto.
SECTION 7.06 Resignation of Administrative Agent.
(a) The Administrative Agent may at any time give notice of its resignation to the Lenders and the
Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right (with the
consent of the Borrower, provided that no consent of the Borrower shall be required if an Event of Default has
occurred and is continuing), to appoint a successor, which shall be a bank with an office in the United States or
Tokyo, or an Affiliate of any such bank with an office in the United States or Tokyo. If no such successor shall
have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after
the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the
Required Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not
be obligated to), on behalf of the Lenders (and with the consent of the Borrower, provided that no consent of the
Borrower shall be required if an Event of Default has occurred and is continuing), appoint a successor
Administrative Agent meeting the qualifications set forth above. Whether or not a successor has been appointed,
such resignation shall become effective in accordance with such notice on the Resignation Effective Date.
(b) With effect from the Resignation Effective Date (i) the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder and under the other Loan Documents and (ii) except for any
indemnity payments owed to the retiring Administrative Agent, all payments, communications and
determinations to be made by, to or through the Administrative Agent shall instead be made by or to each Lender
directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided
for above. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor
shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring
Administrative Agent (other than any rights to indemnity payments owed to the retiring Administrative Agent),
and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder and
under the other Loan Documents. The fees payable by the Borrower to a successor Administrative Agent shall be
the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.
After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the
provisions of this Article VII and Section 9.04 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub agents and their respective Related Parties in respect of any actions taken or
omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.
SECTION 7.07 Non-Reliance on Administrative Agent and Other Lenders. Each Lender acknowledges
and agrees that the extensions of credit made hereunder are commercial loans and not investments in a business
enterprise or securities. Each Lender further represents that it is engaged in making, acquiring or holding
commercial loans in the ordinary course of its business and has, independently and without reliance upon the
Administrative Agent, any arranger of the credit facilities evidenced by this Agreement or any other Lender and
their respective Related Parties and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement as a Lender, and to make, acquire or hold
Advances hereunder. Each Lender shall, independently and without reliance upon the Administrative Agent, any
arranger of the credit facilities evidenced by this Agreement or any amendment thereof or any other Lender and
their respective Related Parties and based on such documents and information (which may contain material, non-
public information within the meaning of the United States securities laws concerning the Borrower and its
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Affiliates) as it shall from time to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any related agreement or any document furnished hereunder
or thereunder and in deciding whether or to the extent to which it will continue as a Lender or assign or otherwise
transfer its rights, interests and obligations hereunder. Nothing in this Agreement shall oblige the Administrative
Agent to conduct any “know your customer” or other procedures in relation to any Person or any check on the
extent to which any transaction contemplated by this Agreement might be unlawful for any Lender, on behalf of
any Lender and each Lender confirms to the Administrative Agent that it is solely responsible for any such
procedures or check it is required to conduct and that it shall not rely on any statement in relation to such
procedures or check made by the Administrative Agent.
SECTION 7.08 Indemnification. The Lenders agree to indemnify the Administrative Agent (to the
extent not reimbursed by the Borrower), ratably according to the respective principal amounts of the Advances
made by each of them (or, if no Advances are at the time outstanding, ratably according to the respective
amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Administrative Agent under this Agreement, in each case,
acting in the capacity of Administrative Agent; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent’s gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrative Agent in
connection with the preparation, execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Administrative Agent is not promptly reimbursed for
such expenses by the Borrower.
SECTION 7.09 Other Agents. None of the Lenders identified on the facing page or signature pages of
this Agreement as an “arranger” or “book runner” shall have any right, power, obligation, liability, responsibility
or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing,
none of the Lenders so identified shall have or be deemed to have any fiduciary relationship with any Lender.
Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding
to enter into this Agreement or in taking or not taking action hereunder.
ARTICLE VIII
[RESERVED]
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Amendments, Etc.
(a) Except as provided in Section 2.08(c), no amendment or waiver of any provision of this Agreement,
nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Required Lenders and the Borrower and acknowledged by the Administrative Agent,
and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for
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which given; provided, however, that no amendment, waiver or consent shall, unless in writing, do any of the
following:
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(i) waive any of the conditions specified in Section 3.01, 3.02 or 3.03 unless signed by each
Lender directly and adversely affected thereby;
(ii) increase or extend the Commitments of a Lender or subject a Lender to any additional
obligations, unless signed by such Lender;
(iii) reduce the principal of, or stated rate of interest on, the Advances, the stated rate at which any
fees hereunder are calculated or any other amounts payable hereunder, unless signed by each Lender
directly and adversely affected thereby; provided that only the consent of the Required Lenders shall be
necessary to amend the definition of “Default Interest” or to waive any obligation of the Borrower to
pay Default Interest (except that no amendment entered into pursuant to the terms of Section 2.08(c)
shall constitute a reduction in the rate of interest or fees for purposes of this clause (ii));
(iv) postpone any date fixed for any payment of principal of, or interest on, the Advances or any
fees or other amounts payable hereunder, unless signed by each Lender directly and adversely affected
thereby;
(v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the
Advances, or the number of Lenders, that, in each case, shall be required for the Lenders or any of
them to take any action hereunder, unless signed by all Lenders; or
(vi) amend this Section 9.01, unless signed by all Lenders.
and provided further that no amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of
the Administrative Agent under this Agreement. Notwithstanding the foregoing, the Administrative Agent and
the Borrower may amend any Loan Document
to correct any errors, mistakes, omissions, defects or
inconsistencies, or to effect administrative changes that are not adverse to any Lender, and such amendment shall
become effective without any further consent of any other party to such Loan Document other than the
Administrative Agent and the Borrower.
(b) [reserved].
(c) If, in connection with any proposed amendment, waiver or consent requiring the consent of “all
Lenders,” “each Lender” or “each Lender directly and adversely affected thereby,” the consent of the Required
Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent
is necessary but not obtained being referred to herein as a “Non-Consenting Lender”), then the Borrower may
elect to replace a Non-Consenting Lender as a Lender party to this Agreement; provided that, concurrently with
such replacement, (i) another bank or other entity (which is reasonably satisfactory to the Borrower and the
Administrative Agent) shall agree, as of such date, to purchase at par for cash the Advances and other obligations
under the Loan Documents due to the Non-Consenting Lender pursuant to an Assignment and Acceptance and to
become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting
Lender to be terminated as of such date, and (ii) the Borrower shall pay to such Non-Consenting Lender in same
day funds on the day of such replacement all principal, interest, fees and other amounts then accrued but unpaid
to such Non-Consenting Lender by the Borrower to and including the date of termination. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
Each party hereto agrees that an assignment required pursuant to this paragraph may be effected pursuant to an
Assignment and Acceptance executed by the Borrower, the Administrative Agent and the assignee (or, to the
extent applicable, an agreement incorporating an Assignment and Acceptance by reference pursuant to an
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approved electronic platform as to which the Administrative Agent and such parties are participants), and (b) the
Lender required to make such assignment need not be a party thereto in order for such assignment to be effective
and shall be deemed to have consented to an be bound by the terms thereof; provided that, following the
effectiveness of any such assignment, the other parties to such assignment agree to execute and deliver such
documents necessary to evidence such assignment as reasonably requested by the applicable Lender, provided
that any such documents shall be without recourse to or warranty by the parties thereto.
SECTION 9.02 Notices, Etc. (a) All notices and other communications provided for hereunder shall be
in writing (including telecopier) and mailed, telecopied or delivered, if to the Borrower or the Administrative
Agent, to the address, telecopier number or if applicable, electronic mail address, specified for such Person on
Schedule II; or, as to the Borrower or the Administrative Agent, at such other address as shall be designated by
such party in a written notice to the other parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to the Borrower and the Administrative Agent. All such notices and
communications shall, when mailed or telecopied, be effective three Business Days after being deposited in the
mails, postage prepaid, or upon confirmation of receipt (except that if electronic confirmation of receipt is
received at a time that the recipient is not open for business, the applicable notice or communication shall be
effective at the opening of business on the next business day of the recipient), respectively, except that notices
and communications to the Administrative Agent pursuant to Article II, III or VII shall not be effective until
received by the Administrative Agent. Delivery by telecopier or other electronic communication of an executed
counterpart of any amendment or waiver of any provision of this Agreement or of any Exhibit hereto to be
executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof.
(b) Electronic Communications. Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant
to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any
Lender pursuant to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving
notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its
discretion, agree to accept notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular
notices or communications.
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an
e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended
recipient (such as by the “return receipt requested” function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication is not sent during the normal business
hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of
business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address
as described in the foregoing clause (i) of notification that such notice or communication is available and
identifying the website address therefor.
(c) THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES
(AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE
BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM
LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY
OF ANY KIND, EXPRESS,
INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY
AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no
event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any
IMPLIED OR STATUTORY,
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liability to the Borrower, any Lender or any other Person for losses, claims, damages, liabilities or expenses of
any kind (whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative Agent’s
transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages,
liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment
to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in
no event shall any Agent Party have any liability to the Borrower, any Lender or any other Person for indirect,
special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
(d) Each Lender agrees that notice to it (as provided in the next sentence) (a “Notice”) specifying that
any communication has been posted to the Platform shall constitute effective delivery of such information,
documents or other materials to such Lender for purposes of this Agreement. Each Lender agrees to notify the
Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective
address, contact name, telephone number, telecopier number and electronic mail address to which notices and
other communications may be sent and (ii) accurate wire instructions for such Lender. Furthermore, each Public
Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected
the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to
enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and
applicable Law, including United States federal and state securities Laws, to make reference to Borrower
Materials that are not made available through the “Public Side Information” portion of the Platform and that may
contain material non- public information with respect to the Borrower or its securities for purposes of United
States federal or state securities laws.
(e) If any notice required under this Agreement is permitted to be made, and is made, by telephone,
actions taken or omitted to be taken in reliance thereon by the Administrative Agent or any Lender shall be
binding upon the Borrower notwithstanding any inconsistency between the notice provided by telephone and any
subsequent writing in confirmation thereof provided to the Administrative Agent or such Lender; provided that
any such action taken or omitted to be taken by the Administrative Agent or such Lender shall have been in good
faith and in accordance with the terms of this Agreement.
(f) With respect to notices and other communications hereunder from the Borrower to any Lender, the
Borrower shall provide such notices and other communications to the Administrative Agent, and the
Administrative Agent shall promptly deliver such notices and other communications to any such Lender in
accordance with subsection (b) above or otherwise.
SECTION 9.03 No Waiver; Remedies. No failure on the part of any Lender or the Administrative
Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by
applicable law.
SECTION 9.04 Costs and Expenses. (a) The Borrower agrees to pay, upon demand, all reasonable and
documented out-of-pocket costs and expenses of each Agent in connection with the preparation, execution,
delivery, administration, modification and amendment of this Agreement and the other documents to be delivered
hereunder, including, (i) due diligence expenses, syndication expenses, travel expenses and (ii) the reasonable
and documented out-of-pocket fees, charges and expenses of a single primary counsel (and one local counsel in
each relevant jurisdiction) for the Administrative Agent with respect thereto and with respect to advising the
Agents as to their respective rights and responsibilities under this Agreement. The Borrower further agrees to
pay, upon demand, all reasonable and documented out-of-pocket costs and expenses of the Agents and the
legal proceedings or
Lenders,
otherwise) of this Agreement and the other documents to be delivered hereunder, including, without limitation,
in connection with the enforcement (whether through negotiations,
if any,
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reasonable and documented out-of-pocket fees and expenses of a single primary counsel and an additional single
local counsel in any relevant jurisdictions for the Agents and the Lenders and, solely in the case of an actual or
perceived conflict of interest where the Agents notify the Borrower of the existence of such conflict in writing,
one additional counsel, in connection with the enforcement of rights under this Agreement.
(b) The Borrower agrees to indemnify and hold harmless each Agent and each Lender and each of their
Affiliates and their respective officers, directors, employees, agents and advisors (each, an “Indemnified Party”)
from and against any and all claims, damages, losses, penalties, liabilities and expenses (provided, that, the
Borrower’s obligations to the Indemnified Parties in respect of fees and expenses of counsel shall be limited to
the reasonable and documented out-of-pocket fees and expenses of one primary counsel for all Indemnified
Parties, taken together, (and, if reasonably necessary, one local counsel in any relevant jurisdiction) and, solely in
the case of an actual or potential conflict of interest of which the Borrower is notified in writing, of one
additional counsel for all Indemnified Parties, taken together (and, if reasonably necessary, one local counsel in
any relevant jurisdiction) (all such claims, damages, losses, penalties, liabilities and reasonable expenses being,
collectively, the “Losses”) that may be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of,
any investigation, litigation or proceeding arising out of, related to or in connection with (i) this Agreement, any
of the transactions contemplated hereby or the actual or proposed use of the proceeds of the Advances or (ii) the
actual or alleged presence or release of Hazardous Materials on any property of the Consolidated Group or any
Environmental Action relating in any way to the Consolidated Group, in each case whether or not such
investigation, litigation or proceeding is brought by the Borrower, its directors, shareholders or creditors or an
Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not
the transactions contemplated hereby are consummated, except to the extent Losses (A) are found in a final,
nonappealable judgment by a court of competent jurisdiction to have resulted from the gross negligence, bad
faith or willful misconduct of such Indemnified Party or any of its Related Indemnified Parties (including any
breach of its obligations under this Agreement), (B) result from any dispute between an Indemnified Party and
one or more other Indemnified Parties (other than against an Agent or Arranger acting in such a role) or
(C) result from the claims of one or more Lenders solely against one or more other Lenders (and not claims by
one or more Lenders against any Agent acting in its capacity as such except, in the case of Losses incurred by
any Agent or any Lender as a result of such claims, to the extent such Losses are found in a final, nonappealable
judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence,
bad faith or willful misconduct (including any breach of its obligations under this Agreement)) not attributable to
any actions of a member of the Consolidated Group and for which the members of the Consolidated Group
otherwise have no liability. The Borrower further agrees that no Indemnified Party shall have any liability
(whether direct or indirect, in contract, tort or otherwise) to the Borrower or any of its shareholders or creditors
for or in connection with this Agreement or any of the transactions contemplated hereby or the actual or proposed
use of the proceeds of the Advances, except to the extent such liability is found in a final non-appealable
judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence,
bad faith or willful misconduct (including any breach of its obligations under this Agreement). In no event,
however, shall any Indemnified Party or the Borrower be liable on any theory of liability for any special, indirect,
consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated
savings); provided that nothing in this sentence shall limit the Borrower’s indemnity and reimbursement
obligations to the extent that such special, indirect, consequential or punitive damages are included in any claim
by a third party unaffiliated with any of the Indemnified Parties with respect to which the applicable Indemnified
Party is entitled to indemnification as set forth in the immediately preceding sentence. As used above, a “Related
Indemnified Party” of an Indemnified Party means (1) any Controlling Person or Controlled Affiliate of such
Indemnified Party, (2) the respective directors, officers, or employees of such Indemnified Party or any of its
Controlling Persons or Controlled Affiliates and (3) the respective agents, advisors or representatives of such
Indemnified Party or any of its Controlling Persons or Controlled Affiliates, in the case of this clause (3), acting
at the instructions of such Indemnified Party, Controlling Person or Controlled Affiliate; provided that each
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reference to a Controlling Person, Controlled Affiliate, director, officer or employee in this sentence pertains to a
Controlling Person, Controlled Affiliate, director, officer or employee involved in the structuring, arrangement,
negotiation or syndication of the Bridge Facility and this Agreement. Notwithstanding the foregoing, this section
9.04(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc.
arising from any non-Tax claim.
(c) If any payment of principal of, or Conversion of, any Eurocurrency Rate Advance is made by the
Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Advance, as a
result of (i) a payment or Conversion pursuant to Section 2.06, 2.08(b), 2.08(c), 2.10 or 2.12, (ii) acceleration of
the maturity of the Advances pursuant to Section 6.01, (iii) a payment by an Eligible Assignee to any Lender
other than on the last day of the Interest Period for such Advance upon an assignment of the rights and
obligations of such Lender under this Agreement pursuant to Section 9.07 as a result of a demand by the
Borrower pursuant to Section 9.07(a) or (iv) for any other reason, the Borrower shall, upon demand by such
Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the
account of such Lender any amounts required to compensate such Lender for any additional reasonable losses,
costs or expenses that it may reasonably incur as a result of such payment or Conversion or as a result of any
inability to Convert or exchange in the case of Section 2.08 or 2.12, including, without limitation, any reasonable
loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by any Lender to fund or maintain such Advance.
(d) Without prejudice to the survival of any other agreement of the Borrower hereunder,
the
agreements and obligations of the Borrower contained in Sections 2.11, 2.14 and 9.04 shall survive the payment
in full of principal, interest and all other amounts payable hereunder.
SECTION 9.05 Right of Setoff. Subject to Section 3.04, upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by
Section 6.01 to authorize the Administrative Agent to declare the Advances due and payable pursuant to the
provisions of Section 6.01, each Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such
Lender or such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations
of the Borrower now or hereafter existing under this Agreement, whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. Each Lender agrees promptly to
notify the Borrower after any such setoff and application is made by such Lender; provided that the failure to
give such notice shall not affect the validity of such setoff and application. The rights of each Lender and its
Affiliates under this Section 9.05 are in addition to other rights and remedies (including, without limitation, other
rights of setoff) that such Lender and its Affiliates may have.
SECTION 9.06 Binding Effect. This Agreement shall become effective upon the satisfaction (or waiver
in accordance with Section 9.01) of the conditions set forth in Section 3.01 and, thereafter, shall be binding upon
and inure to the benefit of, and be enforceable by, the Borrower, the Administrative Agent and each Lender and
their respective successors and permitted assigns, except that the Borrower shall have no right to assign their
rights hereunder or any interest herein without the prior written consent of the Lenders, and any purported
assignment without such consent shall be null and void.
SECTION 9.07 Assignments and Participations. (a) Each Lender may, with the consent of the
Borrower and the Administrative Agent, which consents shall not be unreasonably withheld or delayed (it being
agreed that notwithstanding anything herein, including the proviso set forth below, during the Certain Funds
Period the Borrower may withhold such consent in its sole discretion unless a Certain Funds Default is
continuing) and, in the case of the Borrower, (A) shall not be required while an Event of Default (or during the
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Certain Funds Period a Certain Funds Default) has occurred and is continuing and (B) shall be deemed given if
the Borrower shall not have objected within 10 Business Days following its receipt of notice of such assignment
(and, within five days after demand by the Borrower (with a copy of such demand to the Administrative Agent)
to (i) any Defaulting Lender, (ii) any Lender that has made a demand for payment pursuant to Section 2.11 or
2.14, (iii) any Lender that has asserted pursuant to Section 2.08(b) or 2.12 that it is impracticable or unlawful for
such Lender to make Eurocurrency Rate Advances or (iv) any Lender that fails to consent to an amendment or
waiver hereunder for which consent of all Lenders (or all affected Lenders) is required and as to which the
Required Lenders shall have given their consent, such Lender will), assign to one or more Persons (other than
natural persons) all or a portion of its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitment and the Advances owing to it); provided, however, that:
(A) such consent shall not be required in the case of an assignment to any other Lender or an Affiliate
of any Lender, provided that (i) notice thereof shall have been given to the Borrower and the Administrative
Agent and (ii) solely with respect to assignments during the Certain Funds Period, such Affiliate has a rating
for its long term unsecured and non-credit enhanced debt obligations which is not less than that of the
relevant assigning Lender;
(B) each such assignment shall be of a constant, and not a varying, percentage of all rights and
obligations under this Agreement;
(C) except in the case of an assignment to a Person that, immediately prior to such assignment, was a
Lender or an assignment of all of a Lender’s rights and obligations under this Agreement, the amount of the
Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than
$25,000,000 or an integral multiple of $5,000,000 in excess thereof;
(D) each such assignment shall be to an Eligible Assignee;
(E) each such assignment made as a result of a demand by the Borrower pursuant
to this
Section 9.07(a) shall be arranged by the Borrower with the approval of the Administrative Agent (which
approval shall not be unreasonably withheld) and shall be either an assignment of all of the rights and
obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and
obligations made concurrently with another such assignment or other such assignments that,
in the
aggregate, cover all of the rights and obligations of the assigning Lender under this Agreement;
(F) no Lender shall be obligated to make any such assignment as a result of a demand by the Borrower
pursuant to this Section 9.07(a), (1) so long as a Default shall have occurred and be continuing and
(2) unless and until such Lender shall have received one or more payments from one or more Eligible
Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the
Advances owing to such Lender, together with accrued interest thereon to the date of payment of such
principal amount, and from the Borrower or one or more Eligible Assignees in an aggregate amount equal to
all other amounts accrued to such Lender under this Agreement (including, without limitation, any amounts
owing under Sections 2.11, 2.14 or 9.04(c)) and (3) unless and until the Borrower shall have paid (or caused
to be paid) to the Administrative Agent a processing and recordation fee of $3,500; provided, however, that
the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in
the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire; and
(G) the parties to each such assignment (other than, except in the case of a demand by the Borrower
pursuant to this Section 9.07(a), the Borrower) shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance and, if such assignment does not
occur as a result of a demand by the Borrower pursuant to this Section 9.07(a) (in which case the Borrower
shall pay the fee required by subclause (F)(3) of this Section 9.07(a)), a processing and recordation fee of
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$3,500; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such
processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver
to the Administrative Agent an Administrative Questionnaire.
Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement, except that such assigning Lender shall continue to be
entitled to the benefit of Section 9.04(a) and (b) with respect to matters arising out of the prior involvement of
such assigning Lender as a Lender hereunder (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall
cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and
the assignee thereunder confirm to and agree with each other and the other parties hereto as follows:
(i)
other than as provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or
document furnished pursuant hereto;
(ii)
such assigning Lender makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under this Agreement or any other instrument or document furnished
pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement, together with copies of
the financial statements referred to in Section 4.01(e) and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and
Acceptance;
(iv) such assignee will, independently and without reliance upon any Agent, such assigning
Lender or any other Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking action under this
Agreement;
(v)
such assignee confirms that it is an Eligible Assignee;
(vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent
on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers and discretion as are reasonably
incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms all of the obligations
that by the terms of this Agreement are required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an
assignee representing that it is an Eligible Assignee, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit B hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof
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to the Borrower; provided that the Administrative Agent shall only be required to execute any such Assignment
and Acceptance once it has satisfied and complied with all necessary “know your customer” or similar checks
under all applicable laws and regulations in relation to the proposed assignment to the assignee.
(d) The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower,
shall maintain at its address as set forth on Schedule II a copy of each Assignment and Acceptance delivered to
and accepted by it and a register for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount (and stated interest) of the Advances owing to, each Lender from time to
time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agents and the Lenders shall treat each Person whose name is recorded in
the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Each Lender may sell participations to one or more banks or other entities (other than the Borrower
or any of its Affiliates or any natural person) in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and the Advances owing to it)
without the consent of the Administrative Agent or the Borrower; provided, however, that:
(i)
such Lender’s obligations under
this Agreement
(including, without
limitation,
its
Commitment) shall remain unchanged;
(ii) such Lender shall remain solely responsible to the other parties hereto for the performance of
such obligations;
(iii) such Lender shall remain the Lender of any such Advance for all purposes of this Agreement;
(iv) the Borrower, the Agents and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender’s rights and obligations under this Agreement; and
(v) no participant under any such participation shall have any right to approve any amendment or
waiver of any provision of this Agreement, or any consent to any departure by the Borrower herefrom
or therefrom, except to the extent that such amendment, waiver or consent would reduce the principal
of, or stated rate of interest on, the Advances or the stated rate at which any fees or any other amounts
payable hereunder are calculated, in each case to the extent subject to such participation, or postpone
any date fixed for any payment of principal of, or interest on, the Advances or any fees or any other
amounts payable hereunder, in each case to the extent subject to such participation.
Each Lender shall promptly notify the Borrower after any sale of a participation by such Lender pursuant to this
Section 9.07(e); provided that the failure of such Lender to give notice to the Borrower as provided herein shall
not affect the validity of such participation or impose any obligations on such Lender or the applicable
participant.
Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the
Borrower, maintain a register on which it enters the name and address of each participant and the principal
amounts (and stated interest) of each participant’s interest in the Advances or other obligations under the Loan
Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any
portion of the Participant Register (including the identity of any participant or any information relating to a
participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan
Document) to any Person except
that such disclosure is necessary to establish that such
letter of credit or other obligation is in registered form under Treasury Regulations
loan,
commitment,
Section 5f.103-1(c) and Proposed Treasury Regulations 1.163-5(b) (or any amended or successor version). The
to the extent
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entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each
Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of
this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent
(in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
The Borrower agrees that each participant shall be entitled to the benefits of Sections 2.11, 2.14 and 9.04(c)
(subject to the requirements and limitations therein, including the requirements under Section 2.14(f) (it being
understood that the documentation required under Section 2.14(f) shall be delivered to the participating Lender))
to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section; provided that such participant (A) agrees to be subject to the provisions of Section 2.20 as if it were
an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment
under Section 2.11 or 2.14, with respect to any participation, than its participating Lender would have been
entitled to receive, except to the extent such entitlement to receive a greater payment results from the occurrence,
after the participant acquired the applicable participation, of any of the following: (i) the adoption or taking effect
of any law, rule, regulation or treaty or (ii) any change in any law, rule, regulation or treaty or in the
administration, interpretation, implementation or application thereof by any Governmental Authority.
(f) Any Lender may, in connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower;
provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall
agree to preserve the confidentiality of any Information relating to the Borrower received by it from such Lender
as more fully set forth in Section 9.08.
(g) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create
a security interest in all or any portion of its rights under this Agreement (including, without limitation and the
Advances owing to it) to secure obligations of such Lender, including, without limitation, any pledge or
assignment to secure obligations in favor of any Federal Reserve Bank in accordance with Regulation A of the
Board or any central bank having jurisdiction over such Lender.
SECTION 9.08 Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain
the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its
Affiliates and to its and its Affiliates’ respective managers, administrators, trustees, partners, directors, officers,
employees, agents, advisors and other representatives (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction
over it or its Affiliates (including any self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal
process (provided that the Administrative Agent or such Lender, as applicable, agrees that it will, to the extent
practicable and other than with respect to any audit or examination conducted by bank accountants or any
governmental bank regulatory authority exercising examination or regulatory authority, notify the Borrower
promptly thereof, unless such notification is prohibited by law, rule or regulation), (d) to any other party hereto,
(e) in connection with the exercise of any remedies hereunder or any action or proceeding relating to this
Agreement or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or obligations under this Agreement, (ii) any actual or
prospective party (or its managers, administrators, trustees, partners, directors, officers, employees, agents,
advisors and other representatives) to any swap or derivative or similar transaction under which payments are to
be made by reference to the Borrower and its obligations, this Agreement or payments hereunder, (iii) any rating
agency, (iv) the CUSIP Service Bureau or any similar organization or (v) any Person to whom or for whose
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benefit such Lender has created a security interest in all or any portion of its rights under this Agreement
pursuant to Section 9.07(g), (g) with the consent of the Borrower or (h) to the extent such Information
(x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the
Administrative Agent, any Lender or any of their respective Affiliates on a non-confidential basis from a source
other than the Borrower. Each Lender acknowledges that its ability to disclose information concerning the
Transactions is restricted by the City Code and the Panel and that Section 9.08 is subject to those restrictions.
For purposes of this Section, “Information” means this Agreement and the other Loan Documents and
all information received from the Consolidated Group relating to the Consolidated Group or any of their
respective businesses, other than any such information that is available to the Administrative Agent or any
Lender on a non-confidential basis prior to disclosure by the Consolidated Group and other than information
pertaining to this Agreement routinely provided by arrangers to data service providers, including league table
providers, that serve the lending industry. Any Person required to maintain the confidentiality of Information as
provided in this Section shall be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
SECTION 9.09 Debt Syndication during the Certain Funds Period. Each of the Lenders and the
Administrative Agent confirms that it is aware of the terms and requirements of Practice Statement No. 25 (Debt
Syndication during Offer Periods) issued by the Panel.
SECTION 9.10 Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York.
SECTION 9.11 Execution in Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of
an executed counterpart of a signature page to this Agreement by telecopier, facsimile or in a .pdf or similar file
shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 9.12 Jurisdiction, Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive jurisdiction of the United States District Court of the Southern
District of New York, located in the Borough of Manhattan (or if such court lacks subject matter jurisdiction, the
Supreme Court of the State of New York sitting in the Borough of Manhattan), and any appellate court from any
such court, in any action or proceeding arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding shall be heard and determined in any such New York State
court or, to the extent permitted by law, in any such federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.
(b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any New York State or federal court. Each of
the defense of an
the parties hereto hereby irrevocably waives,
inconvenient forum to the maintenance of such action or proceeding in any such court.
to the fullest extent permitted by law,
(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for
notices in Section 9.02. The Borrower irrevocably designates and appoints the Service of Process Agent, with
offices on the date of this Agreement at 111 Eighth Avenue, 13th Floor, New York, New York 10011, as its
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authorized agent, to accept and acknowledge on its behalf, service of any and all process which may be served in
any suit, action or proceeding of the nature referred to in Section 9.12(a) in any federal or New York State court
sitting in New York City. Said designation and appointment shall be irrevocable by the Borrower. The Borrower
hereby consents to process being served in any suit, action or proceeding of the nature referred to in
Section 9.12(a) in any federal or New York State court sitting in New York City by service of process upon the
Service of Process Agent, with offices on the date of this Agreement at 111 Eighth Avenue, 13th Floor, New
York, New York 10011, as provided in this Section 9.12(c); provided that, to the extent lawful and possible,
notice of said service upon such agent shall be mailed by registered or certified air mail, postage prepaid, return
receipt requested, to the Service of Process Agent, and to the Borrower (with a copy thereof to the Service of
Process Agent) at the address specified for such Person on Schedule II or at such other address as shall be
designated by such party in a written notice to the Administrative Agent. The Borrower irrevocably waives, to
the fullest extent permitted by law, all claim of error by reason of any such service in such manner and agrees
that such service shall be deemed in every respect effective service of process upon the Borrower in any such
suit, action or proceeding and shall, to the fullest extent permitted by law, be taken and held to be valid and
personal service upon and personal delivery to the Borrower. To the extent the Borrower has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process (whether from service or notice,
attachment prior to judgment, attachment in aid of execution of a judgment, execution or otherwise), the
Borrower hereby irrevocably waives such immunity in respect of its obligations under the Loan Documents.
Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.
SECTION 9.13 Patriot Act Notice. Each Lender and the Administrative Agent (for itself and not on
behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the Patriot Act, it is
required to obtain, verify and record information that identifies the Borrower, which information includes the
name and address of the Borrower and other information that will allow such Lender or the Administrative
Agent, as applicable, to identify the Borrower in accordance with the Patriot Act. The Borrower shall provide, to
the extent commercially reasonable, such information and take such actions as are reasonably requested by the
Administrative Agent or any Lenders in order to assist the Administrative Agent and the Lenders in maintaining
compliance with the Patriot Act.
SECTION 9.14 No Advisory or Fiduciary Responsibility. The Borrower acknowledges and agrees, and
acknowledges its Subsidiaries’ understanding, that no Credit Party will have any obligations except those
obligations expressly set forth herein and in the other Loan Documents and each Credit Party is acting solely in
the capacity of an arm’s length contractual counterparty to the Borrower with respect to the Loan Documents and
the transaction contemplated therein and not as a financial advisor or a fiduciary to, or an agent of, the Borrower
or any other person. The Borrower agrees that it will not assert any claim against any Credit Party based on an
alleged breach of fiduciary duty by such Credit Party in connection with this Agreement and the transactions
contemplated hereby. Additionally, the Borrower acknowledges and agrees that no Credit Party is advising the
Borrower as to any legal, tax, investment, accounting, regulatory or any other matters in any jurisdiction. The
Borrower shall consult with its own advisors concerning such matters and shall be responsible for making its own
independent investigation and appraisal of the transactions contemplated hereby, and the Credit Parties shall have
no responsibility or liability to the Borrower with respect thereto.
The Borrower further acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that
each Credit Party, together with its Affiliates, is a full service securities or banking firm engaged in securities
trading and brokerage activities as well as providing investment banking and other financial services. In the
ordinary course of business, any Credit Party may provide investment banking and other financial services to,
and/or acquire, hold or sell, for its own accounts and the accounts of customers, equity, debt and other securities
and financial instruments (including bank loans and other obligations) of, the Borrower and other companies with
which the Borrower may have commercial or other relationships. With respect to any securities and/or financial
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instruments so held by any Credit Party or any of its customers, all rights in respect of such securities and
financial instruments, including any voting rights, will be exercised by the holder of the rights, in its sole
discretion.
In addition, the Borrower acknowledges and agrees, and acknowledges its Subsidiaries’ understanding,
that each Credit Party and its affiliates may be providing debt financing, equity capital or other services
(including financial advisory services) to other companies in respect of which the Borrower may have conflicting
interests regarding the transactions described herein and otherwise. No Credit Party will use confidential
information obtained from the Borrower by virtue of the transactions contemplated by the Loan Documents or its
other relationships with the Borrower in connection with the performance by such Credit Party of services for
other companies, and no Credit Party will furnish any such information to other companies. The Borrower also
acknowledges that no Credit Party has any obligation to use in connection with the transactions contemplated by
the Loan Documents, or to furnish to the Borrower, confidential information obtained from other companies.
SECTION 9.15 Waiver of Jury Trial. Each of the Borrower, the Administrative Agent and the Lenders
hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to this Agreement or the actions of the Administrative Agent
or any Lender in the negotiation, administration, performance or enforcement thereof.
SECTION 9.16 Conversion of Currencies. If, for the purpose of obtaining judgment in any court, it is
necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to
the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance
with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other
currency on the Business Day immediately preceding the day on which final judgment is given.
The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the
obligations owing hereunder (the “Applicable Creditor”) shall, notwithstanding any judgment in a currency (the
“Judgment Currency”) other than the currency in which such sum is stated to be due hereunder (the “Agreement
Currency”), be discharged only to the extent that, on the Business Day following receipt by the Applicable
Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance
with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment
Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the
the Borrower agrees, as a separate obligation and
Applicable Creditor
notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of
the Borrower contained in this Section 9.16 shall survive the termination of this Agreement and the payment of
all other amounts owing hereunder.
in the Agreement Currency,
SECTION 9.17 Acknowledgement and Consent
Institutions.
Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or
understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial
Institution arising under any Loan Document may be subject to the Write-Down and Conversion Powers of an
EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
to Bail-In of EEA Financial
(a)
the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any
such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA
Financial Institution; and
(b)
the effects of any Bail-In Action on any such liability, including, if applicable:
(i)
a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in
such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or
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otherwise conferred on it, and that such shares or other instruments of ownership will be accepted
by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan
Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and
Conversion Powers of any EEA Resolution Authority.
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SECTION 9.18 Certain ERISA Matters.
(a) Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to,
and (y) covenants, from the date such Person became a Lender party hereto to the date such Person
ceases being a Lender party hereto, for the benefit of, the Administrative Agent and the Arrangers and
their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower,
that at least one of the following is and will be true:
(i)
(ii)
such Lender is not using “plan assets” (within the meaning of Plan Asset Regulations) of one or
more Benefit Plans in connection with the Commitments or Advances;
the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption
for certain transactions determined by independent qualified professional asset managers), PTE
95-60 (a class exemption for certain transactions involving insurance company general accounts),
PTE 90-1 (a class exemption for certain transactions involving insurance company pooled
separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank
collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined
by in-house asset managers),
to such Lender’s entrance into,
participation in, administration of and performance of the Advances, the Commitments and this
Agreement, and the conditions for exemptive relief thereunder are and will continue to be satisfied
in connection therewith,
is applicable with respect
(iii) (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager”
(within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager
made the investment decision on behalf of such Lender to enter into, participate in, administer and
perform the Commitments, the Advances and this Agreement, (C) the entrance into, participation
in, administration of and performance of the Commitments, the Advances and this Agreement
satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the
best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are
satisfied with respect to such Lender’s entrance into, participation in, administration of and
performance of the Commitments, the Advances and this Agreement; or
(iv) such other representation, warranty and covenant as may be agreed in writing between the
Administrative Agent, in its sole discretion, and such Lender.
(b)
In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect to a
Lender or if such Lender has not provided another representation, warranty and covenant as provided
in sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and
warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date
such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto,
for the benefit of, the Administrative Agent and the Arrangers and their respective Affiliates, and not,
for the avoidance of doubt, to or for the benefit of the Borrower, that:
(i)
none of the Administrative Agent or the Arrangers or their respective Affiliates is a fiduciary with
respect to the assets of such Lender (including in connection with the reservation or exercise of
any rights by the Administrative Agent under this Agreement, any Loan Document or any
documents related to hereto or thereto),
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(ii)
the Person making the investment decision on behalf of such Lender with respect to the entrance
into, participation in, administration of and performance of the Commitments, the Advances and
this Agreement is independent (within the meaning of 29 CFR § 2510.3-21) and is a bank, an
insurance carrier, an investment adviser, a broker-dealer or other person that holds, or has under
management or control, total assets of at least $50 million, in each case as described in 29 CFR §
2510.3-21(c)(1)(i)(A)-(E),
(iii) the Person making the investment decision on behalf of such Lender with respect to the entrance
into, participation in, administration of and performance of the Commitments, the Advances and
this Agreement is capable of evaluating investment risks independently, both in general and with
regard to particular transactions and investment strategies,
(iv) the Person making the investment decision on behalf of such Lender with respect to the entrance
into, participation in, administration of and performance of the Commitments, the Advances and
this Agreement
to the
Commitments, the Advances and this Agreement and is responsible for exercising independent
judgment in evaluating the transactions hereunder, and
is a fiduciary under ERISA or the Code, or both, with respect
(v) no fee or other compensation is being paid directly to the Administrative Agent or any Arranger or
any their respective Affiliates for investment advice (as opposed to other services) in connection
with the Commitments, the Advances or this Agreement.
(c) The Administrative Agent and each Arranger hereby informs the Lenders that each such Person is not
undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity, in
connection with the transactions contemplated hereby, and that such Person has a financial interest in
the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest
or other payments with respect to the Commitments, the Advances and this Agreement, (ii) may
recognize a gain if it extended the Commitments or the Advances for an amount less than the amount
being paid for an interest in the Commitments or the Advances by such Lender or (iii) may receive fees
or other payments in connection with the transactions contemplated hereby, the Loan Documents or
otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront fees,
underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees, utilization
fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate transaction fees,
amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other early
termination fees or fees similar to the foregoing.
(d) The representations in this Section 9.18 are intended to comply with United States Department of
Labor Regulations codified at 29 C.F.R. § 2510.3-21(a) and (c)(1) as promulgated on April 8, 2016 (81
Fed. Reg. 20,997). To the extent these regulations are revoked, repealed or no longer effective, these
representations shall be deemed to be no longer in effect.
SECTION 9.19 Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any
time the interest rate applicable to any Advance, together with all fees, charges and other amounts which are
treated as interest on such Advance under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the
Lender holding such Advance in accordance with applicable law, the rate of interest payable in respect of such
Advance hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate
and, to the extent lawful, the interest and Charges that would have been payable in respect of such Advance but
were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Advances or periods shall be increased (but not above the Maximum
Rate therefor) until such cumulated amount, together with interest thereon at the Cost of Funds Rate to the date
of repayment, shall have been received by such Lender. Notwithstanding the forgoing, if the Lender shall have
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received interest and/or Charges in an amount that exceeds the Maximum Rate, the excess interest and Charges
shall be (i) applied to the principal of such Advance, (ii) if it exceeds such unpaid principal of such Advance,
applied to the principal of other Advances held by such Lender, or (iii) if it exceeds such unpaid principal of
other Advances, refunded to the Borrower. The Borrower represents and warrants to the Lenders that, as of the
date of this Agreement, it falls into Article 2, Paragraph 1, Item 1 of the Act on Specified Commitment Line
Contract (Act No. 4 of 1999).
SECTION 9.20 English Language.
(a) Save where this Agreement expressly provides to the contrary, any notice given under or in connection
with this Agreement must be:
(i)
in English; or
(ii)
in any other language required in respect of such notice by applicable law and accompanied by a
certified English translation at the cost of the Borrower, which English translation will prevail in
all circumstances.
(b) All other documents provided under or in connection with this Agreement must be:
(i)
in English; or
(ii)
if not in English, and if so required by the Administrative Agent, accompanied by a certified
English translation at the cost of the Borrower and, in this case, the English translation will prevail
in all circumstances unless the document is a constitutional, statutory or other official document.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of the date first above written.
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TAKEDA PHARMACEUTICAL COMPANY
LIMITED, as Borrower
By: /s/ Costa Saroukos
Name: Costa Saroukos
Title: Chief Financial Officer
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
By: /s/ Takasuke Sekine
Name: Takasuke Sekine
Title: Managing Director
JPMORGAN CHASE BANK, N.A., TOKYO
BRANCH, as a Lender
By: /s/ Takasuke Sekine
Name: Takasuke Sekine
Title: Managing Director
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
SUMITOMO MITSUI BANKING
CORPORATION, as a Lender
By: /s/ Makoto Takashima
Name: Makoto Takashima
Title: Representative Director
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
MUFG BANK, LTD., as a Lender
By: /s/ Kanetsugu Mike
Name: Kanetsugu Mike
Title: Representative of the Board of Directors
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
MIZUHO BANK, LTD, as a Lender
By: /s/ Taku Ishikawa
Name: Taku Ishikawa
Title: General Manager
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
THE NORINCHUKIN BANK, as a Lender
By: /s/ Hiroshi Kamikawa
Name: Hiroshi Kamikawa
Title: General Manager
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
BANK OF AMERICA, N.A., TOKYO BRANCH,
as a Lender
By: /s/ Miwa Ohmori
Name: Miwa Ohmori
Title: Representative in Japan
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
BARCLAYS BANK PLC, TOKYO BRANCH,
as a Lender
By: /s/ Akio Kashima
Name: Akio Kashima
Title: Representative in Japan
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
BNP PARIBAS (ACTING THROUGH ITS TOKYO
BRANCH), as a Lender
By: /s/ Nicolas Pillet
Name: Nicolas Pillet
Title: Representative in Japan
By: /s/ Kimiyasu Nishino
Name: Kimiyasu Nishino
Title: Managing Director
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
SUMITOMO MITSUI TRUST BANK, LIMITED,
as a Lender
By: /s/ Shigenori Ikemura
Name: Shigenori Ikemura
Title: Executive Officer General Manager
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, TOKYO BRANCH,
as a Lender
By: /s/ Oliver Pacton
Name: Oliver Pacton
Title: President and Chief Executive Officer
Japan
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
NOMURA CAPITAL INVESTMENT CO, LTD,
as a Lender
By: /s/ Masahiro Goto
Name: Masahiro Goto
Title: President
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.,
TOKYO BRANCH, as a Lender
By: /s/ Michio Ryu
Name: Michio Ryu
Title: General Manager
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
BANK OF CHINA LIMITED, TOKYO BRANCH,
as a Lender
By: /s/ Fan Liping
Name: Fan Liping
Title: Deputy General Manager
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
COMMERZBANK AG TOKYO BRANCH,
as a Lender
By: /s/ Andrea Console
Name: Andrea Console
Title: Country CEO Japan
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
CRÈDIT AGRICOLE CORPORATE AND
INVESTMENT BANK, TOKYO BRANCH,
as a Lender
By: /s/ Antoine Sirgi
Name: Antoine Sirgi
Title: Senior Country Officer
By: /s/ Satoshi Oda
Name: Satoshi Oda
Title: Managing Director
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
DBS BANK LTD., TOKYO BRANCH, as a Lender
By: /s/ Takako Furuhashi
Name: Takako Furuhashi
Title: Branch Manager
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
ING BANK N.V., TOKYO BRANCH, as a Lender
By: /s/ Tetsuo Hoshiya
Name: Tetsuo Hoshiya
Title: Representative in Japan
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
INTESA SANPAOLO S.P.A. TOKYO BRANCH,
as a Lender
By: /s/ Roberto Bisagno
Name: Roberto Bisagno
Title: Representative in Japan
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
SOCIÈTÈ GÈNÈRALE, TOKYO BRANCH,
as a Lender
By: /s/ Kanta Murata
Name: Kanta Murata
Title: Deputy Branch Manager
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
STANDARD CHARTERED BANK, TOKYO
BRANCH, as a Lender
By: /s/ Hidekatsu Takamatsu
Name: Hidekatsu Takamatsu
Title: Director
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
WELLS FARGO BANK, NATIONAL
ASSOCIATION (ACTING THROUGH ITS
SINGAPORE BRANCH), as a Lender
By: /s/ James Chuin Chai Chie
Name: James Chuin Chai Chie
Title: Director
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
THE BANK OF NEW YORK MELLON, TOKYO
BRANCH, as a Lender
By: /s/ J. David Cruikshank
Name: J. David Cruikshank
Title: Chairman, Asia Pacific
Signature Page to
Term Loan Credit Agreement
CONFORMED COPY
SCHEDULE I
COMMITMENTS
LENDER
JPMORGAN CHASE BANK, N.A., TOKYO BRANCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMITOMO MITSUI BANKING CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MUFG BANK, LTD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MIZUHO BANK, LTD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE NORINCHUKIN BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BANK OF AMERICA, N.A., TOKYO BRANCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BARCLAYS BANK PLC, TOKYO BRANCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BNP PARIBAS (ACTING THROUGH ITS TOKYO BRANCH) . . . . . . . . . . . . . . . . . . . . . . .
SUMITOMO MITSUI TRUST BANK, LIMITED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED,
TOKYO BRANCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOMURA CAPITAL INVESTMENT CO, LTD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BANCO BILBAO VIZCAYA ARGENTARIA, S.A., TOKYO BRANCH . . . . . . . . . . . . . . . .
BANK OF CHINA LIMITED, TOKYO BRANCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMMERZBANK AG TOKYO BRANCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CRÈDIT AGRICOLE CORPORATE AND INVESTMENT BANK, TOKYO BRANCH . . . .
DBS BANK LTD., TOKYO BRANCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ING BANK N.V., TOKYO BRANCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INTESA SANPAOLO S.P.A. TOKYO BRANCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SOCIÈTÈ GÈNÈRALE, TOKYO BRANCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
STANDARD CHARTERED BANK, TOKYO BRANCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WELLS FARGO BANK, NATIONAL ASSOCIATION (ACTING THROUGH ITS
COMMITMENTS
$600,000,000.00
$900,000,000.00
$900,000,000.00
$750,000,000.00
$750,000,000.00
$543,750,000.00
$356,250,000.00
$356,250,000.00
$356,250,000.00
$356,250,000.00
$225,000,000.00
$127,840,909.09
$127,840,909.09
$127,840,909.09
$127,840,909.09
$127,840,909.09
$127,840,909.09
$127,840,909.09
$127,840,909.09
$127,840,909.09
SINGAPORE BRANCH) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE BANK OF NEW YORK MELLON, TOKYO BRANCH . . . . . . . . . . . . . . . . . . . . . . . . .
AGGREGATE COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$127,840,909.09
$127,840,909.10
$ 7,500,000,000
SCHEDULE II
CONFORMED COPY
ADMINISTRATIVE AGENT’S OFFICE; CERTAIN ADDRESSES FOR NOTICE
BORROWER:
Takeda Pharmaceutical Company Limited
Corporate Finance Department
12-10, Nihonbashi 2-chome, Chuo-ku, Tokyo 103-8668 Japan
Attention: Chief Financial Officer
Telephone: 03-3278-2284
Facsimile: 03-3278-2198
cc:
Takeda Pharmaceutical Company Limited
One Takeda Parkway
Deerfield, IL 60015
Attention: General Counsel
Facsimile No.: (224) 554-7831
CONFORMED COPY
ADMINISTRATIVE AGENT:
In the case of requests for Borrowings and other notices
JPMorgan Chase Bank, N.A.
Tokyo Building
7-3, Marunouchi 2-chome, Chiyoda-ku,
Tokyo 100-6432
Attention: Loan Agency Tokyo Branch
Facsimile: +81-3-6388-2534
E-Mail: loan.agency.tokyo.branch@jpmorgan.com
CONFORMED COPY
EXHIBIT A
FORM OF NOTICE OF BORROWING
JPMorgan Chase Bank, N.A.,
as Administrative Agent
JPMorgan Chase Bank, N.A.
Tokyo Building
7-3, Marunouchi 2-chome, Chiyoda-ku,
Tokyo 100-6432
Attention: Loan Agency Tokyo Branch
Facsimile: +81-3-6388-2534
Ladies and Gentlemen:
[Date]
Reference is hereby made to the Term Loan Credit Agreement dated as of June 8, 2018 (as the same
may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”),
among Takeda Pharmaceutical Company Limited (the “Borrower”), the Lenders from time to time party thereto
and JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the “Administrative Agent”).
Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit
Agreement. This notice constitutes a Notice of Borrowing and the Borrower hereby requests an Advance under
the Credit Agreement, and in that connection the Borrower specifies the following information with respect to
the Advance requested hereby:
1.
Principal amount of Advance:
2. Date of Advance (which is a Business Day):
3. Currency of Advance:
4.
5.
[Interest Period1]
Location and number of the Borrower’s account to which proceeds of Advance are to be disbursed:
I, [
], hereby certify that I am the duly elected, qualified and acting [
] of the Borrower,
and that, as such, I am authorized to execute and deliver this certificate on behalf of the Borrower. I further
certify that, as of the date hereof, (x) no Certain Funds Default is continuing or would result from the borrowing
requested herein and (y) all the Certain Funds Representations are true, or, if a Certain Funds Representation
does not include a materiality construct, true in all material respects.
[Signature Page Follows]
1
Applicable only in case of a Eurocurrency Rate Advance; if included, must comply with the definition of “Interest Period” and end not
later than the Maturity Date.
IN WITNESS WHEREOF, the undersigned has caused this Notice of Borrowing to be executed and
delivered as of the date first above written.
CONFORMED COPY
Very truly yours,
TAKEDA PHARMACEUTICAL COMPANY
LIMITED, as the Borrower
By:
Name:
Title:
EXHIBIT B
FORM OF ASSIGNMENT AND ACCEPTANCE
CONFORMED COPY
This Assignment and Acceptance (the “Assignment and Acceptance”) is dated as of the Assignment
Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert
name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given
to them in the Credit Agreement identified below (as amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee.
The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated
herein by reference and made a part of this Assignment and Acceptance as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the
Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the
Standard Terms and Conditions and the Credit Agreement, as of the Assignment Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a
Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the
extent related to the amount and percentage interest identified below of all of such outstanding rights and
obligations of the Assignor under the respective facilities identified below and (ii) to the extent permitted to be
assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its
capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the
Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract
claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the
rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned
pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale
and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and
Acceptance, without representation or warranty by the Assignor.
1. Assignor:
2. Assignee:
[and is an Affiliate of [identify Lender]2]
3. Borrower:
Takeda Pharmaceutical Company Limited
4. Administrative
JPMorgan Chase Bank, N.A., as the administrative agent under the Credit Agreement
The Term Loan Credit Agreement dated as of June 8, 2018 among Takeda
Pharmaceutical Company Limited, as borrower,
the Lenders parties thereto and
JPMorgan Chase Bank, N.A., as Administrative Agent
Agent:
5. Credit Agreement:
6. Assigned Interest:
2
Select as applicable.
Aggregate Amount of
Commitment/Advances for all
Lenders
[$/€]
[$/€]
[$/€]
Amount of
Commitment/Advances Assigned
[$/€]
[$/€]
[$/€]
CONFORMED COPY
Percentage Assigned of
Commitment/Advances3
%
%
%
Assignment Date:
[TO BE INSERTED BY ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE ASSIGNMENT DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]
, 20
The Assignee agrees to deliver to the Administrative Agent a completed Administrative Questionnaire
in which the Assignee designates one or more credit contacts to whom all syndicate-level information (which
may contain material non-public information about the Borrower and their Related Parties or their respective
securities) will be made available and who may receive such information in accordance with the Assignee’s
compliance procedures and applicable laws, including U.S. Federal and state securities laws.
The terms set forth in this Assignment and Acceptance are hereby agreed to:
ASSIGNOR
[NAME OF ASSIGNOR]
By:
Name:
Title:
ASSIGNEE
[NAME OF ASSIGNEE]
By:
Name:
Title:
[Consented to and]4 Accepted:
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
By:
Name:
Title:
[Consented to:]5
TAKEDA PHARMACEUTICAL COMPANY
LIMITED
By:
Name:
Title:
3
4
5
Set forth, to at least 9 decimals, as a percentage of the Commitment/Advances of all Lenders thereunder.
To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.
To be added only if the consent of the Borrower is required by the terms of the Credit Agreement.
Exhibit B-2
CONFORMED COPY
ANNEX I
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ACCEPTANCE
1. Representations and Warranties.
1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of
the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim
and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this
Assignment and Acceptance and to consummate the transactions contemplated hereby; and (b) assumes no
responsibility with respect to (i) any statements, warranties or representations made in or in connection with the
Credit Agreement, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement or any collateral
thereunder, (iii) the financial condition of the Borrower, any of its
Subsidiaries or Affiliates or any other Person obligated in respect of the Credit Agreement or (iv) the
performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of
their respective obligations under the Credit Agreement.
1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has
taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the
transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire
the Assigned Interest and become a Lender, (iii) from and after the Assignment Date, it shall be bound by the
provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have
the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the
type represented by the Assigned Interest and either it, or the Person exercising discretion in making its decision
to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the
Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01
thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance and to purchase the Assigned Interest
on the basis of which it has made such analysis and decision independently and without reliance on the
Administrative Agent, any Arranger or any other Lender and their respective Related Parties, and (vi) attached to
the Assignment and Acceptance is any documentation required to be delivered by it pursuant to the terms of the
Credit Agreement, duly completed and executed by the Assignee; (b) makes for itself as of the date hereof rather
than the Effective Date, the representation and warranty concerning each Lender set forth in Section 9.18 of the
Credit Agreement and (c) agrees that (i) it will, independently and without reliance on the Administrative Agent,
any Arranger, the Assignor or any other Lender and their respective Related Parties, and based on such
documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement, and (ii) it will perform in accordance with their terms all
of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender.
2. Payments. From and after the Assignment Date, the Administrative Agent shall make all payments
in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the
Assignor for amounts which have accrued to but excluding the Assignment Date and to the Assignee for amounts
which have accrued from and after the Assignment Date.
3. General Provisions. This Assignment and Acceptance shall be binding upon, and inure to the benefit
of, the parties hereto and their respective successors and assigns. This Assignment and Acceptance may be
executed in any number of counterparts, which together shall constitute one instrument. Acceptance and adoption
Exhibit B-3
of the terms of this Assignment and Acceptance by the Assignee and the Assignor by Electronic Signature or
delivery of an executed counterpart of a signature page of this Assignment and Acceptance by any Electronic
System shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance.
This Assignment and Acceptance shall be governed by, and construed in accordance with, the law of the State of
New York.
CONFORMED COPY
Exhibit B-4
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
CONFORMED COPY
JPMorgan Chase Bank, N.A.
Tokyo Building
7-3, Marunouchi 2-chome, Chiyoda-ku,
Tokyo 100-6432
Attention: Loan Agency Tokyo Branch
Facsimile: +81-3-6388-2534
Ladies and Gentlemen:
[Date]
Reference is hereby made to the Term Loan Credit Agreement dated as of June 8, 2018 (as the same
may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”),
among Takeda Pharmaceutical Company Limited (the “Borrower”), the Lenders from time to time party thereto
and JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the “Administrative Agent”).
Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit
Agreement.
The undersigned is the [Chief Executive Officer / Chief Financial Officer / Treasurer] of the
Borrower (the “Authorized Officer”) and, as such, the undersigned is authorized to execute and deliver this
Compliance Certificate to the Administrative Agent on behalf of the Borrower in accordance with Section
5.01(i)(iii) of the Credit Agreement. The Authorized Officer hereby certifies as follows, in his/her capacity as an
officer of the Borrower and not in his/her individual capacity:
1.
2.
3.
I have reviewed the terms of the Credit Agreement and I have made, or caused to be made under my
supervision, a review in reasonable detail of the transactions and conditions of the Consolidated Group
during the accounting period covered by the financial statements attached hereto as Annex I [for
quarterly financial statements add: and such financial statements have been prepared in accordance
with IFRS (subject to the absence of footnotes and year end audit adjustments); [and]
The examinations described in paragraph 1 did not disclose[, except as set forth below], and I have no
knowledge of the existence of any condition or event which constitutes a Default or Event of Default
during or at the end of the accounting period covered by the attached financial statements or as of the
date of this Compliance Certificate; [and]
a.
[Please specify in reasonable detail each condition or event which constitutes a Default or
Event of Default and any action taken or proposed to be taken with respect thereto]; [and]
[The Borrower is in compliance with the Consolidated Net Debt to Consolidated EBITDA covenant
contained in Section 5.03 of the Credit Agreement as shown in the calculations attached hereto as
Annex II.]
CONFORMED COPY
ANNEX I
FINANCIAL STATEMENTS FOR PERIOD ENDING [
]
[To be attached.]
Exhibit C-2
ANNEX II
CALCULATION OF CONSOLIDATED NET DEBT TO CONSOLIDATED EBITDA RATIO
CONFORMED COPY
[To be attached.]
Exhibit C-3
Exhibit 10.8
CONFORMED COPY
AMENDMENT NO. 2
Dated as of October 26, 2018
to
364-DAY BRIDGE CREDIT AGREEMENT
Dated as of May 8, 2018
THIS AMENDMENT NO. 2 (this “Amendment”) is made as of October 26, 2018 by and among
Takeda Pharmaceutical Company Limited, a joint-stock company organized and existing under the laws of
Japan, (the “Company”), the financial institutions listed on the signature pages hereof and JPMorgan Chase
Bank, N.A., as Administrative Agent (the “Administrative Agent”), under that certain 364-Day Bridge Credit
Agreement dated as of May 8, 2018 by and among the Company, the Lenders and the Administrative Agent (as
amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Credit
Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings
given to them in the Credit Agreement.
WHEREAS, the Company has requested that the requisite Lenders and the Administrative Agent agree
to make certain amendments to the Credit Agreement;
WHEREAS, the Company, the Lenders party hereto and the Administrative Agent have so agreed on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions
contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company, the Lenders party hereto and the Administrative Agent hereby agree to enter into
this Amendment.
1. Amendments to the Credit Agreement. Effective as of the Amendment No. 2 Effective Date (as
defined below), the parties hereto agree that the Credit Agreement is hereby amended as follows:
(a) Section 1.01 of the Credit Agreement is hereby amended to add the following definitions thereto in
the appropriate alphabetical order:
“Japanese Senior Short-Term Loan Facility Agreement” means that certain Senior Short-Term Loan
Facility Agreement dated as of October 26, 2018 (as in effect on such date and without giving effect to any
subsequent amendments, waivers or modifications thereto), by and among the Borrower, Sumitomo Mitsui
Banking Corporation and MUFG Bank, Ltd., as lead arrangers, Mizuho Bank, Ltd., The Norinchukin Bank and
Sumitomo Mitsui Trust Bank, Limited, as arrangers and the lenders party thereto, providing for a term loan
facility which on its terms shall automatically mature upon the earlier of (i) the term of such loan facility, which
shall be a period of one, two, three or six months as selected by the Borrower in the relevant notice of borrowing;
or, (ii) the date on which such loan facility is actually and fully repaid with proceeds of the Japanese Hybrid Loan
Facility Agreement or any hybrid notes (other than hybrid notes issued in a currency other than Japanese Yen) or
otherwise in accordance with Section 2.06(a) thereof.
“Japanese Hybrid Loan Facility Agreement” means that certain Subordinated Syndicated Loan
Agreement dated as of October 26, 2018 (as in effect on such date and without giving effect to any subsequent
amendments, waivers or modifications thereto), by and among the Borrower, Sumitomo Mitsui Banking
CONFORMED COPY
Corporation and MUFG Bank, Ltd., as lead arrangers, Mizuho Bank, Ltd., The Norinchukin Bank and Sumitomo
Mitsui Trust Bank, Limited, as arrangers and the lenders party thereto, providing for a 60-year hybrid loan
facility.
(b) The penultimate paragraph appearing in Section 2.05(d) of the Credit Agreement is hereby
amended to add the following proviso immediately prior to the period appearing at the end of the first sentence
appearing therein:
“; provided that (i) notwithstanding the foregoing, mandatory prepayments or Commitment reductions
in respect of any commitments, loans and advances under the Japanese Senior Short-Term Loan
Facility Agreement shall be applied in accordance with clause (b) of this paragraph and (ii) for the
avoidance of doubt, the credit facility under the Japanese Senior Short-Term Loan Facility Agreement
constitutes a “Qualifying Committed Financing” hereunder”
(c) Section 5.01(i) of the Credit Agreement is hereby amended to add the following Subparagraphs
(vii) and (viii) and to renumber Subparagraph (vii) to Subparagraph (ix):
“(vii) promptly after the entry into by the Borrower or any of its Subsidiaries of any transaction
documents in respect of any hybrid notes (other than any hybrid notes to be issued in a currency
other than Japanese Yen and any hybrid notes that are not identified by the Borrower to be used
for Certain Funds Purposes) to be issued before drawdown of the loan facility under the Japanese
Senior Short- Term Loan Facility Agreement, evidence that the Japanese Senior Short-Term Loan
Facility Agreement has been cancelled by the incurrence of hybrid indebtedness pursuant to such
hybrid notes;
(viii) promptly after the submission of a drawdown notice under the Japanese Hybrid Loan Facility
Agreement or the entry into transaction documents in respect of any hybrid notes (other than any
hybrid notes to be issued in a currency other than Japanese Yen) after a drawdown of the loan
facility under the Japanese Senior Short-Term Loan Facility Agreement, evidence that
the
Japanese Senior Short- Term Loan Facility Agreement has been prepaid using the proceeds of the
Japanese Hybrid Loan Facility Agreement or such hybrid notes; and”
2. Conditions of Effectiveness. The effectiveness of this Amendment (the “Amendment No. 2 Effective
Date”) is subject to the following conditions precedent:
(a) The Administrative Agent shall have received counterparts of this Amendment duly executed by the
Company and the Required Lenders.
(b) The Administrative Agent shall have received payment of the Administrative Agent’s and its
affiliates’ fees and reasonable out-of-pocket expenses (including the reasonable fees, charges and disbursements
of counsel for the Administrative Agent) in connection with the Loan Documents to the extent invoiced at least
one (1) Business Day prior to the Amendment No. 2 Effective Date.
3. Representations and Warranties of the Company. The Company hereby represents and warrants that
this Amendment has been duly executed and delivered by the Company. This Amendment and the Credit
Agreement as amended hereby constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally and general principles of equity
(whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.
2
CONFORMED COPY
4. Reference to and Effect on the Credit Agreement.
(a) Upon the Amendment No. 2 Effective Date, each reference in the Credit Agreement to “this
Agreement”, “hereunder”, “hereof”, “herein”, or words of like import, and each reference to the Credit
Agreement in any other Loan Document shall be deemed a reference to the Credit Agreement as amended
hereby.
(b) Each Loan Document and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.
(c) Except with respect to the subject matter hereof or otherwise confirmed specifically in writing, the
execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or
remedy of the Administrative Agent, the Lenders or the Borrower, nor constitute a waiver thereby of any
provision of the Credit Agreement, the Loan Documents or any other documents, instruments and agreements
executed and/or delivered in connection therewith, which shall remain unchanged and binding on such parties.
(d) This Amendment is a Loan Document under (and as defined in) the Credit Agreement.
5. Governing Law. This Amendment shall be construed in accordance with and governed by the law of
the State of New York.
6. Headings. Section headings in this Amendment are included herein for convenience of reference
only and shall not constitute a part of this Amendment for any other purpose.
7. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number
of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the
same instrument. Signatures delivered by facsimile or PDF shall have the same force and effect as manual
signatures delivered in person.
[Signature Pages Follow]
3
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above
written.
CONFORMED COPY
TAKEDA PHARMACEUTICAL COMPANY
LIMITED,
as the Company
By: /s/ Costa Saroukos
Name: Costa Saroukos
Title: Chief Financial Officer
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
By: /s/ Takasuke Sekine
Name: Takasuke Sekine
Title: Managing Director
JPMORGAN CHASE BANK, N.A., TOKYO
BRANCH, as a Lender
By: /s/ Takasuke Sekine
Name: Takasuke Sekine
Title: Managing Director
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
SUMITOMO MITSUI BANKING CORPORATION,
as a Lender
By: /s/ Makoto Takashima
Name: Makoto Takashima
Title: Representative Director
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
MUFG BANK, LTD., as a Lender
By: /s/ Ichiro Numajima
Name: Ichiro Numajima
Title: Executive Officer
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
MIZUHO BANK, LTD, as a Lender
By: /s/ Taku Ishikawa
Name: Taku Ishikawa
Title: General Manager
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
THE NORINCHUKIN BANK, as a Lender
By: /s/ Hiroshi Kamikawa
Name: Hiroshi Kamikawa
Title: General Manager
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
BANK OF AMERICA, N.A., TOKYO BRANCH,
as a Lender
By: /s/ Miwa Ohmori
Name: Miwa Ohmori
Title: Representative in Japan
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
BARCLAYS BANK PLC, TOKYO BRANCH, as a
Lender
By: /s/ Akio Kashima
Name: Akio Kashima
Title: Representative in Japan
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
BNP PARIBAS (ACTING THROUGH ITS TOKYO
BRANCH) , as a Lender
/s/ Nicolas Pillet
By:
Name: Nicolas Pillet
Title: Representative in Japan
/s/ Tatsuhisa Ishikawa
By:
Name: Tatsuhisa Ishikawa
Title: Deputy General Manager
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
SUMITOMO MITSUI TRUST BANK, LIMITED,
as a Lender
By: /s/ Shigenori Ikemura
Name: Shigenori Ikemura
Title: Executive Officer General Manager
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED, TOKYO BRANCH,
as a Lender
By: /s/ Olivier Pacton
Name: Olivier Pacton
Title: President and Chief Executive Officer
Japan
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
NOMURA CAPITAL INVESTMENT CO, LTD,
as a Lender
By: /s/ Masahiro Goto
Name: Masahiro Goto
Title: President and Chief Executive Officer
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.,
TOKYO BRANCH, as a Lender
By: /s/ Michio Ryu
Name: Michio Ryu
Title: General Manager
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
BANK OF CHINA LIMITED, TOKYO BRANCH,
as a Lender
/s/ Zhao Haiqing
By:
Name: Zhao Haiqing
Title: Deputy General Manager
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
COMMERZBANK AG TOKYO BRANCH, as a
Lender
/s/ Andrea Console
By:
Name: Andrea Console
Title: Country CEO Japan
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
AGRICOLE
CRÈDIT
AND
INVESTMENT BANK, TOKYO BRANCH, as a
Lender
CORPORATE
By: /s/ Antoine Sirgi
Name: Antoine Sirgi
Title: Senior Country Officer
By: /s/ Satoshi Oda
Name: Satoshi Oda
Title: Managing Director
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
DBS BANK LTD., TOKYO BRANCH, as a Lender
By: /s/ Takako Furuhashi
Name: Takako Furuhashi
Title: Branch Manager
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
ING BANK N.V., TOKYO BRANCH, as a Lender
By: /s/ Katsuhiko Kado
Name: Katsuhiko Kado
Title: Director
By: /s/ Yuichi Hirasawa
Name: Yuichi Hirasawa
Title: Director
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
INTESA SANPAOLO S.P.A. TOKYO BRANCH,
as a Lender
By: /s/ Roberto Bisagno
Name: Roberto Bisagno
Title: General Manager
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
SOCIÈTÈ GÈNÈRALE, TOKYO BRANCH, as a
Lender
By: /s/ Kanta Murata
Name: Kanta Murata
Title: Deputy Branch Manager
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
STANDARD CHARTERED BANK, TOKYO
BRANCH, as a Lender
By: /s/ Sho Takeuchi
Name: Sho Takeuchi
Title: Associate Director
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
CONFORMED COPY
FARGO
WELLS
ASSOCIATION
SINGAPORE BRANCH), as a Lender
(ACTING
BANK,
NATIONAL
ITS
THROUGH
By: /s/ James Chiun Chai Chie
Name: James Chiun Chai Chie
Title: Director
Signature Page to Amendment No. 2 to
364-Day Bridge Credit Agreement
Exhibit 10.9
CONFORMED COPY
500,000,000,000 Yen
SENIOR SHORT-TERM LOAN FACILITY AGREEMENT
Dated as of October 26, 2018
among
TAKEDA PHARMACEUTICAL COMPANY LIMITED,
as Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as Lenders,
and
SUMITOMO MITSUI BANKING CORPORATION,
as Administrative Agent
SUMITOMO MITSUI BANKING CORPORATION and MUFG BANK, LTD,
as Lead Arrangers and Bookrunners
and
MIZUHO BANK, LTD,
as Arranger and Bookrunner
and
THE NORINCHUKIN BANK and SUMITOMO MITSUI TRUST BANK, LIMITED,
as Arrangers
TABLE OF CONTENTS
CONFORMED COPY
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.02 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.03 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.04 Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.05 Jersey Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.06 Currency Translations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.01 The Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.02 Making the Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.03 [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.04 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.05 Termination or Reduction of the Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.06 Repayment of the Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.07 Interest on the Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.08 Interest Rate Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.09 [Reserved]
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.10 Optional Prepayments of the Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.11 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.12 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.13 Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.15 Sharing of Payments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.16 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.17 Evidence of Debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.18 [Reserved]
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.19 Defaulting Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.20 Mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.01 Conditions Precedent to Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.02 Conditions Precedent to Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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CONFORMED COPY
SECTION 3.03 Conditions to the Advance after the Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.04 Actions by Lenders During the Certain Funds Period . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.01 Representations and Warranties of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.02 Representations and Warranties of the Lenders and the Borrower . . . . . . . . . . . . .
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.01 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.02 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.03 Financial Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VI EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.01 Events of Default
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VII THE AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.01 Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.02 Administrative Agent Individually . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.03 Duties of Administrative Agent; Exculpatory Provisions . . . . . . . . . . . . . . . . . . . .
SECTION 7.04 Reliance by Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.05 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.06 Resignation of Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.07 Non-Reliance on Administrative Agent and Other Lenders . . . . . . . . . . . . . . . . . .
SECTION 7.08 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.09 Other Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VIII [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.01 Amendments, Etc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.02 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.03 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.04 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.05 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.06 Binding Effect
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.07 Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.08 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.09 Debt Syndication during the Certain Funds Period . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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CONFORMED COPY
SECTION 9.11 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.12 Jurisdiction, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.13 Patriot Act Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.14 No Advisory or Fiduciary Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.15 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.16 Conversion of Currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.17 Acknowledgement and Consent to Bail-In of EEA Financial Institutions . . . . . . .
SECTION 9.18 Certain ERISA Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.19 Interest Rate Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.20 English Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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SCHEDULES
Schedule I
Schedule II
EXHIBITS
Exhibit A
Exhibit B
Exhibit C
-
-
-
-
-
Commitments
Administrative Agent’s Office; Certain Addresses for Notices
Form of Notice of Borrowing
Form of Assignment and Acceptance
Form of Compliance Certificate
iii
SENIOR SHORT TERM LOAN FACILITY AGREEMENT
This Senior Short-Term Loan Facility Agreement (this “Agreement”) dated as of October 26, 2018 is
among Takeda Pharmaceutical Company Limited, a joint-stock company organized and existing under the laws
of Japan (the “Borrower”), the Lenders (as defined below) that are parties hereto, and Sumitomo Mitsui Banking
Corporation, as Administrative Agent (as defined below) for the Lenders.
CONFORMED COPY
RECITALS
WHEREAS, the Borrower intends to directly or indirectly acquire (the “Target Acquisition”) pursuant
to the Offer Documents or Scheme Documents, as applicable (each as defined below) all of the outstanding
shares of the Target which are subject to the Scheme or Takeover Offer (as the case may be), which acquisition
will be effected pursuant to a Scheme or a Takeover Offer (each as defined below).
WHEREAS, in connection with the Target Acquisition, the Borrower has requested that the Lenders
extend credit to the Borrower in the form of term loans in an aggregate principal amount not to exceed
500,000,000,000 Yen with the proceeds to be applied towards the Certain Funds Purposes (as defined below).
IN CONSIDERATION THEREOF the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01
Certain Defined Terms.
As used in this Agreement, the following terms shall have the following meanings (such meanings to
be equally applicable to both the singular and plural forms of the terms defined):
“Acceptance Condition” means, in respect of a Takeover Offer, the condition to the Takeover Offer
with respect to the number of acceptances to the Takeover Offer which must be secured to declare the
Takeover Offer unconditional as to acceptances (as set out in the Offer Press Announcement.
“Acquisition” means any acquisition (whether by purchase, merger, consolidation or otherwise) or
series of related acquisitions by the Parent or any Subsidiary after the Effective Date of (i) at least a majority
of the assets of (or at least a majority of the assets constituting a business unit, division, product line or line
of business of) any Person, or (ii) at least the majority of the Equity Interests in a Person or division or line
of business of a Person.
“Administrative Agent” means Sumitomo Mitsui Banking Corporation (including its branches and
affiliates), in its capacity as administrative agent for the Lenders hereunder, together with any successor
thereto appointed pursuant to Article VII, the “Administrative Agent”.
“Administrative Agent’s Office” means the Administrative Agent’s address as set forth on Schedule II, or
such other address as the Administrative Agent may from time to time notify to the Borrower and the Lenders.
“Administrative Questionnaire” means an administrative questionnaire in the form supplied by the
Administrative Agent.
“Advance” means the advance by a Lender pursuant to its Commitment to the Borrower as part of the
Borrowing.
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“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, controls, is
controlled by or is under common control with such Person or is a director or officer of such Person. For
purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under
common control with”) of a Person means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of such Person, whether through the ownership of Voting
Stock, by contract or otherwise.
“Agent Parties” has the meaning set forth in Section 9.02(b).
“Agents” means, collectively, the Administrative Agent, the Lead Arrangers and the Arranger.
“Agreement” has the meaning set forth in the introduction hereto.
“Agreement Currency” has the meaning set forth in Section 9.16.
“Agreement Value” means, with respect to any Hedge Agreement at any date of determination, the
amount, if any, that would be payable to any counterparty thereunder in respect of the “agreement value”
under such Hedge Agreement if such Hedge Agreement were terminated on such date, calculated as
provided in the International Swap Dealers Association, Inc. Code of Standard Wording, Assumptions and
Provisions for Swaps, 1986 Edition.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the
Borrower or any of its Subsidiaries from time to time concerning or relating to bribery or corruption.
“Anti-Social Conduct” means (i) a demand and conduct with force and arms; (ii) an unreasonable
demand and conduct having no legal cause; (iii) threatening or committing violent behavior relating to its
business transactions; (iv) an action to defame the reputation or interfere with the business of any Lender by
spreading rumor, using fraudulent means or resorting to force; or (v) other actions similar or analogous to
any of the foregoing in any jurisdiction.
“Anti-Social Group” means (i) an organized crime group (as defined in the Law relating to Prevention
of Unjustifiable Acts by Gang Members of Japan (Law No. 77 of 1991, as amended)); (ii) a member of an
organized crime group; (iii) a person who used to be a member of an organized crime group but has only
ceased to be a member of an organized crime group for a period of less than 5 years; (iv) quasi-member of
an organized crime group; (v) a related or associated company of an organized crime group; (vi) a corporate
racketeer or blackmailer advocating social cause or a special intelligence organized crime group; or (vii) a
member of any other criminal force similar or analogous to any of the foregoing in any jurisdiction.
“Anti-Social Relationship” means in relation a Person, (i) an Anti-Social Group controls its
management; (ii) an Anti-Social Group is substantively involved in its management; (iii) it has entered into
arrangements with an Anti-Social Group for the purpose of, or which have the effect of, unfairly benefiting
itself or a third party or prejudicing a third party; (iv) it is involved in the provision of funds or other
benefits to an Anti-Social Group; or (v) any of its directors or any other person who is substantively
involved in its management has a socially objectionable relationship with an Anti-Social Group.
“Applicable Creditor” has the meaning set forth in Section 9.16.
“Applicable Lending Office” means, with respect to any Lender, the office of such Lender specified as
its “Applicable Lending Office” or similar concept in its Administrative Questionnaire or in the Assignment
and Acceptance pursuant to which it became a Lender, or such other office, branch, Subsidiary or affiliate of
such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.
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“Applicable Margin” means 0.10%.
“Arrangers” means Mizuho Bank, Ltd., The Norinchukin Bank and Sumitomo Mitsui Trust Bank,
Limited.
“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an
Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit B hereto
(or such other form as is agreed upon by the Borrower and the Administrative Agent).
“Availability Period” means the period starting on the Closing Date and ending on the Commitment
Termination Date.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable
EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of
Directive 2014/59/EU of the European Parliament and of the Council of the European Union,
the
implementing law for such EEA Member Country from time to time which is described in the EU Bail-In
Legislation Schedule.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that
is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code to which Section 4975 of
the Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or
otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee
benefit plan” or “plan”.
“Board” means the Board of Governors of the Federal Reserve System of the United States of America.
“Borrowed Debt” means any Debt for money borrowed, including loans, hybrid securities, debt
convertible into Equity Interests and any Debt represented by notes, bonds, debentures or other similar
evidences of Debt for money borrowed.
“Borrower” has the meaning set forth in the recitals of this Agreement.
“Borrower Materials” has the meaning specified in Section 5.01.
“Borrowing” means the borrowing consisting of a simultaneous Advance of the same Type made by
each of the Lenders to the Borrower pursuant to Section 2.01.
“Borrowing Minimum” means 100,000,000 Yen.
“Borrowing Multiple” means an integral multiple of 100,000,000 Yen.
“Bridge Credit Agreement” has the meaning specified in the definition of “Bridge Facility”.
“Bridge Facility” means the commitments and any advances made under the 364-Day Bridge Credit
Agreement, dated as of May 8, 2018 (the “Bridge Credit Agreement”), among Takeda Pharmaceutical
Company Limited, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.
“Bridge Facility Effective Date” means May 8, 2018.
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“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks
are authorized to close under the laws of, or are in fact closed in Tokyo and any day on which dealings in
Yen are conducted by and between banks in the Japan interbank Yen market.
“CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability
Information System maintained by the U.S. Environmental Protection Agency.
“Certain Funds Default” means an Event of Default arising from any of the following (other than in
respect of any Subsidiary of the Borrower, the Target or any Subsidiary of the Target, or a breach of a
procurement obligation with respect to any Subsidiary of the Borrower, the Target or any Subsidiary of the
Target):
(i) Section 6.01(a) (in so far as it relates to payment of principal and/or interest);
(ii) Section 6.01(b) as it relates to a Certain Funds Representation;
(iii) Section 6.01(c) as
the following covenants:
(A) Sections 5.01(d)(i) or (j) (other than paragraph (ix), (x) and (xii) thereof) or (B) Sections 5.02(a),
(b) or (d);
to the failure to perform any of
relates
it
(iv) Section 6.01(e) in relation to the Borrower, but excluding, in relation to involuntary proceedings
referenced therein, any Event of Default caused by a frivolous or vexatious action, proceeding or
petition in respect of which no order or decree in respect of such involuntary proceeding shall have
been entered; or
(v) Section 6.01(i).
“Certain Funds Period” means the period commencing on the Effective Date and ending on the date on
which a Mandatory Cancellation Event occurs, for the avoidance of doubt, on such date but immediately
after the relevant Mandatory Cancellation Event occurs or first exists.
“Certain Funds Purposes” means:
(i) where the Target Acquisition proceeds by way of a Scheme:
(a)
(b)
(c)
(d)
payment (directly or indirectly) of the cash price payable by the Borrower to the holders of the
Scheme Shares in consideration of the acquisition of such Scheme Shares pursuant to the Scheme;
financing (directly or indirectly) the consideration payable to holders of options to acquire
Target Shares pursuant to any proposal in respect of those options as required by the City Code;
financing (directly or indirectly) the fees, costs and expenses in respect of the Transactions; and
repayment of certain Existing Target Indebtedness (which the Borrower may from time to time
elect); or
(ii) where the Target Acquisition proceeds by way of a Takeover Offer:
(a)
payment (directly or indirectly) of all or part of the cash price payable by the Borrower to the
holders of the Target Shares subject to the Takeover Offer in consideration of the acquisition of
such Target Shares pursuant to the Takeover Offer;
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(b)
(c)
(d)
(e)
payment (directly or indirectly) of the cash consideration payable to the holders of Target Shares
pursuant to the operation by Borrower of the procedures contained in Articles 117 and 121 of the
Jersey Companies Law;
financing (directly or indirectly) the consideration payable to holders of options to acquire Target
Shares pursuant to any proposal in respect of those options as required by the City Code;
financing (directly or indirectly) the fees, costs and expenses in respect of the Transactions; and
repayment of certain Existing Target Indebtedness (which the Borrower may from time to time
elect).
“Certain Funds Representations” means each of the following: (1) Sections 4.01(a), (b)(i), (b)(ii) and
(b)(iii); (2) Section 4.01(c) and (d); (3) Section 4.01(q); and (4) Section 4.01(t), (u)(ii) and (v) (but only to
the extent they relate to the then current actual method of the Target Acquisition), in each case only insofar
as it relates to the Borrower (excluding, for the avoidance of doubt, any Subsidiary of the Borrower, Target
or any Subsidiary of Target).
“Charges” has the meaning specified in Section 9.19.
“City Code” means the City Code on Takeovers and Mergers applicable, inter alia, to takeovers of
listed companies in the United Kingdom and to Jersey listed companies pursuant to the Companies
(Takeovers and Mergers Panel) (Jersey) Law 2009.
“Clean-up Date” has the meaning set forth in Section 6.01.
“Closing Date” means the date on which each of the conditions set forth in Section 3.02 have been
satisfied (or waived in accordance with Section 9.01).
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Commitment” means, as to any Lender, the commitment of such Lender to make the Advance
pursuant to Section 2.01(a), as such commitment may be reduced from time to time pursuant to the terms
hereof. The initial amount of each Lender’s Commitment is (a) the amount set forth in the column labeled
“Commitment” opposite such Lender’s name on Schedule I hereto, or (b) if such Lender has entered into
any Assignment and Acceptance, the amount set forth for such Lender in the Register maintained by the
Administrative Agent pursuant to Section 9.07(d), as such amount may be reduced pursuant to Section 2.05.
As of the Effective Date, the aggregate amount of the Commitments is 500,000,000,000 Yen as such
amount may be reduced in accordance with Section 2.05 or 6.01.
“Commitment Termination Date” means the date on which a Mandatory Cancellation Event occurs, for
the avoidance of doubt, on such date but immediately after the relevant Mandatory Cancellation Event
occurs or first exists.
“Consolidated” refers to the consolidation of accounts in accordance with IFRS.
“Consolidated EBITDA” means, for any fiscal period, the Consolidated net profit of the Consolidated
Group for such period determined in accordance with IFRS plus the following, to the extent deducted in
calculating such Consolidated net profit: (a) the provision for Federal, state, local and foreign taxes based on
income, profits, revenue, business activities, capital or similar measures payable by the Consolidated Group
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in each case, as set forth on the financial statements of the Consolidated Group, (b) share of loss of
investments accounted for using the equity method, (c) Consolidated Interest Expense and dividend
expense, (d) any losses (including all fees and expenses or charges relating thereto) on the retirement of
debt, (e) any extraordinary, unusual, nonrecurring or non-cash impairments, charges, expenses or losses
(including impairments, charges, fees, expenses and losses incurred in connection with the Transactions or
any issuance of Debt or equity, acquisitions, investments, restructuring activities, asset sales or divestitures
permitted hereunder, purchase accounting effects, derivatives transactions and other finance expenses and
other operating expenses), (f) non-cash stock option expenses, non-cash equity-based compensation and/or
non-cash expenses related to stock-based compensation, (g) any foreign currency exchange losses, (h) losses
(including all fees and expenses or charges relating thereto) on sales of assets outside of the ordinary course
of business and losses from discontinued operations and (i) depreciation and amortization expense and
minus, to the extent included in calculating such Consolidated net profit for such period, the sum of (i) share
of profit of investments accounted for using the equity method, (ii) interest and dividend income, (iii) any
gains (less all fees and expenses or charges relating thereto) on the retirement of debt, (iv) any
extraordinary, unusual, nonrecurring or non-cash income (including other finance income ), (v) gains (less
all fees and expenses or charges relating thereto) on the sales of assets outside of the ordinary course of
business and gains from discontinued operations (without duplication of any amounts added back in clause
(a) of this definition) and (vi) any foreign currency exchange gains, all as determined on a Consolidated
basis. Consolidated EBITDA will be calculated on a pro forma basis as if the Transactions and any related
incurrence or repayment of Debt by any member of the Consolidated Group had occurred on the first day of
the relevant period, but shall not take into account any cost savings or synergies projected to be realized as a
result of such acquisition or disposition other than cost savings or cost synergies that are factually
supportable and quantifiable pro forma cost savings or expense reductions related to operational efficiencies
(including the entry into any material contract or arrangement), strategic initiatives or purchasing
improvements and other cost savings, improvements or cost synergies, in each case, that have been realized,
or are reasonably expected to be realized, by any member of the Consolidated Group based upon actions to
be taken within 12 months after the consummation of the action as if such cost savings, expense reductions,
improvements and cost synergies occurred on the first day of the relevant period; provided that the
aggregate amount of such cost savings and cost synergies, together with any cost savings and cost synergies
included in the calculation of Consolidated EBITDA pursuant to the immediately succeeding sentence, shall
not exceed, for any such fiscal period, ten percent (10%) of Consolidated EBITDA for such period (as
calculated without giving effect this sentence or the immediately succeeding sentence). In addition, in the
event that any member of the Consolidated Group acquired or disposed of any Person, business unit or line
of business or made any investment during the relevant period, Consolidated EBITDA will be determined
giving pro forma effect to such acquisition, disposition or investment as if such acquisition, disposition or
investment and any related incurrence or repayment of Debt had occurred on the first day of the relevant
period, but shall not take into account any cost savings or synergies projected to be realized as a result of
such acquisition or disposition other than cost savings or cost synergies that are factually supportable and
quantifiable pro forma cost savings or expense reductions related to operational efficiencies (including the
entry into any material contract or arrangement), strategic initiatives or purchasing improvements and other
cost savings, improvements or cost synergies, in each case, that have been realized, or are reasonably
expected to be realized, by any member of the Consolidated Group based upon actions to be taken within 12
months after the consummation of the action as if such cost savings, expense reductions, improvements and
cost synergies occurred on the first day of the relevant period; provided that the aggregate amount of such
cost savings and cost synergies, together with any cost savings and cost synergies included in the calculation
of Consolidated EBITDA pursuant to the immediately preceding sentence, shall not exceed, for any such
fiscal period, ten percent (10%) of Consolidated EBITDA for such period (as calculated without giving
effect this sentence or the immediately preceding sentence).
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“Consolidated Group” means, prior to the consummation of the Target Acquisition, the Borrower and
its Subsidiaries (excluding the Target and its Subsidiaries) and thereafter, the Borrower and its Subsidiaries
(including the Target and its Subsidiaries).
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“Consolidated Interest Expense” means, for any fiscal period,
interest expense of the
Consolidated Group on a Consolidated basis determined in accordance with IFRS, including the imputed
interest component of capitalized lease obligations during such period, and all commissions, discounts and
other fees and charges owed with respect to letters of credit, if any, and net costs under Hedge Agreements;
provided that if any member of the Consolidated Group acquired or disposed of any Person or line of
business during the relevant period (including for the avoidance of doubt the Transactions), Consolidated
Interest Expense will be determined giving pro forma effect to any incurrence or repayment of Debt related
to such acquisition or disposition as if such incurrence or repayment of Debt had occurred on the first day of
the relevant period.
the total
“Consolidated Net Assets” means the aggregate amount of assets (less applicable reserves and other
properly deductible items) after deducting therefrom all current liabilities, as set forth on the Consolidated
balance sheet of
to
Section 5.01(i)(ii) prior to the time as of which Consolidated Net Assets shall be determined.
recently furnished to the Lenders pursuant
the Consolidated Group most
“Consolidated Net Debt” means, as of any date of determination, the aggregate amount of Borrowed
Debt of the Consolidated Group determined on a Consolidated basis as of such date, minus all unrestricted
cash and cash equivalents of the Consolidated Group.
“Consolidated Tangible Assets” means, as of any date of determination thereof, Consolidated Total
Assets minus, without duplication, (x) the Intangible Assets of the Consolidated Group and (y) goodwill of
the Consolidated Group, in each case on such date.
“Consolidated Total Assets” means, as of the date of any determination thereof, total assets of the
Consolidated Group calculated in accordance with IFRS on a consolidated basis as of such date.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of
the management or policies of a Person, whether through the ability to exercise voting power, by contract or
otherwise. The terms “Controlling” and “Controlled” have meanings correlative thereto.
“Conversion”, “Convert”, or “Converted” each refers to a conversion of the Advance of one Type into
an Advance of the other Type pursuant to Section 2.08 or 2.12.
“Cost of Funds Rate Advance” means an Advance that bears interest as provided in Section 2.07(a)(i).
“Cost of Funds Rate” means the weighted average of the rates notified to the Administrative Agent by
each Lender as soon as practicable and in any event not later than 10:00 A.M. (Tokyo time) one Business
Day prior to the first day of the Interest Period applicable to a Cost of Funds Advance (or, if earlier,
10:00 A.M. (Tokyo time) in the date falling one Business Day before the date on which interest is due to be
paid in respect of the Advance), to be that which expresses as a percentage rate per annum the cost to the
relevant Lender of funding its Advance from whatever source it may reasonably select; provided that if any
Lender does not supply a quotation by the time specified in this definition, the Cost of Funds Rate shall be
calculated on the basis of the quotations of the other Lenders that have so supplied a quotation.
“Court” means the Royal Court of Jersey.
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“Court Meeting” means the meeting or meetings of Scheme Shareholders (or any adjournment thereof)
to be convened by order of the Court under Article 125(1) of the Jersey Companies Law for the purposes of
considering and, if thought fit, approving the Scheme.
“Court Order” means the Act of Court sanctioning the Scheme under Article 125(2) of the Jersey
Companies Law.
“Credit Party” means the Administrative Agent or any Lender.
“Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed
money, (b) all obligations of such Person for the deferred purchase price of property or services that would
appear as a liability on the balance sheet of such Person prepared in accordance with IFRS (other than trade
payables incurred in the ordinary course of such Person’s business), (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such Person
created or arising under any conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or lender under such agreement
in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person
as lessee under leases that have been or should be, in accordance with IFRS, recorded as capital leases,
(f) all obligations, contingent or otherwise, of such Person in respect of acceptances, letters of credit or
similar extensions of credit, (g) all obligations of such Person in respect of Hedge Agreements, (h) all Debt
of others referred to in clauses (a) through (g) above or clause (i) below directly guaranteed in any manner
by such Person, or the payment of which is otherwise provided for by such Person, and (i) all Debt referred
to in clauses (a) through (h) above secured by any Lien on property (including, without limitation, accounts
and contract rights) owned by such Person, even though such Person has not assumed or become liable for
the payment of such Debt; provided, however, that the amount of such Debt will be the lesser of (x) the fair
market value of such asset at such date of determination and (y) the amount of such other Debt.
“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other
liquidation,
creditors, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or
other applicable jurisdictions from time to time in effect.
conservatorship, bankruptcy,
the benefit of
assignment
for
“Default” means any Event of Default or any event that would constitute an Event of Default but for
the requirement specified in Article VI that notice be given or time elapse or both.
“Default Interest” has the meaning specified in Section 2.07(b).
“Defaulting Lender” means, subject to Section 2.19(b), any Lender that (a) has failed to (i) fund all or
any portion of its Advance within two Business Days of the date such Advance was required to be funded
hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such
failure is the result of such Lender’s determination that one or more conditions precedent to funding (each
of which conditions precedent, together with any applicable default, shall be specifically identified in such
writing) has not been satisfied, or (ii) pay to the Administrative Agent or any other Lender any other amount
required to be paid by it hereunder within two Business Days of the date when due, (b) has notified the
Borrower or the Administrative Agent in writing that it does not intend to comply with its funding
obligations hereunder, or has made a public statement to that effect (unless such writing or public statement
relates to such Lender’s obligation to fund the Advance hereunder and states that such position is based on
such Lender’s determination that a condition precedent to funding (which condition precedent, together with
any applicable default, shall be specifically identified in such writing or public statement) cannot be
satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the
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Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its
prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender
pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the
Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a
proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee,
administrator, assignee for the benefit of creditors or similar Person charged with reorganization or
liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state
or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-in Action;
provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of
any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental
Authority so long as such ownership interest does not result in or provide such Lender with immunity from
the jurisdiction of courts within the United States or from the enforcement of judgments or writs of
attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate,
disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the
Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through
(d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a
Defaulting Lender (subject to Section 2.19(b)) upon delivery of written notice of such determination to the
Borrower and each Lender.
“Disclosure Letter” means that certain Disclosure Letter dated as of the Effective Date from the
Borrower to the Lead Arrangers and the Arrangers.
“Dollar Equivalent” means, at any time, (a) with respect to any amount denominated in Dollars, such
amount, and (b) with respect to any amount in any currency other than Dollars, the equivalent in Dollars of
such amount, calculated on the basis of the Exchange Rate pursuant to Section 1.06 using the Exchange
Rate with respect to such currency at the time in effect pursuant to the provisions of such Section 1.06.
“Dollars” and the “$” sign each means lawful currency of the United States.
“EEA Financial Institution” means (a) any institution established in any EEA Member Country which
is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member
Country which is a parent of an institution described in clause (a) of this definition, or (c) any institution
established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or
(b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of
the member states of
the European Union, Iceland,
Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with
public administrative authority of any EEA Member Country (including any delegee) having responsibility
for the resolution of any EEA Financial Institution.
“Effective Date” means the date on which the conditions set forth in Section 3.01 are satisfied (or
waived in accordance with Section 9.01).
“Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; (c) a commercial bank organized
under the laws of the United States, or any State thereof, and having total assets in excess of
$10,000,000,000; (d) a commercial bank organized under the laws of any other country that is a member of
lending
the Organization for Economic Cooperation and Development or has concluded special
arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or
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a political subdivision of any such country, and having total assets in excess of $10,000,000,000, so long as
such bank is acting through a branch or agency located in the country in which it is organized or another
country that is described in this clause (d); and (e) any other Person approved by the Administrative Agent
and, so long as no Event of Default has occurred and is continuing, by the Borrower, such approval not to be
unreasonably withheld or delayed; provided, however, that no Defaulting Lender (or Person who would be a
Defaulting Lender upon becoming a Lender) nor the Borrower nor any Affiliate of the Borrower shall
qualify as an Eligible Assignee.
“Environmental Action” means any action,
suit, demand, demand letter, claim, notice of
noncompliance or violation, notice of liability or potential liability, investigation, proceeding, consent order
or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous
Materials or arising from alleged injury or threat of injury to health, safety or the environment, including,
without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any
third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.
“Environmental Law” means any applicable federal, state, local or foreign statute; law (including
common law); ordinance; rule; regulation; code; final and binding court order, judgment, decree or judicial
or agency interpretation, policy or guidance; or agency order relating to pollution or protection of the
environment, health, safety or natural resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.
“Environmental Permit” means any permit, approval,
identification number,
license or other
authorization required under any Environmental Law.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a
limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and
any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity
interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
time, and the applicable regulations promulgated thereunder.
“ERISA Affiliate” means any trade or business (whether or not incorporated) that is a member of the
Borrower’s controlled group, or under common control with the Borrower, within the meaning of
Section 414 of the Code.
“ERISA Event” means:
(a)
(i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA,
with respect to any Single Employer Plan unless the 30-day notice requirement with respect to such
event has been waived by the PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of
ERISA (without regard to subsection (2) of such Section) are being met with a contributing sponsor, as
defined in Section 4001(a)(13) of ERISA, of a Single Employer Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur
with respect to such Plan within the following 30 days unless the 30-day notice requirement has been
waived by the PBGC;
(b)
the application for a minimum funding waiver with respect to a Single Employer Plan;
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(c)
the termination of or provision of a notice of intent to terminate any Plan pursuant to
Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to
in Section 4041(e) of ERISA) or otherwise so as to incur liability of the Borrower or any ERISA
Affiliate under Title IV of ERISA (other than premiums due to the PBGC);
(d)
the cessation of operations at a facility of the Borrower or any ERISA Affiliate in the
circumstances described in Section 4062(e) of ERISA;
(e)
the withdrawal by the Borrower or any ERISA Affiliate from a Multiple Employer Plan
during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(f)
the conditions for the imposition of a lien under Section 303(k) of ERISA shall have been
met with respect to any Plan; or
(g)
the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of
ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that could
constitute grounds for the termination of a Plan, or the appointment of a trustee to administer a Single
Employer Plan or Multiple Employer Plan.
“Escrow Account” means any account established for the purpose of depositing funds prior to their
being applied towards Certain Funds Purposes.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan
Market Association (or any successor Person), as in effect from time to time.
“Eurocurrency Liabilities” has the meaning specified in Regulation D of the Board, as in effect from
time to time.
“Eurocurrency Rate” means the Japanese Yen TIBOR rate administered by the JBA TIBOR
Administration (or any other Person that takes over the administration of such rate) for deposits in Yen for a
period equal in length to such Interest Period as displayed on Thomson Reuters Japan screen page 17097
(or, in the event such rate does not appear on such Thomson Reuters Japan screen page 17097, on any
successor or substitute page of such screen page that displays such rate, or on the appropriate page of such
other information service that publishes such rate from time to time as selected by the Administrative Agent
in its reasonable discretion; in each case, the “Screen Rate”) at approximately 11:00 A.M., Tokyo time on
the Quotation Day and Interest Period; provided that if the Screen Rate shall be less than zero, such rate
shall be deemed to be zero for the purposes of this Agreement; provided further that, if the Screen Rate shall
not be available at such time for such Interest Period (an “Impacted Interest Period”) with respect to Yen,
then the Eurocurrency Rate shall be the Interpolated Rate at such time; provided that if any Interpolated
Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Interpolated Rate” means, at any time, the rate per annum determined by the Administrative Agent (which
determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from
interpolating on a linear basis between: (a) the Screen Rate for the longest period (for which that Screen
Rate is available in Yen) that is shorter than the Impacted Interest Period and (b) the Screen Rate for the
shortest period (for which that Screen Rate is available for Yen) that exceeds the Impacted Interest Period,
in each case, at such time; provided further that if no Screen Rate is available for Yen, the Eurocurrency
Rate shall be the Reference Bank Rate.
“Eurocurrency Rate Advance” means an Advance that bears interest as provided in Section 2.07(a)(ii).
“Eurocurrency Rate Reserve Percentage” means a fraction (expressed as a decimal), the numerator of
which is the number one and the denominator of which is the number one minus the aggregate of the
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maximum reserve, liquid asset, fees or similar requirements (including any marginal, special, emergency or
supplemental reserves or other requirements) established by any central bank, monetary authority, the
Board, the Financial Conduct Authority, the Prudential Regulation Authority, the European Central Bank or
other Governmental Authority for any category of deposits or liabilities customarily used to fund loans in
the applicable currency, expressed in the case of each such requirement as a decimal. Such reserve, liquid
asset, fees or similar requirements shall include those imposed pursuant to Eurocurrency Liabilities. A
Eurocurrency Rate Advance shall be deemed to be subject to such reserve, liquid asset, fee or similar
requirements without benefit of or credit for proration, exemptions or offsets that may be available from
time to time to any Lender under any applicable law, rule or regulation, including Eurocurrency Liabilities.
The Eurocurrency Rate Reserve Percentage shall be adjusted automatically on and as of the effective date of
any change in any reserve, liquid asset or similar requirement.
“Events of Default” has the meaning specified in Section 6.01.
“Exchange Rate” means on any day, for purposes of determining the Dollar Equivalent or Yen
Equivalent of any other currency, the rate at which such other currency may be exchanged into Dollars or
Yen, as applicable, at
the time of determination on such day as quoted by Bloomberg on
www.bloomberg.com/markets/currencies/fxc.html (and applying the Currency Converter set forth on such
webpage), or as displayed on such other information service which publishes that rate of exchange from
time to time in place of Bloomberg. In the event that such rate is not displayed by Bloomberg on the
webpage specified in the immediately preceding sentence, the Exchange Rate shall be determined by
reference to such other publicly available service for displaying exchange rates as may be agreed upon by
the Administrative Agent and the Borrower, or, in the absence of such an agreement, such Exchange Rate
shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the
market where its foreign currency exchange operations in respect of such currency are then being
conducted, at or about such time as the Administrative Agent shall elect after determining that such rates
shall be the basis for determining the Exchange Rate, on such date for the purchase of Yen or Dollars for
delivery two Business Days later; provided that if at the time of any such determination, for any reason, no
such spot rate is being quoted, the Administrative Agent may use any reasonable method, in consultation
with the Borrower, it deems appropriate to determine such rate, and such determination shall be conclusive
absent manifest error.
“Excluded Taxes” has the meaning specified in Section 2.14(a).
“Existing Target Indebtedness” means indebtedness of the Target existing on the Closing Date.
“FATCA” means (a) Sections 1471 to 1474 of the Code or any associated regulations, (b) any treaty,
law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the
United States and any other jurisdiction, which (in either case) facilitates the implementation of any law or
regulation referred to in paragraph (a) above; or (c) any agreement pursuant to the implementation of any
treaty, law or regulation referred to in paragraphs (a) or (b) above with the U.S. Internal Revenue Service,
the United States government or any governmental or taxation authority in any other jurisdiction.
“FIEA” means the Financial Instruments and Exchange Act of Japan (Law No. 25 of 1948, as
amended).
“Foreign Exchange Act” means the Foreign Exchange and Foreign Trade Act of Japan (Law No. 59 of
2009, as amended).
“GAAP” means generally accepted accounting principles as in effect in the United States from time to
time.
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“General Meeting” means the extraordinary general meeting of the holders of Target Shares (or any
adjournment thereof) to be convened in connection with the implementation of a Scheme.
“Governmental Authority” means the government of Japan, the United States of America, or any other
nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government.
“Hazardous Materials” means (a) petroleum and petroleum products, byproducts or breakdown
products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and
(b) any other chemicals, materials or substances designated, classified or regulated as “hazardous” or
“toxic” or as a “pollutant” or “contaminant” or for which liability may be imposed, under any
Environmental Law.
“Hedge Agreements” means interest rate swap, cap or collar agreements, interest rate future or option
contracts, currency swap agreements, currency future or option contracts and other similar agreements.
“HYB Debt” means the obligations of the Borrower for which the rights with respect to interest and the
conditions of redemption or repayment are substantially similar to those provided for in the Yen HYB Loans
under the Yen Hybrid Loan Agreement, including (but not limited to) with respect to the subordinated
nature thereof.
“IFRS” means the International Financial Reporting Standards, as promulgated by the International
Accounting Standards Board (or any successor board or agency), as in effect on the Effective Date.
“Impacted Interest Period” has the meaning provided in the definition of “Eurocurrency Rate”.
“Indemnified Party” has the meaning specified in Section 9.04(b).
“Information” has the meaning specified in Section 9.08.
“Initial Lender” has the meaning specified in the definition of “Lenders”.
“Intangible Assets” means the aggregate amount, for the Consolidated Group on a consolidated basis,
of all assets classified as intangible assets under IFRS, including, without limitation, customer lists, acquired
technology, computer software, trademarks, patents, copyrights, organization expenses, franchises, licenses,
trade names, brand names, mailing lists, catalogs, unamortized debt discount and capitalized research and
development costs.
“Interest Period” means, for the Advance, the period commencing on the date of the Advance and
ending on the last day of the period calculated pursuant to the provisions below and, thereafter, each
subsequent period commencing on the last day of the immediately preceding Interest Period and ending on
the last day of the period calculated pursuant to the provisions below. The duration of each such Interest
Period shall be one month; provided, however, that:
(a)
whenever the last day of any Interest Period would otherwise occur on a day other than a
Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding
Business Day, provided, however, that, if such extension would cause the last day of such Interest
Period to occur in the next succeeding calendar month, the last day of such Interest Period shall occur
on the immediately preceding Business Day; and
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(b)
whenever the first day of any Interest Period occurs on a day of an initial calendar month
for which there is no numerically corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such succeeding calendar month.
“Interpolated Rate” has the meaning specified in the definition of “Eurocurrency Rate”.
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“Jersey Companies Law” means the Companies (Jersey) Law 1991.
“Judgment Currency” has the meaning set forth in Section 9.16.
“Lead Arrangers” means Sumitomo Mitsui Banking Corporation and MUFG Bank, Ltd.
“Lenders” means, collectively, (a) each bank, financial institution and other institutional lender listed
on the signature pages hereof (each, an “Initial Lender”) and (b) each Eligible Assignee that shall become a
party hereto pursuant to Section 9.07(a), (b) and (c). Each Lender shall have a license required to engage in
the business of lending money in Japan.
“Lien” means any lien, security interest or other charge or encumbrance of any kind, or any other type
of preferential arrangement, intended as a security interest, including, without limitation, the lien or retained
security title of a conditional vendor and any easement, right of way or other encumbrance on title to real
property.
“Loan Documents” means this Agreement and any amendments, notes or notices entered into in
connection herewith.
“Long Stop Date” means the date falling 12 months after the Bridge Facility Effective Date; provided
that such date may be extended if and to the extent that (i) any condition in paragraphs 4(c) to (j) in Part A
of Appendix 1 to the Original Scheme Press Release (or the equivalent provision in any Offer Press
Announcement) has not been satisfied by the date falling 12 months after the Bridge Facility Effective Date;
(ii) the Long Stop Date (as defined in the Original Scheme Press Release) has also been extended (with the
Target having consented, to the extent required, to any such extension) and (iii) such date shall not be
extended beyond the date falling 15 months after the Bridge Facility Effective Date.
“Losses” has the meaning specified in Section 9.04(b).
“Mandatory Cancellation Event” means the occurrence of any of the following conditions or events:
(i) where the Target Acquisition proceeds by way of a Scheme:
(a)
the Court Meeting is held (and not adjourned or otherwise postponed) to approve the
Scheme at which a vote is held to approve the Scheme, but the Scheme is not so approved in
accordance with Article 125(2) of the Jersey Companies Law by the requisite majority of the Scheme
Shareholders at such Court Meeting;
(b)
the General Meeting is held (and not adjourned or otherwise postponed) to pass the
Scheme Resolutions at which a vote is held on the Scheme Resolutions, but the Scheme Resolutions
are not passed by the requisite majority of the shareholders of Target at such General Meeting;
(c)
an application for the issuance of the Court Order is made to the Court (and not adjourned
or otherwise postponed) but the Court (in its final judgment) refuses to grant the Court Order;
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(d)
Court; or
either the Scheme lapses or it is withdrawn with the consent of the Panel or by order of the
(e)
the date which is 15 days after the Scheme Effective Date;
unless, in respect of paragraphs (a) to (d) inclusive above, for the purpose of switching from a
Scheme to a Takeover Offer, within 5 Business Days of such event the Borrower has notified the
Administrative Agent that the Borrower intends to issue, and then within 10 Business Days after
delivery of such notice the Borrower does issue, an Offer Press Announcement and provides a copy to
the Administrative Agent (in which case no Mandatory Cancellation Event shall have occurred);
(ii) where the Target Acquisition proceeds by way of a Takeover Offer:
(a)
such Takeover Offer lapses,
terminates or is withdrawn unless, for the purpose of
switching from a Takeover Offer to a Scheme, within 5 Business Days of such event the Borrower has
notified the Administrative Agent that the Borrower intends to issue, and then within 10 Business Days
after delivery of such notice the Borrower does issue, a Scheme Press Release and provides a copy to
the Administrative Agent (in which case no Mandatory Cancellation Event shall have occurred); or
(b)
the date which is six weeks after the date (or to the extent necessary to address a minority
shareholder’s application to Court
thereof and written notice is provided to the
Administrative Agent on or prior to the end of such initial six week period, twelve weeks after the date)
that the Borrower serves notice under Article 117 of the Jersey Companies Law to buy out minority
shareholders;
in protest
(iii) the date upon which all payments made or to be made for Certain Funds Purposes have been paid in
full in cleared funds; or
(iv) the date which is 15 days after the Long Stop Date.
“Margin Stock” has the meaning provided in Regulation U.
“Maximum Rate” has the meaning specified in Section 9.19.
“Material Adverse Effect” means a material adverse effect on (a) the financial condition or results of
operations of the Borrower or the Consolidated Group taken as a whole, (b) the rights and remedies of the
Administrative Agent or any Lender under this Agreement, taken as a whole, or (c) the ability of the
Borrower to perform its or their payment obligations under this Agreement.
“Maturity Date” means, with respect to the Advance, the day that is one month, two months, three
months or six months after the date such Advance is made, as selected by the Borrower in the Notice of
Borrowing for the Advance.
“Moody’s” means Moody’s Investors Service, Inc. (or any successor thereof).
“Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to
which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an obligation to make contributions.
“Multiple Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA,
that (a) is maintained for employees of the Borrower or any ERISA Affiliate and at least one Person other
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than the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower
or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has
been or were to be terminated.
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“Non-Consenting Lender” has the meaning specified in Section 9.01(c).
“Non-Defaulting Lender” means, at any time, a Lender that is not a Defaulting Lender.
“Notice” has the meaning specified in Section 9.02(c).
“Notice of Borrowing” has the meaning specified in Section 2.02(a).
“NPL” means the National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
“OFAC” means the U.S. Treasury Department’s Office of Foreign Assets Control.
“Offer Documents” means the Takeover Offer Document and the Offer Press Announcement.
“Offer Press Announcement” means a press announcement released by or on behalf of the Borrower in
accordance with Rule 2.7 of the City Code announcing that the Target Acquisition is to be effected by a
Takeover Offer and setting out the terms and conditions of the Takeover Offer.
“Original Scheme Press Release” means the Scheme Press Release released by the Borrower on May 8,
2018.
“Other Connection Taxes” means, with respect to the Administrative Agent or any Lender, Taxes
imposed as a result of a present or former connection between the Administrative Agent or such Lender and
the jurisdiction imposing such Tax (other than connections arising from the Administrative Agent or such
Lender having executed, delivered, become a party to, performed its obligations under, received payments
under, received or perfected a security interest under, engaged in any other transaction pursuant to, or
enforced, any Loan Document, or sold or assigned an interest in any Loan Document).
“Other Taxes” has the meaning specified in Section 2.14(b).
“Panel” means the Panel on Takeovers and Mergers.
“Participant Register” has the meaning specified in Section 9.07(e).
“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, signed into law October 26, 2001.
“PBGC” means the Pension Benefit Guaranty Corporation (or any successor thereto).
“Person” means an individual, partnership, corporation (including a business trust),
joint stock
company, trust, unincorporated association, joint venture, limited liability company or other entity, or a
government or any political subdivision or agency thereof.
“Plan” means a Single Employer Plan or a Multiple Employer Plan.
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“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA,
as amended from time to time.
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“Platform” has the meaning specified in Section 5.01(i).
“Pro Forma Financials” has the meaning provided in Section 3.02(f).
“Projections” means any projections and any forward looking statements (including statements with
respect to booked business) of the Consolidated Group furnished to the Lenders or the Administrative Agent
by or on behalf of the Borrower prior to the Closing Date.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any
such exemption may be amended from time to time.
“Public Debt Rating” means, as of any date and subject to the provisions of the next succeeding
sentence, the lowest rating that has been most recently announced by each of S&P or Moody’s, as the case
may be, for any class of non-credit enhanced long-term senior unsecured debt issued by the Borrower. For
purposes of the foregoing: (a) if only one of S&P and Moody’s shall have in effect a Public Debt Rating, the
Public Debt Rating shall be determined by reference to the available rating; (b) if the ratings established by
S&P and Moody’s shall fall within different levels, the Public Debt Rating shall be the higher of such
ratings, except that, in the event that the lower of such ratings is more than one level below the higher of
such ratings, the Public Debt Rating shall be the level immediately above the lower of such ratings; and
(c) if S&P or Moody’s shall change the basis on which ratings are established, each reference to the Public
Debt Rating announced by S&P or Moody’s, as the case may be, shall refer to the then equivalent rating by
S&P or Moody’s, as the case may be.
“Public Lender” has the meaning set forth in Section 5.01.
“Quotation Day” means two Business Days prior to the first day of such Interest Period.
“Reference Bank Rate” means the arithmetic mean of the rates (rounded upwards to four decimal
places) supplied to the Administrative Agent at its request by the Reference Banks (as the case may be) as of
the applicable time on the Quotation Day for the Advance in Yen and the applicable Interest Period as the
rate at which the relevant Reference Bank could borrow funds in the Tokyo (or other applicable) interbank
market in the relevant currency and for the relevant period, were it to do so by asking for and then accepting
interbank offers in reasonable market size in that currency and for that period.
“Reference Banks” means such banks as may be appointed by the Administrative Agent (and agreed by
such bank) in consultation with the Borrower.
“Register” has the meaning specified in Section 9.07(d).
“Registrar” means the Registrar of Companies for Jersey.
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners,
directors, officers, employees, agents, trustees and advisors of such Person and of such Person’s Affiliates.
“Required Lenders” means, at any time, Lenders holding more than 50% of the available Commitments
or aggregate outstanding principal amount of Advances at such time; provided that the Commitment of, or
the Advances held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a
determination of Required Lenders.
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“Resignation Effective Date” has the meaning provided in Section 7.06(a).
“Responsible Officer” means, with respect to the Borrower, the Chief Executive Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Head of Corporate Law, Japan
Legal and the General Counsel of the Borrower (or other executive officer of the Borrower performing
similar functions) or any other officer of the Borrower responsible for overseeing or reviewing compliance
with this Agreement.
“Restricted Margin Stock” means Margin Stock owned by the Consolidated Group the value of which
(determined as required under clause 2(i) of the definition of “Indirectly Secured” set forth in Regulation U)
represents not more than 25% of the aggregate value (determined as required under clause (2)(i) of the
definition of “Indirectly Secured” set forth in Regulation U), on a consolidated basis, of the property and
assets of the Consolidated Group (excluding any Margin Stock) that is subject to the provisions of
Section 5.02(a) or (b).
“S&P” means Standard & Poor’s Financial Services LLC (or any successor thereof).
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or
target of comprehensive Sanctions (at the time of this Agreement, Crimea, Cuba, Iran, North Korea, Sudan
and Syria).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of
designated Persons maintained by OFAC, the U.S. Department of State, the Ministry of Finance of Japan,
the United Nations Security Council, the European Union, Her Majesty’s Treasury of the United Kingdom,
any relevant and applicable European Union member state or other relevant sanctions authority, (b) any
Person operating, organized or resident in a Sanctioned Country, (c) any Person owned or controlled by any
such Person or Persons described in the foregoing clauses (a) or (b) or (d) any Person otherwise the subject
of any Sanctions.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or
enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S.
Department of State, (b) the Japanese government, including those imposed under the Foreign Exchange
Act and the Import Trade Control Order of Japan (Cabinet Order No. 414 of 1949, as amended) or (c) the
United Nations Security Council, the European Union, Her Majesty’s Treasury of the United Kingdom or
any relevant and applicable European Union member state or other relevant sanctions authority.
“Scheme” means a scheme of arrangement to be effected under Article 125 of the Jersey Companies
Law between Target and the Scheme Shareholders pursuant to which the Borrower will become the holder
of all of the Scheme Shares in accordance with the Scheme Documents, subject to such changes and
amendments to the extent not prohibited by the Loan Documents.
“Scheme Circular” means the document issued by or on behalf of Target to the Scheme Shareholders
setting out the terms and conditions of and an explanatory statement in relation to the Scheme, stating the
recommendation of the Target Acquisition and the Scheme to the Scheme Shareholders by the board of
directors of Target and setting out the notices of the Court Meeting and the General Meeting as such
document may be amended from time to time to the extent such amendment is not prohibited by the Loan
Documents.
“Scheme Documents” means, collectively (a) the Scheme Press Release, (b) the Scheme Circular,
(c) the Scheme Resolutions and (d) any other document issued by or on behalf of Target to its shareholders
in respect of the Scheme and any other document designated as a “Scheme Document” by the
Administrative Agent and the Borrower.
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“Scheme Effective Date” means the date on which the Court Order sanctioning the Scheme is duly
delivered on behalf of Target to the Registrar in accordance with Article 125(3) of the Jersey Companies
Law.
“Scheme Press Release” means a press announcement released by the Borrower in accordance with
Rule 2.7 of the City Code announcing that the Target Acquisition is to be effected by a Scheme and setting
out the terms and conditions of the Scheme.
“Scheme Resolutions” means the resolutions of the shareholders of Target which are required to
implement the Scheme and which are referred to and substantially in the form set out in the Scheme Circular
and which are to be proposed at the General Meeting.
“Scheme Shareholders” means the registered holders of Scheme Shares at the relevant time.
“Scheme Shares” means the Target Shares which are subject to the Scheme in accordance with its
terms.
“Screen Rate” has the meaning set forth in the definition of “Eurocurrency Rate”.
“Service of Process Agent” means CT Corporation Systems, 111 Eighth Avenue, 13th Floor, New
York, New York 10011.
“Significant Subsidiary” means any Subsidiary of the Borrower that constitutes a “significant
subsidiary” under Regulation S-X promulgated by the Securities and Exchange Commission, as in effect
from time to time.
“Single Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA,
that (a) is maintained for employees of the Borrower or any ERISA Affiliate and no Person other than the
Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any
ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were
to be terminated.
“Subsidiary” means, with respect to any Person, any corporation, partnership, joint venture, limited
liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding
capital stock having ordinary voting power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of
such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or
estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or
more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.
“Takeover Offer” means a “takeover offer” within the meaning of Article 116(1) of the Jersey
Companies Law proposed to be made by the Borrower to acquire (directly or indirectly) Target Shares,
substantially on the terms and conditions set out in an Offer Press Announcement (as such offer may be
amended in any way which is not prohibited by the terms of the Loan Documents).
“Takeover Offer Document” means the document
issued by or on behalf of the Borrower and
dispatched to shareholders of Target in respect of a Takeover Offer containing the terms and conditions of
the Takeover Offer reflecting the Offer Press Announcement in all material respects as such document may
be amended from time to time to the extent such amendment is not prohibited by the Loan Documents.
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“Target” means Shire plc.
“Target Acquisition” means the direct or indirect acquisition, pursuant to the Offer Documents or
Scheme Documents, as applicable, of the Target Shares, which acquisition will be effected pursuant to a
Scheme or Takeover Offer.
“Target Shares” means all of the issued and to be issued ordinary shares in the capital of the Target
(including any issued pursuant to the exercise of any options or awards or other instruments convertible into
or exchangeable for shares of the Target).
“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, withholdings
(including back-up withholdings), assessments, fees or other like charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable thereto.
“Transactions” means the Target Acquisition, the entry into this Agreement and the transactions
contemplated hereby, the borrowing by the Borrower under the Commitments, and in each case, related fees
costs and expenses.
“Type” refers to a Cost of Funds Rate Advance or a Eurocurrency Rate Advance.
“United States” and “U.S.” each means the United States of America.
“Unrestricted Margin Stock” means any Margin Stock owned by the Consolidated Group which is not
Restricted Margin Stock.
“Voting Stock” means shares of capital stock issued by a corporation, or equivalent interests in any
other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such Person, even if the right so to vote
has been suspended by the happening of such a contingency.
“Withdrawal Liability” has the meaning specified in Part I of Subtitle E of Title IV of ERISA.
“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the
write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In
Legislation for the applicable EEA Member Country, which write-down and conversion powers are
described in the EU Bail-In Legislation Schedule.
“Yen” and the “¥” sign each means lawful currency of Japan.
“Yen Equivalent” means, at any time, (a) with respect to any amount denominated in Yen, such
amount, and (b) with respect to any amount in any currency other than Yen, the equivalent in Yen of such
amount, calculated on the basis of the Exchange Rate pursuant to Section 1.06 using the Exchange Rate with
respect to such currency at the time in effect pursuant to the provisions of such Section 1.06.
“Yen HYB Bonds” means HYB Debt incurred to the Borrower in the form of notes, bonds, debentures
or other similar instruments denominated in Yen.
“Yen HYB Loans” means loans advanced to the Borrower under the Yen HYB Loan Agreement.
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“Yen HYB Loan Agreement” means that certain subordinated syndicated loan agreement dated as of
October 26, 2018 among Takeda Pharmaceutical Company Limited, a joint-stock company organized and
existing under the laws of Japan, the lenders that are parties thereto, and Sumitomo Mitsui Banking
Corporation, as agent for the lenders.
SECTION 1.02
Computation of Time Periods. In this Agreement, in the computation of periods of
time from a specified date to a later specified date, the word “from” means “from and including”, the word
“through” means “through and including” and each of the words “to” and “until” mean “to but excluding”.
SECTION 1.03
Accounting Terms. Except as otherwise expressly provided herein, all accounting
terms not specifically defined herein shall be construed in accordance with, and all financial data (including
financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with,
IFRS, as in effect from time to time. If at any time any change in IFRS would affect the calculation of any
covenant set forth herein and either the Borrower or the Required Lenders shall so request, the Administrative
Agent, the Lenders and the Borrower shall negotiate in good faith to amend such covenant to preserve the
original intent thereof in light of such change in IFRS (subject to the approval of the Required Lenders); provided
that, until so amended, (i) such covenant shall continue to be calculated in accordance with IFRS prior to such
change and (ii) the Borrower shall provide to the Administrative Agent and the Lenders, concurrently with the
delivery of any financial statements or reports with respect
to such covenant, statements setting forth a
reconciliation between calculations of such covenant made before and after giving effect to such change in IFRS.
Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein
shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving
effect to (i) any election under applicable accounting standards to value any Debt or other liabilities of the
Borrower or any Subsidiary at “fair value” or similar term and (ii) any treatment of Debt in respect of convertible
debt instruments under applicable accounting standards to value any such Debt in a reduced or bifurcated
manner, and such Debt shall at all times be valued at the full stated principal amount thereof.
SECTION 1.04
Terms Generally. The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same
meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to
any agreement,
instrument or other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, restated, supplemented or otherwise modified
(subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein),
(b) any definition of or reference to any statute, rule or regulation shall be construed as referring thereto as from
time to time amended, supplemented or otherwise modified (including by succession of comparable successor
laws), (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns
(subject to any restrictions on assignment set forth herein and (d) the words “herein”, “hereof” and “hereunder”,
and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular
provision hereto.
SECTION 1.05
Jersey Terms. In each Loan Document, where it relates to a person incorporated or
formed or having its centre of main interests in Jersey, a reference to:
(a)
a winding up, administration or dissolution includes, without limitation, bankruptcy (as that term is
interpreted pursuant to Article 8 of the Interpretation (Jersey) Law 1954), any procedure or process
referred to in Part 21 of the Jersey Companies Law, and any other similar proceedings affecting the
rights of creditors generally under Jersey law, and shall be construed so as to include any equivalent or
analogous proceedings; or
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(b) a receiver, administrative receiver, administrator or the like includes, without limitation, the Viscount
of the Royal Court of Jersey, autorisés or any other person performing the same function of each of the
foregoing.
SECTION 1.06
Currency Translations. For purposes of (i) determining the amount of Borrowed
Debt incurred, outstanding or proposed to be incurred or outstanding under Section 5.02(e), (ii) determining the
amount of indebtedness incurred in connection with an Acquisition under Section 5.03, (iii) determining the
amount of obligations secured by Liens incurred, outstanding or proposed to be incurred or outstanding under
Section 5.02(a), (iv) determining the amount of Debt, the net assets of a Person or judgments outstanding under
Section 6.01(d), (e) or (f) or (v) determining the amount of any HYB Debt under Section 2.05(c) or 2.06(b), all
amounts incurred, outstanding or proposed to be incurred or outstanding, in currencies other than Dollars shall be
translated into Dollars, and in currencies other than Yen shall be translated into the Yen Equivalent, as
applicable, in each case at the Exchange Rate on the applicable date; provided that no Default shall arise as a
result of any limitation set forth in Dollars in Section 5.02(a) or (e) being exceeded solely as a result of changes
in Exchange Rates from those rates applicable at the time or times Debt or obligations secured by Liens were
initially consummated or acquired in reliance on the exceptions under such Sections.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCE
SECTION 2.01
The Advance. Each Lender severally and not jointly agrees, on the terms and
conditions hereinafter set forth to make a single Advance denominated in Yen to the Borrower on any Business
to exceed such Lender’s outstanding Commitment
Day during the Availability Period in an amount not
immediately prior to the making of the Advance. The Borrowing shall be in an aggregate amount equal to the
Borrowing Minimum or a Borrowing Multiple in excess thereof and shall initially consist of a Eurocurrency Rate
Advance made on the same day by the Lenders ratably according to their respective Commitments. Upon the
making of the Advance by a Lender such Lender’s relevant Commitment will be permanently reduced to zero
and terminated. The Borrower may prepay the Advance pursuant to Section 2.10, provided that the Advance may
not be reborrowed once repaid.
SECTION 2.02
Making the Advance. (a) The Borrowing shall be made on notice by the Borrower,
given not later than 9:00 A.M. (Tokyo time) on the third Business Day prior to the date of the proposed
Borrowing, to the Administrative Agent, which shall give to each Lender prompt notice thereof by writing or
telecopy. A notice of Borrowing (a “Notice of Borrowing”) shall be by telecopy to the Agent in writing
substantially in the form of Exhibit A hereto, specifying therein the requested (i) date of the Borrowing (which
shall be a Business Day), (ii) aggregate amount of such Borrowing, (iii) Maturity Date for the Advance, if the
Borrowing is to consist of a Eurocurrency Rate Advance, and (iv) account or accounts in which the proceeds of
the Borrowing should be credited. Each Lender shall, before 11:00 A.M. (Tokyo time) on the date of the
Borrowing make available for the account of its Applicable Lending Office to the Administrative Agent at the
applicable Administrative Agent’s Office, in same day funds, such Lender’s ratable portion of the Borrowing.
After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth
in Article III, the Administrative Agent will make such funds available to the Borrower in immediately available
funds to the account or accounts specified by the Borrower to the Administrative Agent in the Notice of
Borrowing relating to the Borrowing. Notwithstanding anything to the contrary herein, there shall not be more
than one separate Borrowing for the Advance.
(b)
Anything in Section 2.02(a) to the contrary notwithstanding, the Borrower may not select a
Eurocurrency Rate Advance if the obligation of the Lenders to make a Eurocurrency Rate Advance shall then be
suspended pursuant to Section 2.08 or 2.12.
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(c)
The Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case it is
specified in the Notice of Borrowing that the Borrowing to be comprised of a Eurocurrency Rate Advance, the
Borrower shall indemnify each Lender against any reasonable loss, cost or expense incurred by such Lender as a
result of any failure to fulfill on or before the date specified in such Notice of Borrowing the applicable
conditions set forth in Article III, including, without limitation, any reasonable loss (excluding loss of anticipated
profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund the Advance to be made by such Lender as part of the Borrowing when such
Advance, as a result of such failure, is not made on such date.
(d)
Unless the Administrative Agent shall have received notice from a Lender prior to the time of
the Borrowing that such Lender will not make available to the Administrative Agent such Lender’s ratable
portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of the Borrowing in accordance with Section 2.02(a) and the
Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that any Lender shall not have so made such ratable portion available
to the Administrative Agent, such Lender and the Borrower severally agree to pay or to repay to the
Administrative Agent forthwith on demand such corresponding amount and to pay interest thereon, for each day
from the date such amount is made available to the Borrower until the date such amount is paid or repaid to the
Administrative Agent, at (i) in the case of the Borrower, the higher of (A) the interest rate applicable at the time
to the Advance comprising the Borrowing and (B) the cost of funds incurred by the Administrative Agent in
respect of such amount and (ii) in the case of such Lender, the greater of the Cost of Funds Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. If
the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping
period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the
Borrower for such period. If such Lender shall pay to the Administrative Agent such corresponding principal
amount, such amount so paid shall constitute such Lender’s Advance as part of the Borrowing for all purposes of
this Agreement. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have
against a Lender that shall have failed to make such payment to the Administrative Agent.
(e)
The failure of any Lender to make the Advance to be made by it as part of the Borrowing shall
not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such
Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be
made by such other Lender on the date of the Borrowing.
(f)
If any Lender makes available to the Administrative Agent funds for the Advance to be made
by such Lender as provided herein, and such funds are not made available to the Borrower by the Administrative
Agent because the conditions to the Borrowing are not satisfied or waived in accordance with the terms hereof,
the Administrative Agent shall promptly return such funds (in like funds as received from such Lender) to such
Lender, without interest.
(g)
Each Lender at its option may make the Advance by causing any domestic or foreign branch or
Affiliate of such Lender to make such Advance (and in the case of an Affiliate, the provisions of Sections 2.08,
2.11 and 2.14 shall apply to such Affiliate to the same extent as to such Lender); provided that any exercise of
such option shall not affect the obligation of the Borrower to repay such Advance in accordance with the terms of
this Agreement.
SECTION 2.03
[Reserved].
Fees. (a) Commitment Fee. As part of the consideration for each Lender’s
Commitment hereunder, the Borrower agrees to pay to the Administrative Agent, for the account of each Lender
SECTION 2.04
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(other than a Defaulting Lender for such time as such Lender is a Defaulting Lender), a non-refundable
commitment fee from (and excluding) the Effective Date and from time to time through and including the date of
termination of the Commitments in full, at a rate per annum equal to 0.05% per annum on the aggregate daily
amount of such Lender’s Commitments during such period, such fee to be earned and payable in arrears quarterly
on the last Business Day of each March, June, September and December, and on the date the Commitment
terminates in full or is otherwise reduced to zero.
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(b)
[Reserved].
(c)
Additional Fees. The Borrower shall pay to the Administrative Agent, Lead Arrangers and
Arranger for their account (or that of their applicable Affiliate) such fees as may from time to time be agreed
between any of the Consolidated Group and the Administrative Agent, Lead Arrangers, and/or Arranger.
(d)
Calculation of Commitment. For the avoidance of doubt, with respect to the definition of
“Mandatory Cancellation Event” and the ability thereunder for the Borrower to provide notices and issue
documents to facilitate a switch from a Scheme to a Takeover Offer and vice versa, the Commitment shall be
deemed to be in effect until the end of the day on which the applicable notice or issuance is required to but does
not occur for the purposes of calculating any fees under this Agreement or any fee letters related hereto.
SECTION 2.05
Termination or Reduction of the Commitments. (a) Unless previously terminated,
the Commitments shall terminate in full at 5:00 p.m. (Tokyo time) on the earlier of (i) the date on which all of the
Certain Funds Purposes have been achieved without the making of any Advances and (ii) the date on which the
Certain Funds Period terminates. Additionally, each Lender’s Commitment will be permanently reduced to zero
and terminated upon such Lender making an Advance under such Commitment. Any termination or reduction of
the Commitments shall be permanent.
(b)
Ratable Reduction or Termination. The Borrower shall have the right, upon at least three
Business Days’ notice to the Administrative Agent at or about 10:00 A.M. (Tokyo time), to terminate in whole or
permanently reduce ratably in part the unused portions of Commitments of the Lenders; provided that each
partial reduction shall be in an aggregate amount of not less than 5,000,000,000 Yen and an integral multiple of
5,000,000,000 Yen in excess thereof; provided further that any such notice may state that such notice is
conditioned upon the effectiveness of other credit facilities or the consummation of a specific transaction, in
which case such notice may be revoked by the Borrower if such condition is not satisfied.
(c)
Mandatory Reduction or Termination. Each Lender’s Commitment will be permanently
reduced ratably upon the incurrence by the Borrower of any HYB Debt (but excluding the Yen HYB Loan
Agreement) following the Effective Date until the end of the Availability Period (provided, however, that this
provision shall not apply with respect to the funding or drawdown of (i) any such HYB Debt by issuance of
subordinated notes or bonds denominated in a currency other than Yen and (ii) any such HYB Debt that is not
identified by the Borrower to be used for Certain Funds Purposes or does not have conditions precedent
thereunder that are no more restrictive to the Borrower than the conditions precedent to the Closing Date in the
Bridge Credit Agreement). The Commitments shall be reduced by the Yen Equivalent of the amount of such
HYB Debt upon the date of funding of such HYB Debt (if notes or bonds) or upon the execution of the loan
agreement for such HYB Debt (if loans).
SECTION 2.06
Repayment of the Advance.
(a)
The Borrower shall repay on the Maturity Date to the Administrative Agent for the ratable
account of the Lenders, together with accrued and unpaid interest to the date of such repayment on the principal
amount repaid, the aggregate principal amount of the Advance made to the Borrower outstanding on such date.
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(b)
The Borrower shall with respect to any HYB Debt incurred by the Borrower following the
Effective Date (including the Yen HYB Loan Agreement, provided, however, that this provision shall not apply
with respect to the funding of any such HYB Debt by issuance of subordinated notes or bonds denominated in a
currency other than Yen), upon the date of funding of any such HYB Debt pay the Yen or Yen Equivalent of the
amount of such funding to repay the Advance, and if any prepayment hereunder is made on a date other than the
last day of an Interest Period for the Advance, the Borrower shall also pay any amount owing pursuant to
Section 9.04(c), until all of the amounts have been paid in full.
(c)
Each Party hereto acknowledges and agrees with respect to the foregoing that it is the intention
of such parties that the Advance will be repaid in its entirety by the Maturity Date with the proceeds of Yen HYB
Bonds, Yen HYB Loans and/or other HYB Debt incurred by the Borrower after the Effective Date (provided,
however, that this provision shall not apply with respect to the funding of any such HYB Debt by issuance of
subordinated notes or bonds denominated in a currency other than Yen), and the Borrower shall therefore ensure
that such proceeds when incurred are used to repay the Advances in accordance with this Section 2.06(b) ahead
of any other purpose.
SECTION 2.07
Interest on the Advance. (a) Scheduled Interest. The Borrower shall pay interest on
the unpaid principal amount of the Advance made to it from the date of the Advance until such principal amount
shall be paid in full, at the following rates per annum:
(i)
Cost of Funds Rate Advance. During such periods as the Advance is a Cost of Funds Rate
Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum
of (A) the Cost of Funds Rate for such Interest Period for such Advance and (B) the Applicable Margin
payable in arrears on (x) the last day of such Interest Period and (y) on the date such Cost of Funds
Rate Advance shall be Converted or paid in full; provided that, in the event of any payment of interest
pursuant to clause (y) above, accrued but unpaid interest shall only be payable in respect of the
principal amount of the Advance prepaid or Converted on such date.
(ii)
Eurocurrency Rate Advance. During such periods as the Advance is a Eurocurrency Rate
Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum
of (A) the Eurocurrency Rate for such Interest Period for such Advance, and (B) the Applicable
Margin, payable in arrears on (x) the last day of such Interest Period and (y) on the date such
Eurocurrency Rate Advance shall be Converted or paid in full; provided that, in the event of any
payment of interest pursuant to clause (y) above, accrued but unpaid interest shall only be payable in
respect of the principal amount of the Advance prepaid or Converted on such date.
(b)
Default Interest. Upon the occurrence and during the continuance of an Event of Default
pursuant to Section 6.01(a), the Administrative Agent shall, upon the request of the Required Lenders, require the
Borrower to pay interest (“Default Interest”), which amount shall accrue as of the date of occurrence of the Event
of Default, on (i) amounts that are overdue, payable in arrears on the dates referred to in Section 2.07(a)(i) or
2.07(a)(ii), at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid
on such overdue amount pursuant to Section 2.07(a)(i) or 2.07(a)(ii) and (ii) to the fullest extent permitted by
law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date
such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall
be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid on the Advance pursuant to Section 2.07(a)(ii) (or, if the Advance has been Converted to a
Cost of Funds Rate Advance pursuant to Section 2.07(a)(i)), provided, however, that following acceleration of
the Advance pursuant to Section 6.01, Default Interest shall accrue and be payable hereunder whether or not
previously required by the Administrative Agent.
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(c)
Additional Interest on Eurocurrency Rate Advance. The Borrower shall pay to each Lender, so
long as and to the extent such Lender shall be subject to, under applicable law, rules or regulations to reserves,
liquid asset, fees or similar requirements (as further described in the definition of Eurocurrency Rate Reserve
Percentage) with respect to deposits or liabilities (as so described), additional interest on the unpaid principal
amount of the Advance of such Lender made to the Borrower as a Eurocurrency Rate Advance, from the date of
such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the
remainder obtained by subtracting (a) the Eurocurrency Rate for the applicable Interest Period for the Advance
from (b) the rate obtained by dividing such Eurocurrency Rate by a percentage equal to 100% minus the
Eurocurrency Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which
interest is payable on the Advance. Such Lender shall as soon as practicable provide notice to the Administrative
Agent and the Borrower of any such additional interest arising in connection with the Advance, which notice
shall be conclusive and binding, absent demonstrable error.
SECTION 2.08
Interest Rate Determination. (a) The Administrative Agent shall give prompt
notice to the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for
purposes of Section 2.07(a)(i) or 2.07(a)(ii).
(b)
If, with respect to a Eurocurrency Rate Advance, (i) the Administrative Agent shall have
determined (which determination shall be conclusive and binding absent manifest error) that adequate and
reasonable means (including, without limitation, by means of an Interpolated Rate) do not exist for ascertaining
the Eurocurrency Rate for such Interest Period or (ii) the Required Lenders notify the Administrative Agent that
the Eurocurrency Rate for any Interest Period for the Advance will not adequately and fairly reflect the cost to
the Required Lenders of making, funding or maintaining their respective portion of the Eurocurrency Rate
Advance for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the
Lenders, whereupon (A) (x) the Borrower will, on the last day of the then existing Interest Period therefor prepay
the Advance or (y) the Advance shall automatically, on the last day of the then existing Interest Period therefor,
be Converted to a Cost of Funds Rate Advance with an Interest Period of the same duration, and (B) the
obligation of the Lenders to make the Advance as a Eurocurrency Rate Advance shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension
no longer exist.
(c)
If at any time the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that (i) the circumstances set forth in clause (b)(i) have arisen and such circumstances are
unlikely to be temporary or (ii) the circumstances set forth in clause (b)(i) have not arisen but either (w) the
supervisor for the administrator of the Screen Rate has made a public statement that the administrator of the
Screen Rate is insolvent (and there is no successor administrator that will continue publication of the Screen
Rate), (x) the administrator of the Screen Rate has made a public statement identifying a specific date after which
the Screen Rate will permanently or indefinitely cease to be published by it (and there is no successor
administrator that will continue publication of the Screen Rate), (y) the supervisor for the administrator of the
Screen Rate has made a public statement identifying a specific date after which the Screen Rate will permanently
or indefinitely cease to be published or (z) the supervisor for the administrator of the Screen Rate or a
Governmental Authority having jurisdiction over the Administrative Agent has made a public statement
identifying a specific date after which the Screen Rate may no longer be used for determining interest rates for
loans, then the Administrative Agent and the Borrower shall endeavor to establish an alternate rate of interest to
the Eurocurrency Rate that gives due consideration to the then prevailing market convention for determining a
rate of interest for syndicated loans in the United States at such time, and shall enter into an amendment to this
Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be
applicable (but for the avoidance of doubt, such related changes shall not include a reduction of the Applicable
Margin); provided that, if such alternate rate of interest as so determined would be less than zero, such rate shall
be deemed to be zero for the purposes of this Agreement. Notwithstanding anything to the contrary in
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Section 9.01, such amendment shall become effective without any further action or consent of any other party to
this Agreement so long as the Administrative Agent shall not have received, within five Business Days of the
date notice of such alternate rate of interest is provided to the Lenders, a written notice from the Required
Lenders stating that such Required Lenders object to such amendment. Until an alternate rate of interest shall be
determined in accordance with this clause (c) (but, in the case of the circumstances described in clause (ii) of the
first sentence of this Section 2.08(c), only to the extent the Screen Rate for the applicable currency and such
Interest Period is not available or published at such time on a current basis), any request from the Borrower to
continue the Advance as a Eurocurrency Rate Advance shall be ineffective and the Advance shall automatically,
on the last day of the then existing Interest Period therefor, be Converted to a Cost of Funds Rate Advance with
an Interest Period of the same duration.
SECTION 2.09
[Reserved].
SECTION 2.10
Optional Prepayments of the Advance. The Borrower may, upon written notice to
the Administrative Agent stating the proposed date and aggregate principal amount of the proposed prepayment,
given not later than 10:00 A.M. (Tokyo time) three Business Days prior to the date (which date shall be a
Business Day) of such proposed prepayment, and if such notice is given, the Borrower shall, prepay the
outstanding principal amount of the Advance made to the Borrower in whole or ratably in part, and together with
accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (i) each
partial prepayment shall be in an aggregate principal amount of the Borrowing Minimum or a Borrowing
Multiple in excess thereof and (ii) if any prepayment of a Eurocurrency Rate Advance is made on a date other
than the last day of an Interest Period for such Eurocurrency Rate Advance, the Borrower shall also pay any
amount owing pursuant to Section 9.04(c); and provided, further, that, subject to clause (ii) of the immediately
preceding proviso, any such notice may state that such notice is conditioned upon the effectiveness of other credit
facilities or the consummation of a specific transaction, in which case such notice may be revoked by the
Borrower if such condition is not satisfied.
SECTION 2.11
Increased Costs. (a) If, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) the compliance with any directive, guideline or request from any
central bank or other Governmental Authority including, without limitation, any agency of the European Union
or similar monetary or multinational authority (whether or not having the force of law), in each case after the date
hereof (or with respect to any Lender (or the Administrative Agent), if later, the date on which such Lender (or
the Administrative Agent) becomes a Lender (or the Administrative Agent)), there shall be any increase in the
cost to any Lender or the Administrative Agent of agreeing to make or making, funding or maintaining the
Advance (excluding for purposes of this Section 2.11 any such increased costs resulting from (i) Taxes as to
which such Lender is indemnified under Section 2.14, (ii) Excluded Taxes, or (iii) Other Taxes), then the
Borrower shall from time to time, upon demand by such Lender or the Administrative Agent (with a copy of such
demand to the Administrative Agent, if applicable), pay to the Administrative Agent for the account of such
Lender (or for its own account, if applicable) additional amounts sufficient to compensate such Lender or the
Administrative Agent for such increased cost as reasonably determined by such Lender or the Administrative
Agent (which determination shall be made in good faith (and not on an arbitrary or capricious basis) and
consistent with similarly situated customers of the applicable Lender or the Administrative Agent under
agreements having provisions similar to this Section 2.11 after consideration of such factors as such Lender or
the Administrative Agent then reasonably determines to be relevant). A certificate describing such increased
costs in reasonable detail delivered to the Borrower shall be conclusive and binding for all purposes, absent
demonstrable error.
(b)
If any Lender reasonably determines that compliance with any law or regulation or any
directive, guideline or request from any central bank or other Governmental Authority including, without
limitation, any agency of the European Union or similar monetary or multinational authority (whether or not
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having the force of law), in each case promulgated or given after the date hereof (or with respect to any Lender, if
later, the date on which such Lender becomes a Lender), affects or would affect the amount of capital, insurance
or liquidity required or expected to be maintained by such Lender or any corporation controlling such Lender and
that the amount of such capital, insurance or liquidity is increased by or based upon the existence of such
Lender’s commitment to lend hereunder and other commitments of this type, the Borrower shall, from time to
time upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender, additional amounts sufficient to compensate such Lender
or such corporation in the light of such circumstances as reasonably determined by such Lender (which
determination shall be made in good faith (and not on an arbitrary or capricious basis) and consistent with
similarly situated customers of the applicable Lender under agreements having provisions similar to this
Section 2.11 after consideration of such factors as such Lender then reasonably determines to be relevant), to the
extent that such Lender reasonably determines such increase in capital, insurance or liquidity to be allocable to
the existence of such Lender’s Advance or commitment to lend hereunder. A certificate as to such amounts
submitted to the Borrower and the Administrative Agent by such Lender shall be conclusive and binding for all
purposes, absent demonstrable error.
(c)
Failure or delay on the part of any Lender to demand compensation pursuant to this Section
shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower
shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions
incurred more than six months prior to the date that such Lender notifies the Borrower of the change or
circumstance giving rise to such increased costs or reductions and of such Lender’s intention to claim
compensation therefor; provided further that, if the change or circumstance giving rise to such increased costs or
reductions is retroactive, then the six-month period referred to above shall be extended to include the period of
retroactive effect thereof. Any Lender making a claim for compensation under this Section 2.11 may be required
to assign all of its rights and obligations hereunder upon a request by the Borrower in accordance with
Section 9.07.
(d)
Notwithstanding anything in this Section 2.11 to the contrary, for purposes of this Section 2.11,
(A) the Dodd Frank Wall Street Reform and Consumer Protection Act and the rules and regulations issued
thereunder or in connection therewith or in implementation thereof, and (B) all requests, rules, guidelines and
directions promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision
(or any similar or successor agency, or the United States or foreign regulatory authorities, in each case, pursuant
to Basel III) shall be deemed to have been enacted following the date hereof (or with respect to any Lender, if
later, the date on which such Lender becomes a Lender); provided that no Lender shall demand compensation
pursuant to this Section 2.11(c) unless such Lender is making corresponding demands on similarly situated
borrowers in comparable credit facilities to which such Lender is a party.
SECTION 2.12
Illegality. Notwithstanding any other provision of this Agreement, (a) if any
Lender shall notify the Administrative Agent that the introduction of or any change in or in the interpretation of
any law or regulation makes it unlawful, or any central bank or other Governmental Authority, including without
limitation, any agency of the European Union or similar monetary or multinational authority, asserts that it is
unlawful, for such Lender or its Eurocurrency Lending Office to perform its obligations hereunder to make a
Eurocurrency Rate Advance or to fund or maintain a Eurocurrency Rate Advance hereunder, (i) the Eurocurrency
Rate Advance of such Lender will automatically, upon such notification, be Converted into a Cost of Funds Rate
Advance with an Interest Period of one month and (ii) the obligation of such Lender to make a Eurocurrency
Rate Advance or to Convert the Advance into a Eurocurrency Rate Advance shall be suspended until the
Administrative Agent shall notify the Borrower and such Lender that the circumstances causing such suspension
no longer exist and (b) if Lenders constituting the Required Lenders so notify the Administrative Agent, (i) the
Eurocurrency Rate Advance of each Lender will automatically, upon such notification, Convert into a Cost of
Funds Rate Advance with an Interest Period of one month and (ii) the obligation of each Lender to make a
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Eurocurrency Rate Advance or to Convert the Advance into a Eurocurrency Rate Advance shall be suspended
until the Administrative Agent shall notify the Borrower and each Lender that the circumstances causing such
suspension no longer exist. Any Lender that is prohibited from performing its obligations to make the Advance
or to continue to fund or maintain the Advance may be required to assign all of its rights and obligations
hereunder upon a request by the Borrower in accordance with Section 9.07.
SECTION 2.13
Payments and Computations. (a) The Borrower shall make each payment required
to be made by it under this Agreement not later than 11:00 A.M. (Tokyo time) on the day when due in Yen to the
Administrative Agent at the applicable Administrative Agent’s Office in same day funds. The Administrative
Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or
commitment fees ratably (other than amounts payable pursuant to Section 2.02(c), 2.07(c), 2.11, 2.12(a) (or if
applicable the last sentence of Section 2.12), 2.14, 2.15 or 9.04(c)) to the Lenders for the account of their
respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to
any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to Section 9.07(c), from and after the
effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments
hereunder in respect of the interest assigned thereby to the assignor for amounts which have accrued to but
excluding the effective date of such assignment and to the assignee for amounts which have accrued from and
after the effective date of such assignment. All payments to be made by the Borrower shall be made without
condition or deduction for any counterclaim, defense, recoupment or setoff.
(b)
The Borrower hereby authorizes each Lender, if and to the extent payment owed to such
Lender by the Borrower is not made when due hereunder, to charge from time to time against any or all of the
Borrower’s accounts with such Lender any amount so due, unless otherwise agreed between the Borrower and
such Lender.
(c)
All computations of interest hereunder shall be made by the Administrative Agent on the basis
of a year of 365 days and in each case for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest or such fees are payable. Each determination by the
Administrative Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent
demonstrable error.
(d)
Whenever any payment hereunder shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case
be included in the computation of payment of interest or commitment fee, as the case may be; provided,
however, that, if such extension would cause payment of interest on or principal of the Advance made as a
Eurocurrency Rate Advance to be made in the next following calendar month, such payment shall be made on the
immediately preceding Business Day.
(e)
the Administrative Agent may assume that
Unless the Administrative Agent shall have received written notice from the Borrower prior to
the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in
full,
to the
Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause
to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to
the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender
shall repay to the Administrative Agent, following prompt notice thereof, forthwith on demand such amount
distributed to such Lender, together with interest thereon, for each day from the date such amount is distributed
to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Cost of Funds
Rate.
the Borrower has made such payment
in full
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SECTION 2.14
Taxes. (a) Any and all payments by or on behalf of the Borrower under any Loan
Document shall be made, in accordance with Section 2.13, free and clear of and without deduction for any Taxes,
excluding, in the case of each Lender and the Administrative Agent, (i) taxes imposed on (or measured by) its
overall net income (however denominated), franchise taxes, and branch profits taxes, in each case (A) imposed
by the jurisdiction under the laws of which such Lender or the Administrative Agent, as the case may be, is
organized or any political subdivision thereof, by the jurisdiction of the Administrative Agent’s principal office
or such Lender’s Applicable Lending Office, as the case may be, or any political subdivision thereof or (B) that
are Other Connection Taxes, (ii) with respect to a Lender that is not a Japanese tax resident or a Japanese branch
of a non-Japanese tax resident and is not entitled to a full exemption on Japanese withholding tax on interest
payments under a tax treaty entered into by Japan and that is in effect on the date specified in this clause (ii)(A)-
(B) below, any Japanese withholding Taxes imposed by a Governmental Authority pursuant to a law in effect on
the date on which (A) a Lender acquires such interest in an Advance or Commitment or, with respect to the
Administrative Agent, the date that the Administrative Agent becomes a party to a Loan Document or (B) a
Lender changes its Applicable Lending Office, except in each case to the extent that, pursuant to Section 2.14,
amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such
Lender became a party hereto or to such Lender immediately before it changed its Applicable Lending Office,
(iii) any Tax that is imposed (for the avoidance of doubt, including any Tax that is imposed at higher effective
tax rate) by reason of such Lender’s or the Administrative Agent’s failure to comply with Section 2.14(f), and
(iv) any withholding taxes imposed under FATCA (all such excluded Taxes in respect of payments under any
Loan Document being hereinafter referred to as “Excluded Taxes”). If any Taxes from or in respect of any sum
payable under any Loan Document to any Lender or the Administrative Agent shall be required to be deducted or
withheld under applicable law, (A) the Borrower shall be entitled to make such deductions or withholdings and
(B) the Borrower shall pay the full amount deducted or withheld to the relevant taxation authority or other
Governmental Authority in accordance with applicable law. If any Taxes other than Excluded Taxes shall be
required to be deducted from or in respect of any sum payable under any Loan Document to any Lender or the
Administrative Agent, the sum payable by the Borrower shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional sums payable under this
Section 2.14) such Lender or the Administrative Agent, as the case may be, receives an amount equal to the sum
it would have received had no such deductions been made.
(b)
In addition, without duplication of any other obligation set forth in this Section 2.14, the
Borrower agrees to pay to the relevant taxing authority or Governmental Authority any present or future stamp
and documentary Taxes and any other excise or property Taxes, charges or similar levies that arise from any
payment made by it under any Loan Document or from the execution, delivery or registration of, or performance
under, or otherwise with respect to, any Loan Document other than any such Taxes, charges or similar levies that
are Other Connection Taxes imposed with respect to an assignment or the designation of a new Applicable
Lending Office (other than an assignment or designation pursuant to a request by the Borrower) (such Taxes,
charges or similar levies, hereinafter referred to as “Other Taxes”).
(c)
Without duplication of any other obligation set forth in this Section 2.14, the Borrower shall
indemnify each Lender and the Administrative Agent for the full amount of Taxes (other than Excluded Taxes)
and Other Taxes (except to the extent such Other Taxes are Other Connection Taxes imposed solely as a result of
an assignment or the designation of a new Applicable Lending Office (other than an assignment or designation
pursuant to a request by the Borrower)) imposed on or paid by such Lender or the Administrative Agent, as the
case may be, in respect of the Advance made to the Borrower and any liability (including, without limitation,
penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made
within 30 days from the date such Lender or the Administrative Agent, as the case may be, makes written
demand therefor. Such Lender or the Administrative Agent shall deliver to the Borrower a certificate describing
in reasonable detail the amount of such payment or liability.
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(d)
Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand
therefor, for (i) any Taxes attributable to such Lender (but only to the extent that the Borrower has not already
indemnified the Administrative Agent for such Taxes and without limiting the obligation of the Borrower to do
so) and (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.07(e)
relating to the maintenance of a Participant Register, in either case, that are payable or paid by the Administrative
Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant governmental
authority. A certificate describing in reasonable detail the amount of such payment or liability delivered to any
Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the
Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan
Document or otherwise payable by the Administrative Agent to the Lender from any other source against any
amount due to the Administrative Agent under this paragraph (d).
(e)
As soon as practical after the date of any payment of Taxes or Other Taxes for which the
Borrower is responsible under this Section 2.14, the Borrower shall furnish to the Administrative Agent, at its
address as specified in Schedule II, the original or a certified copy of a receipt evidencing payment thereof.
(i)
(f)
Any Lender that is entitled to an exemption from or reduction of withholding Tax with
respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent,
at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed
and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit
such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if
reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation
prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable
the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup
withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding
two sentences, the completion, execution and submission of such documentation (other than such documentation
set forth in Section 2.14(f)(ii) below) shall not be required if in the Lender’s reasonable judgment such
completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or
would materially prejudice the legal or commercial position of such Lender.
(ii)
Without limiting the generality of the foregoing:
(1)
that
Any Lender
is a “United States person” within the meaning of
Section 7701(a)(30) of the Code shall deliver to the Borrower and the Administrative Agent
executed originals of IRS Form W-9 (and any applicable successor form) and such other
documentation or information prescribed by applicable Laws or reasonably requested by the
Borrower or the Administrative Agent certifying that such Lender is exempt from U.S. federal
backup withholding tax. The forms described in this Section 2.14(f)(ii)(1) shall be provided by
each Lender to the Borrower and the Administrative Agent at the time such Lender becomes a
party to this Agreement, at the time or times prescribed by applicable Laws, when reasonably
requested by the Borrower or the Administrative Agent, and promptly upon the obsolescence,
invalidity or expiration of any form previously provided by such Lender;
(2)
Any Lender that is neither a Japanese tax resident nor a Japanese branch of a
non-Japanese tax resident shall provide, to the extent it is legally entitled to do so, the
applicable documentation to claim the benefits of a tax treaty entered into by Japan , at the time
or times prescribed by applicable Laws and when reasonably requested by the Borrower or the
Administrative Agent;
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(3)
Any Lender that is a Japanese branch of a non-Japanese tax resident shall
present, to the extent it is legally entitled to do so, a Certificate of Exemption for Withholding
Tax for Foreign Corporations issued by the relevant tax authority in Japan pursuant to Article
180 of the Income Tax Act of Japan (shotokuzeihou) at the time or times prescribed by
applicable Laws and when reasonably requested by the Borrower or the Administrative Agent.
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(iii)
If a payment made to a Lender under any Loan Document would be subject to
withholding tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting
requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable),
such Lender shall deliver to the Borrower and the Administrative Agent, at the time or times prescribed by law
and at such time or times reasonably requested by the Borrower or the Administrative Agent, such documentation
prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the Borrower or the Administrative Agent as may be
necessary for the Borrower or the Administrative Agent to comply with its obligations under FATCA, to
determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the
amount to deduct and withhold from such payment. Solely for the purposes of this clause 2.14(f)(ii), “FATCA”
shall include any amendments made to FATCA after the date of this Agreement.
(iv)
Each Lender agrees that if any form or certification it previously delivered expires or
becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the
Borrower and the Administrative Agent in writing of its legal inability to do so.
(v)
Notwithstanding the foregoing, any Japanese Taxes resulting from the failure or legal
inability of a Lender to provide any tax forms pursuant to Section 2.14(f)(i)-(ii) or (iv) shall be considered Excluded
Taxes unless (x) such Taxes are imposed as a result of a change in law or treaty occurring after the date the Lender
became a party to this Agreement or acquired its interest in a Loan or Commitment and would otherwise have not
been treated as an Excluded Tax under Section 2.14(a) but for this Section 2.14(f)(v) or (y) such Taxes were grossed
up with respect to the Lender’s assignor immediately before such Lender became a party.
(g)
In the event that an additional payment is made under Section 2.14(a) or 2.14(c) for the account
of the Administrative Agent or any Lender and the Administrative Agent or such Lender, in its sole discretion
exercised in good faith, determines that it has received a refund of any tax paid or payable by it in respect of or
calculated with reference to the deduction or withholding giving rise to such additional payment (including by
the payment of additional amounts pursuant to this Section 2.14), the Administrative Agent or such Lender shall
pay to the Borrower such amount equal to such refund as the Administrative Agent or such Lender shall, in its
reasonable discretion exercised in good faith, have determined is attributable to such deduction or withholding
and will leave the Administrative Agent or such Lender (after such payment) in no worse position than it would
have been had the Borrower not been required to make such deduction or withholding. The Borrower, upon the
request of the Administrative Agent or such Lender, shall repay to the Administrative Agent or such Lender the
amount paid over pursuant to this paragraph (g) (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) in the event that the Administrative Agent or such Lender is required to repay
such refund to such Governmental Authority. Nothing contained in this Section 2.14(g) shall (i) interfere with the
right of a Lender to arrange its tax affairs in whatever manner it thinks fit or (ii) oblige the Administrative Agent
or any Lender to disclose any information relating to its tax returns, tax affairs or any computations in respect
thereof or (iii) require any Lender to take or refrain from taking any action that would prejudice its ability to
benefit from any other credits, reliefs, remissions or repayments to which it may be entitled.
(h)
Each party’s obligations under this Section 2.14 shall survive the resignation or replacement of
the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the
Commitments and the repayment, satisfaction or discharge of all obligations under the Loan Documents.
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(i)
For purposes of this Section 2.14, the term “applicable law” includes FATCA.
SECTION 2.15
Sharing of Payments, Etc. Subject to Section 2.19 in the case of a Defaulting
Lender, if any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right
of setoff, or otherwise) on account of the Advance owing to it (other than pursuant to Section 2.02(c), 2.07(c),
2.11, 2.12(a), 2.14 or 9.04(c)) in excess of its ratable share of payments on account of the Advance obtained by
all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advance
owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with
each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such
Lender’s ratable share (according to the proportion of (a) the amount of such Lender’s required repayment to
(b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.15 may, to the fullest extent permitted
by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of such participation. The provisions of
this Section 2.15 shall not be construed to apply to (A) any payment made by the Borrower pursuant to and in
accordance with the express terms of this Agreement (including the application of funds arising from a
Defaulting Lender) as in effect from time to time or (B) any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Advance to any assignee or participant permitted
hereunder.
SECTION 2.16
Use of Proceeds. The proceeds of the Advance shall be available, and the
Borrower agrees that it shall apply such proceeds, solely towards Certain Funds Purposes.
SECTION 2.17
Evidence of Debt. (a) The Register maintained by the Administrative Agent
pursuant to Section 9.07(d) shall include (i) the date and amount of the Borrowing made hereunder by the
Borrower, the Type of Advance comprising such Borrowing and, if appropriate, the Interest Period applicable
thereto, (ii) the terms of each Assignment and Acceptance delivered to and accepted by it, (iii) the amount of any
principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder
and (iv) the amount of any sum received by the Administrative Agent from the Borrower hereunder and each
Lender’s share thereof.
(b)
Entries made reasonably and in good faith by the Administrative Agent in the Register pursuant
to subsection (a) above shall be prima facie evidence of the amount of principal and interest due and payable or
to become due and payable from the Borrower to each Lender under this Agreement, absent manifest error;
provided, however, that the failure of the Administrative Agent to make an entry, or any finding that an entry is
incorrect, in the Register or such account or accounts shall not limit, expand or otherwise affect the obligations of
the Borrower under this Agreement.
SECTION 2.18
[Reserved].
SECTION 2.19
Defaulting Lenders.
(a)
Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a
Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender (it
being understood that the determination of whether a Lender is no longer a Defaulting Lender shall be made as
described in Section 2.19(b)):
(i)
such Defaulting Lender will not be entitled to any fees accruing during such period
pursuant to Section 2.04(a);
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(ii)
[reserved];
(iii)
to the fullest extent permitted by applicable law, such Lender will not be entitled to
vote in respect of amendments and waivers hereunder, and the Commitment and the outstanding
Advance of such Lender hereunder will not be taken into account in determining whether the Required
Lenders or all of the Lenders, as required, have approved any such amendment or waiver (and the
definition of “Required Lenders” will automatically be deemed modified accordingly for the duration
of such period); provided that any such amendment or waiver that would increase or extend the term of
the Commitment of such Defaulting Lender, extend the date fixed for the payment of principal or
interest owing to such Defaulting Lender hereunder, reduce the principal amount of any obligation
owing to such Defaulting Lender, reduce the amount of or the rate or amount of interest on any amount
owing to such Defaulting Lender or of any fee payable to such Defaulting Lender hereunder, or alter
the terms of this proviso, will require the consent of such Defaulting Lender; and
(iv)
the Borrower may, at its sole expense and effort, require such Defaulting Lender to
assign and delegate its interests, rights and obligations under this Agreement pursuant to Section 9.07.
(b)
If the Borrower and the Administrative Agent agree in writing in their discretion that a Lender
is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the
effective date specified in such notice and subject to any conditions set forth therein, such Lender will cease to be
a Defaulting Lender and will be a Non-Defaulting Lender; provided that no adjustments will be made
retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender
was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the
affected parties, no change hereunder from Defaulting Lender to Non- Defaulting Lender will constitute a waiver
or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.
(c)
Any payment of principal, interest, fees or other amounts received by the Administrative
Agent hereunder for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity,
pursuant to Section 6.01 or otherwise) or received by the Administrative Agent from a Defaulting Lender
pursuant to Section 9.05 shall be applied at such time or times as follows: first, to the payment of any amounts
owing by such Defaulting Lender to the Administrative Agent hereunder; second as the Borrower may request
(so long as no Default or Event of Default exists), to the funding of the Advance in respect of which such
Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as reasonably determined
by the Administrative Agent; third, as the Borrower may request, to be held in a deposit account and released pro
rata in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to the Advance
under this Agreement; fourth, to the payment of any amounts owing to the Lenders as a result of any judgment of
a court of competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such
Defaulting Lender’s breach of its obligations under this Agreement; fifth, so long as no Default or Event of
Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of
competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting
Lender’s breach of its obligations under this Agreement; and sixth, to such Defaulting Lender or as otherwise
directed by a court of competent jurisdiction. Any payments, prepayments or other amounts paid or payable to a
Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or otherwise pursuant
to this Section 2.19(c) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender
irrevocably consents hereto.
SECTION 2.20
Mitigation. (a) Each Lender shall promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge that will result in, and will use reasonable
commercial efforts available to it (and not, in such Lender’s good faith judgment, otherwise disadvantageous to
such Lender) to mitigate or avoid, (i) any obligation by the Borrower to pay any amount pursuant to Section 2.11
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or 2.14 or (ii) the occurrence of any circumstance described in Section 2.12 (and, if any Lender has given notice
of any such event described in clause (i) or (ii) above and thereafter such event ceases to exist, such Lender shall
promptly so notify the Borrower and the Administrative Agent). In furtherance of the foregoing, each Lender will
designate a different funding office if such designation will avoid (or reduce the cost to the Borrower of) any
event described in clause (i) or (ii) of the preceding sentence and such designation will not, in such Lender’s
good faith judgment, be otherwise disadvantageous to such Lender.
(b)
Notwithstanding any other provision of this Agreement, if any Lender fails to notify the
Borrower of any event or circumstance which will entitle such Lender to compensation pursuant to Section 2.11
within 180 days after such Lender obtains knowledge of such event or circumstance, then such Lender shall not
be entitled to compensation from the Borrower for any amount arising prior to the date which is 180 days before
the date on which such Lender notifies the Borrower of such event or circumstance.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01
Conditions Precedent to Effective Date. This Agreement shall become effective
on and as of the first date on which the following conditions precedent have been satisfied (with the
Administrative Agent acting reasonably in assessing whether the conditions precedent are satisfactory) (or
waived in accordance with Section 9.01):
(a)
The Administrative Agent (or its counsel) shall have received from each party hereto either
(i) a counterpart of this Agreement and the other Loan Documents signed on behalf of such party or
(ii) written evidence reasonably satisfactory to the Administrative Agent (which may include .pdf or
facsimile transmission of a signed signature page of this Agreement) that such party has signed a
counterpart of this Agreement.
(b)
All fees and other amounts then due and payable by the Consolidated Group to the
Administrative Agent, the Lead Arrangers, the Arranger and the Lenders under the Loan Documents or
pursuant to any fee or similar letters relating to the Loan Documents shall be paid, to the extent invoiced by
the relevant person at least one Business Day prior to the Effective Date and to the extent such amounts are
payable on or prior to the Effective Date.
(c)
The Administrative Agent shall have received on or before the Effective Date, each dated on or
about such date:
(i)
Certified copies of the resolutions or similar authorizing documentation of the
governing bodies of the Borrower authorizing such Person to enter into and perform its obligations
under the Loan Documents to which it is a party;
(ii)
Certified copies of the Borrower’s articles of incorporation, certificate of incorporation
and bylaws (or comparable organizational documents) and any amendments thereto;
(iii)
A certificate of the Borrower attaching a certificate of commercial registry (rireki
jikou zenbu shomeisho) of the Borrower issued by a Legal Affairs Bureau and certifying that all
information required to be registered under the laws of Japan has been registered in the commercial
registry;
(iv)
A customary certificate of the Borrower certifying the names and true signatures of
the officers of the Borrower authorized to sign this Agreement and the other documents to be delivered
by it hereunder; and
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(v)
A favorable opinion letter of each of (i) Linklaters LLP and (ii) Gaikokuho Kyodo-
Jigyo Horitsu Jimusho Linklaters, in each case in form and substance reasonably satisfactory to the
Administrative Agent.
(d)
(e)
[reserved].
The Administrative Agent shall have received a copy, certified by the Borrower, of the
Original Scheme Press Release.
(f)
The Administrative Agent shall have received, at least 3 Business Days prior to the Effective
Date, so long as requested no less than 10 Business Days prior to the Effective Date, all documentation and
other information required by regulatory authorities under applicable “know your customer” and anti-money
laundering rules and regulations, including the Criminal Proceeds Transfer Prevention Act of Japan (Law
No. 22 of 2007, as amended) and the Patriot Act, in each case relating to the Borrower and its Subsidiaries,
including the Borrower.
(g)
The Administrative Agent shall have received a letter from the Service of Process Agent
indicating its consent to its appointment by the Borrower as its agent to receive service of process as
specified in this Agreement, and confirming that such appointment is in full force and effect and applies to
this Agreement in all respects.
(h)
The Lead Arrangers and the Arranger shall have received a copy of the Disclosure Letter, it
being acknowledged that neither the Administrative Agent nor any Lender shall have any approval right as
regards the form or contents of the Disclosure Letter.
The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date in writing
promptly upon such conditions precedent being satisfied (or waived in accordance with Section 9.01), and such
notice shall be conclusive and binding.
SECTION 3.02
Conditions Precedent to Closing Date. Subject to Section 3.04, the obligation of
each Lender to make an Advance on the Closing Date is subject to the satisfaction (or waiver in accordance with
Section 9.01) of the following conditions:
(a)
The Effective Date shall have occurred.
(b)
received:
If the Target Acquisition is effected by way of a Scheme, the Administrative Agent shall have
(i)
a certificate of the Borrower signed by a director certifying:
(1)
the date on which the Scheme Circular was posted to the shareholders of the
Target;
(2)
the date on which the Court has sanctioned the Scheme and that the Court
Order has been duly delivered to the Registrar in accordance with Article 125(3) of the Jersey
Companies Law;
(3)
(e) below;
confirmation as to the satisfaction of each condition set forth in clauses (d) and
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(4)
the Target Acquisition shall have been, or, within the time period permitted by
the City Code, shall be, consummated in all material respects in accordance with the terms and
to the extent not prohibited by the Loan
conditions of the Scheme Documents except
Documents; and
(5)
each copy of the documents specified in paragraph (ii) below is correct and
complete and has not been amended or superseded on or prior to the Closing Date, except to
the extent such changes thereto have been required pursuant to the City Code or required by
the Panel or by a court of competent jurisdiction or to the extent not prohibited by the Loan
Documents; and
(ii)
a copy of the Scheme Circular which is consistent in all material respects with the
terms and conditions in the Scheme Press Release and the Scheme Resolutions, in each case, except to
the extent changes thereto have been required pursuant to the City Code or required by the Panel or by
a court of competent jurisdiction or are not prohibited by the Loan Documents.
(c)
If the Target Acquisition is effected by way of a Takeover Offer, the Administrative Agent
shall have received:
(i)
a certificate of the Borrower signed by a director certifying:
(1)
the date on which the Takeover Offer Document was posted to the
shareholders of the Target;
(2)
(e) below;
confirmation as to the satisfaction of each condition set forth in clauses (d) and
(3)
each copy of the documents specified in paragraph (ii) below is correct and
complete and has not been amended or superseded on or prior to the Closing Date, except to
the extent such changes thereto have been required pursuant to the City Code or required by the
Panel or are not prohibited by the Loan Documents; and
(4)
that the Takeover Offer has been declared unconditional in all respects without
any material amendment, modification or waiver of the conditions to the Takeover Offer or of
the Acceptance Condition except to the extent not prohibited by the Loan Documents; and
(ii)
a copy of the Takeover Offer Document which is consistent in all material respects with
the terms and conditions in the Offer Press Announcement, except to the extent changes thereto have
been required pursuant to the City Code or required by the Panel or a court of competent jurisdiction or
are permitted under the Loan Documents.
(d)
On the date of the applicable borrowing request and on the proposed date of such borrowing
(x) no Certain Funds Default is continuing or would result from the proposed Borrowing and (y) all the
Certain Funds Representations are true or, if a Certain Funds Representation does not include a materiality
concept, true in all material respects.
(e)
Section 2.02.
The Administrative Agent shall have received a Notice of Borrowing in accordance with
(f)
The Administrative Agent shall have received a pro forma consolidated balance sheet and
related pro forma consolidated statement of income of the Borrower and its Subsidiaries as of and for the
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twelve-month period ending on the last day of the most recently completed four- fiscal quarter period ended
at least 45 days prior to the Closing Date, prepared after giving effect to the Transactions as if the
Transactions had occurred as of such date (in the case of such balance sheet) or at the beginning of such
period (in the case of such statement of income) (the “Pro Forma Financials”), it being acknowledged that
neither the Administrative Agent nor any Lender shall have any approval right as regards the form or
contents of the Pro Forma Financials).
(g)
It is not illegal for any Lender to lend and there is no injunction, restraining order or equivalent
prohibiting any Lender from lending its portion of the Advance or restricting the application of the proceeds
thereof; provided that such Lender has used commercially reasonable efforts to make the Loans through an
Affiliate of such Lender not subject to such legal restriction; provided further, that the occurrence of such
event in relation to one Lender shall not relieve any other Lender of its obligations to make the Advance
hereunder.
The Administrative Agent shall notify the Borrower and the Lenders of the Closing Date as soon as
practicable upon its occurrence, and such notice shall be conclusive and binding.
SECTION 3.03
Conditions to the Advance after the Closing Date. The obligation of each Lender
to make the Advance on any date after the Closing Date and during the Availability Period is subject to the
satisfaction (or waiver in accordance with Section 9.01) of the following conditions:
(a)
Each of the Effective Date and the Closing Date shall have occurred.
(b)
Section 2.02.
The Administrative Agent shall have received a Notice of Borrowing in accordance with
(c)
On the date of the applicable borrowing request and on the proposed date of such borrowing
(i) no Certain Funds Default is continuing or would result from the proposed Borrowing and (ii) all the
Certain Funds Representations are true or, if a Certain Funds Representation does not include a materiality
concept, true in all material respects.
(d)
[reserved].
(e)
It is not illegal for any Lender to lend and there is no injunction, restraining order or equivalent
prohibiting any Lender from lending its portion of the Advance or restricting the application of the proceeds
thereof; provided that such Lender has used commercially reasonable efforts to make the Loans through an
Affiliate of such Lender not subject to such legal restriction; provided further, that the occurrence of such
event in relation to one Lender shall not relieve any other Lender of its obligations to make the Advance
hereunder.
SECTION 3.04
Actions by Lenders During the Certain Funds Period. During the Certain Funds
Period and notwithstanding (i) any provision to the contrary in the Loan Documents or (ii) that any condition set
out
in Sections 3.01, 3.02 or 3.03 may subsequently be determined to not have been satisfied or any
representation given was incorrect in any material respect, none of the Lenders nor the Administrative Agent
shall, unless a Certain Funds Default has occurred and is continuing or would result from a proposed borrowing
or a Certain Funds Representation remains incorrect or, if a Certain Funds Representation does not include a
materiality concept, incorrect in any material respect, be entitled to:
(i)
cancel any of its Commitments;
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(ii)
rescind, terminate or cancel the Loan Documents or the Commitments or exercise any similar right or
remedy or make or enforce any claim under the Loan Documents it may have to the extent to do so
would prevent or limit (A) the making of an Advance for Certain Funds Purposes or (B) the application
of amounts standing to the credit of an Escrow Account for Certain Funds Purposes;
(iii) refuse to participate in the making of an Advance for Certain Funds Purposes unless the conditions set
forth in Section 3.02 or, after the Closing Date, 3.03, as applicable, have not been satisfied;
(iv) exercise any right of set-off or counterclaim in respect of an Advance to the extent to do so would
prevent or limit (A) the making of an Advance for Certain Funds Purposes or (B) the application of
amounts standing to the credit of an Escrow Account for Certain Funds Purposes; or
(v) cancel, accelerate or cause repayment or prepayment of any amounts owing under any Loan Document
to the extent to do so would prevent or limit (A) the making of an Advance for Certain Funds Purposes
or (B) the application of amounts standing to the credit of an Escrow Account for Certain Funds
Purposes;
provided that immediately upon the expiry of the Certain Funds Period all such rights, remedies and
entitlements shall be available to the Lenders and the Administrative Agent notwithstanding that they may not
have been used or been available for use during the Certain Funds Period.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01
Representations and Warranties of the Borrower. The Borrower represents and
warrants on the Effective Date and the date of the making of the Advance (it being understood the conditions to
the Effective Date are solely those set out in Section 3.01 and the conditions to the Advance are solely those set
out in Sections 3.02 and 3.03, as applicable) as follows:
(a)
The Borrower is duly organized, validly existing and in good standing (to the extent that such
concept exists) under the laws of its jurisdiction of organization.
(b)
The execution, delivery and performance by the Borrower of this Agreement and the other
Loan Documents to which it is a party, and the consummation of the transactions contemplated hereby and
thereby, (i) are within the Borrower’s organizational powers, (ii) have been duly authorized by all necessary
organizational action, (iii) do not contravene (A) the Borrower’s charter, articles of incorporation or by-laws
or other organizational documents or (B) any law, regulation or contractual restriction binding on or
affecting the Borrower and (iv) will not result in or require the creation or imposition of any Lien upon or
with respect to any of the properties of the Consolidated Group (other than Liens created or required to be
created pursuant to the terms hereof), except, in the case of clause (iii)(B) and (iv), as would not be
reasonably expected to have a Material Adverse Effect.
(c)
No authorization or approval or other action by, and no notice to or filing with, any
Governmental Authority or regulatory body is required for the due execution, delivery and performance by
the Borrower of this Agreement and the consummation of the transactions contemplated hereby, other than
(i) the Panel, as directed by the Panel pursuant to the requirements of the City Code, anti-trust regulators, as
directed by anti-trust regulators, as contemplated by the Scheme Documents or (as the case may be) the
Takeover Offer Documents or as is obtained by the time required and (ii) the Bank of Japan with respect to
post-facto filings that may be required under the Foreign Exchange Act in connection with the performance
of this Agreement.
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(d)
This Agreement and the other Loan Documents have been duly executed and delivered by the
Borrower. This Agreement and the other Loan Documents are legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with its terms, except as affected by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and
general principles of equity (whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
(e)
The Borrower has heretofore furnished to the Lenders (i) its consolidated balance sheet at
March 31, 2018 and the related consolidated statements of operations, shareholders’ equity and cash flows
for the fiscal year ended March 31, 2018, in each case reported on by KPMG AZSA LLC, independent
public accountants and (ii) the consolidated balance sheet of the Target as December 31, 2017 and the
related consolidated statements of operations, shareholders’ equity and cash flows for the fiscal year ended
December 31, 2017. Such financial statements (to the Borrower’s knowledge with respect to the financial
statements of the Target) present fairly, in all material respects, the consolidated financial position and
results of operations and cash flows of the Borrower and the Target, as applicable, and their respective
consolidated Subsidiaries as of such dates and for such periods in accordance with IFRS and GAAP, as
applicable, except as may be indicated in the notes thereto and subject to year-end audit adjustments and the
absence of footnotes in the case of unaudited financial statements.
(f)
There is no action, suit, investigation, litigation or proceeding (including, without limitation,
any Environmental Action), affecting the Consolidated Group pending or,
to the knowledge of the
Borrower, threatened before any court, governmental agency or arbitrator that would reasonably be expected
to be adversely determined, and if so determined, (a) would reasonably be expected to have a material
adverse effect on the financial condition or results of operations of the Consolidated Group taken as a whole
(other than the litigation set forth in the Disclosure Letter) or (b) would adversely affect the legality, validity
and enforceability of any material provision of this Agreement in any material respect.
(g)
Following application of the proceeds of the Advance, not more than 25 percent of the value of
the assets of the Borrower and of the Consolidated Group, on a Consolidated basis, subject to the provisions
of Section 5.02(a) will be Margin Stock. No part of the proceeds of the Advance have been used or will be
used for any purpose that entails a violation of any of the regulations of the Board, including Regulations T,
U and X of the Board.
(h)
All written information (other than the Projections) concerning the Borrower, the Target and
their Subsidiaries and the transactions contemplated hereby or otherwise prepared by or on behalf of the
Borrower and its Subsidiaries and furnished to the Agents or the Lenders in connection with the negotiation
of, or pursuant to the terms of, this Agreement when taken as a whole (and with respect to information
regarding the Target Group, to the Borrower’s knowledge), was true and correct in all material respects as of
the date when furnished by such Person to the Agents or the Lenders and did not, taken as a whole, when so
furnished contain any untrue statement of a material fact as of any such date or omit to state a material fact
necessary in order to make the statements contained therein, taken as a whole, not misleading in light of the
circumstances under which such statements were made. The Projections and estimates and information of a
general economic nature prepared by or on behalf of the Borrower or its Subsidiaries and that have been
furnished by such Person to any Lenders or the Administrative Agent in connection with the transactions
contemplated hereby have been prepared in good faith based upon assumptions believed by such Person to
be reasonable as of the date of such Projections (it being understood that actual results may vary materially
from the Projections).
(i)
No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan
which would reasonably be expected to have a Material Adverse Effect.
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(j)
[reserved].
(k)
Neither the Borrower nor any ERISA Affiliate (i) is reasonably expected to incur any
Withdrawal Liability to any Multiemployer Plan or has incurred any Withdrawal Liability that has not been
satisfied in full or (ii) has been notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization (within the meaning of Section 4241 of ERISA) or has been determined to be in
“endangered” or “critical’ status (within the meaning of Section 432 of the Code or Section 305 of ERISA),
and no such Multiemployer Plan is reasonably expected to be in reorganization or in “endangered” or
“critical” status.
(l)
(i) The operations and properties of the Consolidated Group comply, and have complied for the
previous three years, in all respects with all applicable Environmental Laws and Environmental Permits
except to the extent that the failure to so comply, either individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect; (ii) all past non-compliance with such
Environmental Laws and Environmental Permits has been resolved without any ongoing obligations or costs
except to the extent that such non-compliance, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect; and (iii) to the Borrower’s knowledge, no circumstances exist
that would be reasonably expected to (A) form the basis of an Environmental Action against a member of
the Consolidated Group or any of its properties that, either individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect or (B) cause any such property to be subject to
any restrictions on ownership, occupancy, use or transferability under any Environmental Law that, either
individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
(m)
(i) None of the properties currently or formerly owned or operated by a member of the
Consolidated Group is listed or formally proposed for listing on the NPL or on the CERCLIS or any
analogous foreign, state or local list; (ii) to the Borrower’s knowledge, there are no, and never have been
any, underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or
lagoons in which Hazardous Materials are being or have been treated, stored or disposed of on any property
currently owned or operated by any member of the Consolidated Group or, to the Borrower’s knowledge, on
any property formerly owned or operated by a member of the Consolidated Group that, either individually
or in the aggregate, would reasonably be expected to have a Material Adverse Effect; (iii) to the Borrower’s
knowledge, there is no asbestos or asbestos-containing material on any property currently owned or operated
by a member of the Consolidated Group the mitigation of which, either individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect; and (iv) to the Borrower’s knowledge, no
Hazardous Materials have been released, discharged or disposed of on any property currently or formerly
owned, leased or operated by a member of the Consolidated Group for which a member of the Consolidated
Group could be expected to be made liable to remediate under Environmental Law except in each case as
would not have a Material Adverse Effect.
(n)
No member of the Consolidated Group is undertaking either individually or together with other
potentially responsible parties, any investigation or assessment or remedial or response action relating to
any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or
operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the
requirements of any Environmental Law that, either individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect; and, to the Borrower’s knowledge, all Hazardous Materials
generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly
owned or operated by a member of the Consolidated Group, or any offsite locations to which a member of
the Consolidated Group sent Hazardous Materials for treatment or disposal, have been disposed of in a
manner that, either individually or in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect.
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(o)
The Borrower is not an “investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940, as amended.
(p)
The Advance and all related obligations of the Borrower under this Agreement rank pari passu
with all other unsecured obligations of the Borrower that are not, by their terms, expressly subordinate to the
obligations of the Borrower hereunder.
(q)
The proceeds of the Advance will be used in accordance with Section 2.16.
(r)
The Borrower has implemented and maintains in effect policies and procedures reasonably
designed to promote compliance by the Borrower, its Subsidiaries and their respective directors, officers,
its
employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Borrower,
Subsidiaries and their respective officers and directors and to the knowledge of the Borrower its employees
and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects.
None of (i) the Borrower, any Subsidiary, any of their respective directors or officers or to the knowledge of
the Borrower or such Subsidiary employees, or (ii) to the knowledge of the Borrower, any agent of the
Borrower or any agent of any Subsidiary that will act in any capacity in connection with or benefit from the
credit facility established hereby, is a Sanctioned Person.
(s)
No Borrowing or use of proceeds thereof or the Transactions will violate any applicable Anti-
Corruption Law or applicable Sanctions.
(t)
The Borrower has delivered to the Administrative Agent a complete and correct copy of the
Scheme Documents (if and when issued) or, as the case may be, the Offer Documents (if and when issued),
including all schedules and exhibits thereto. The release of the Offer Press Announcement and the posting of
the Takeover Offer Documents if a Takeover Offer is pursued has been or will be, prior to their release or
posting (as the case may be) duly authorized by the Borrower. Each of the material obligations of the
Borrower under the Takeover Offer Documents is or will be, when entered into and delivered, the legal,
valid and binding obligation of the Borrower, enforceable against such Persons in accordance with its terms
in each case, except as may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws
affecting the rights and remedies of creditors generally and (ii) general principles of equity.
(u)
The Scheme Press Release and the Scheme Circular (in each case if and when issued) when
taken as a whole: (i) except for the information that relates to the Target or the Target Group, do not (or will
not if and when issued) contain (to the best of its knowledge and belief (having taken all reasonable care to
ensure that such is the case)) any statements which are not in accordance with the material facts, or where
appropriate, do not omit anything likely to affect the import of such information and (ii) contain all the
material terms of the Scheme.
(v)
If the Target Acquisition is effected by way of a Scheme, each of the Scheme Documents
complies in all material respects with the Jersey Companies Law and the City Code, subject to any
applicable waivers by or requirements of the Panel.
(w)
The Borrower is not an EEA Financial Institution.
SECTION 4.02
Representations and Warranties of the Lenders and the Borrower. Each of the
Borrower and each Lender represents and warrants on the Effective Date and the date of the making of the
Advance (it being understood the conditions to the Effective Date are solely those set out in Section 3.01 and
the conditions to the Advance are solely those set out in Sections 3.02 and 3.03, as applicable) that it is not
classified, does not belong to nor is it associated with an Anti-Social Group, does not have an Anti-Social
Relationship and has not engaged in Anti-Social Conduct, whether directly or indirectly through a third party.
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ARTICLE V
COVENANTS
SECTION 5.01
Affirmative Covenants. So long as any portion of the Advance shall remain unpaid
or any Lender shall have any Commitment hereunder, the Borrower will:
(a)
Compliance with Laws, Etc. (i) Comply, and cause each member of the Consolidated Group to
comply, with all applicable laws, rules, regulations and orders (such compliance to include, without
limitation, compliance with ERISA and Environmental Laws), except to the extent that the failure to so
comply, either individually or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect, and (ii) maintain in effect and enforce policies and procedures reasonably designed to
promote compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and
agents with Anti-Corruption Laws and applicable Sanctions.
(b)
Payment of Taxes, Etc. Pay and discharge, or cause to be paid and discharged, before the same
shall become delinquent, all taxes, assessments and governmental charges levied or imposed upon a member
of the Consolidated Group or upon the income, profits or property of a member of the Consolidated Group,
in each case except to the extent that (i) the amount, applicability or validity thereof is being contested in
good faith and by proper proceedings and with respect to which reserves in conformity with applicable
accounting standards have been provided or (ii) the failure to pay such taxes, assessments and charges,
either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
(c)
Maintenance of Insurance. Except where the failure to do so would reasonably be expected to
result in a Material Adverse Effect, maintain, and cause each member of the Consolidated Group to
maintain, insurance with responsible and reputable insurance companies or associations (or pursuant to self-
insurance arrangements) in such amounts (after giving effect to any self-insurance which the Borrower
believes (in the good faith judgement of management of the Borrower) is reasonable and prudent in light of
the size and nature of its business) and covering such risks as is usually carried by companies engaged in
similar businesses and owning similar properties in the same general areas in which any member of the
Consolidated Group operates.
(d)
Preservation of Existence, Etc. Do, or cause to be done, all things necessary to preserve and
keep in full force and effect its (i) existence and (ii) rights (charter and statutory) and franchises; provided,
however, that the Borrower may consummate any merger or consolidation permitted under Section 5.02(b);
and provided further that the Borrower shall not be required to preserve any such right or franchise if the
management of the Borrower shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Borrower and that the loss thereof is not disadvantageous in any material
respect to the Lenders.
(e)
Visitation Rights. At any reasonable time and from time to time during normal business hours
(but not more than once annually if no Event of Default has occurred and is continuing), upon no less than
ten (10) days’ prior notice to the Borrower, permit the Administrative Agent or any of the Lenders, or any
agents or representatives thereof coordinated through the Administrative Agent, to examine and make
copies of and abstracts from the records and books of account, and visit the properties, of the Consolidated
Group, and to discuss the affairs, finances and accounts of the Consolidated Group with any of the members
of the senior treasury staff of the Borrower.
(f)
Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and
account, in which full and correct entries shall be made of all financial transactions and the assets and
the preparation of financial statements in
business of the Consolidated Group sufficient
accordance with IFRS.
to permit
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(g)
Maintenance of Properties, Etc. Cause all of its properties that are used or useful in the conduct
of its business or the business of any member of the Consolidated Group to be maintained and kept in good
condition, repair and working order (ordinary wear and tear excepted) and supplied with all necessary
equipment, and cause to be made all necessary repairs,
replacements, betterments and
improvements thereof, all as in the judgment of the Borrower may be necessary so that the business carried
on in connection therewith may be properly and advantageously conducted at all times, except, in each case,
where the failure to do so would not reasonably be expected to result in a Material Adverse Effect.
renewals,
(h)
(i)
Lenders:
[reserved].
Reporting Requirements. Furnish to the Administrative Agent for further distribution to the
(i)
as soon as available and in any event within 60 days after the end of each of the first three
quarters of each fiscal year of the Borrower, a Consolidated balance sheet of the Consolidated Group as
of the end of such quarter and Consolidated statements of income and cash flows of the Consolidated
Group for the period commencing at the end of the previous fiscal year and ending with the end of such
quarter, duly certified by the Chief Financial Officer or the Treasurer of the Borrower as having been
prepared in accordance with IFRS (subject to the absence of footnotes and year end audit adjustments);
(ii)
as soon as available and in any event within 120 days after the end of each fiscal year of
the Borrower, a copy of the annual audit report for such year for the Consolidated Group, containing a
Consolidated balance sheet of the Consolidated Group as of the end of such fiscal year and
Consolidated statements of income and cash flows of the Consolidated Group for such fiscal year, in
each case accompanied by an unqualified opinion or an opinion reasonably acceptable to the Required
Lenders by KPMG AZSA LLC or other independent public accountants of recognized national
standing;
(iii)
simultaneously with each delivery of the financial statements referred to in subclauses
(i)(i) and (i)(ii) of this Section 5.01, a certificate of the Chief Executive Officer, Chief Financial Officer
or the Treasurer of the Borrower in substantially the form of Exhibit C hereto certifying that no Default
or Event of Default has occurred and is continuing (or if such event has occurred and is continuing the
actions being taken by the Borrower to cure such Default or Event of Default), including, if such
covenant
the calculations necessary to
demonstrate compliance with Section 5.03;
is tested at such time, setting forth in reasonable detail
(iv)
as soon as possible and in any event within five days after any Responsible Officer of the
Borrower shall have obtained knowledge of the occurrence of each Default continuing on the date of
such statement, a statement of a Responsible Officer of the Borrower setting forth details of such
Default and the action that the Borrower has taken and proposes to take with respect thereto;
(v)
promptly after the sending or filing thereof, copies of all reports that the Borrower sends
to any of its securityholders, in their capacity as such, and copies of all reports and registration
statements that members of the Consolidated Group file with the Prime Minister of Japan through the
the Securities and Exchange Commission or any national
Financial Services Agency of Japan,
securities exchange;
(vi)
promptly after a Responsible Officer of the Borrower obtains knowledge of the
commencement thereof, notice of all actions, suits, investigations, litigations and proceedings before
any court, governmental agency or arbitrator affecting the Consolidated Group of the type described in
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Section 4.01(f)(b) subject, in each case, to any confidentiality, legal or regulatory restrictions relating
to the supply of such information;
(vii)
at any time following the Effective Date, if the Borrower has incurred any other
subordinated Debt of the same priority as the Yen HYB Loans (including issuance of any Yen HYB
Bonds), the Borrower shall promptly notify the Agent and all the Lenders of the fact thereof (including
without exception the date of incurrence, the amount of incurrence, whether it constitutes equity, etc.);
and
(viii)
such other information respecting the Consolidated Group as any Lender through the
Administrative Agent may from time to time reasonably request.
The Borrower shall be deemed to have delivered the financial statements and other information
referred to in paragraphs (i), (ii) and (v) above when such financial statements and other information
have been posted on the Borrower’s internet website or the website of the Financial Services Agency of
Japan, the Securities and Exchange Commission or any national securities exchange (in each case, to
the extent such website is accessible by the Lenders without charge) and the Borrower has notified the
Administrative Agent. If the Administrative Agent requests hard copies of such financial statements
and other information, the Borrower shall furnish these to the Administrative Agent provided that no
request shall affect that delivery has deemed to occur in accordance with the immediately preceding
sentence.
(j)
The Scheme and Related Matters. To the extent applicable, the Borrower shall or it shall
procure that the applicable members of the Consolidated Group shall:
(i)
[reserved].
(ii)
Provide evidence that a Scheme Circular is issued and dispatched as soon as is reasonably
practicable and in any event within 28 days (or such longer period as may be agreed with the Panel)
after the issuance of the Original Scheme Press Release unless, during that period the Borrower has
elected to convert the Target Acquisition from a Scheme to a Takeover Offer, in which case the
Takeover Offer Document shall be issued and dispatched as soon as reasonably practicable and in any
event within 28 days (or such longer period as may be agreed with the Panel) after the issuance of the
Offer Press Announcement.
(iii)
Comply in all material respects with the City Code (subject
to any waivers or
dispensations granted by the Panel or the Court) and all other applicable laws and regulations in
relation to any Takeover Offer or Scheme.
(iv)
Except as consented to by the Lead Arrangers and the Arranger in writing (such consent
not to be unreasonably withheld, delayed or conditioned) and save to the extent that following the issue
of a Scheme Press Release or an Offer Press Announcement the Borrower elects to proceed with the
Target Acquisition by way of Takeover Offer or Scheme respectively, ensure that (i) if the Target
Acquisition is effected by way of a Scheme, the Scheme Circular corresponds in all material respects to
the terms and conditions of the Scheme as contained in the Scheme Press Release to which it relates or
(ii) if the Target Acquisition is effected by way of a Takeover Offer, the Takeover Offer Document
corresponds in all material respects to the terms and conditions of the Takeover Offer as contained in
the corresponding Offer Press Announcement, subject to any variation required by the Court and to any
variations required by the Panel or which are not materially adverse to the interests of the Lenders (or
where the prior written consent of the Lead Arrangers and the Arranger has been given).
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(v)
Ensure that the Scheme Documents or, if the Target Acquisition is effected by way of a
Takeover Offer, the Offer Documents, provided to the Lead Arrangers and the Arranger contain all the
material terms and conditions of the Scheme or Takeover Offer, as at that date, as applicable.
(vi)
Not make or approve any increase in the proposed amount of cash consideration payable
per Target Share or make any other acquisition of any Target Share (including pursuant to a Takeover
Offer) at a price that results in an increase in the cash consideration payable per Target Share stated in
the Original Scheme Press Release, unless such modification in price is not materially adverse to the
interests of the Lenders (or where the prior written consent of the Lead Arrangers and the Arranger has
been given).
(vii)
Except as consented to by the Lead Arrangers and the Arranger in writing in the event
that the matter is material to the interests of the Lenders (such consent not to be unreasonably withheld,
delayed, or conditioned), not (i) amend or waive any term of the Scheme Documents or the Takeover
Offer Documents, as applicable, in a manner materially adverse to the interests of the Lenders from
those in the Original Scheme Press Release, or (ii) if the Target Acquisition is proceeding as a
Takeover Offer, amend or waive the Acceptance Condition, save for, (A) in the case of clause (i), any
amendment or waiver required by the Panel, the City Code, a court or any other applicable law,
regulation or regulatory body, (B) in the case of clause (ii), a waiver of the Acceptance Condition to
permit the Takeover Offer to become unconditional with acceptance of Target Shares (excluding any
shares held in treasury) which, when aggregated with all Target Shares owned by the Borrower
(directly or indirectly), represent not less than 75% of all Target Shares (excluding any shares held in
treasury) as at the date on which the Takeover Offer is declared unconditional as to acceptances, (C) in
the case of clause (i) and any condition detailed in the Original Scheme Press Release, any waiver of a
condition, which such condition would not have entitled the Borrower to lapse the Scheme or Takeover
Offer (as the case may be) under rule 13.5(a) of the Takeover Code or (D) an extension of the Long
Stop Date (as defined in the Original Scheme Press Release) in the event that any condition in
paragraphs 4(c) to (j) in Part A of Appendix 1 to the Original Scheme Press Release (or the equivalent
provision in any Offer Press Announcement) has not been satisfied by the date falling 12 months after
the Bridge Facility Effective Date.
(viii)
Not take any action which would require the Borrower to make a mandatory offer for
the Target Shares in accordance with Rule 9 of the City Code.
(ix)
Provide the Administrative Agent with copies of each Offer Document or Scheme
Document (as applicable) and such information as it may reasonably request regarding, in the case of a
Takeover Offer, the current level of acceptances subject to any confidentiality, legal, regulatory or
other restrictions relating to the supply of such information.
(x)
Promptly deliver to the Administrative Agent the receiving agent certificate issued under
Rule 10 of the City Code (if the Target Acquisition is being pursued pursuant to a Takeover Offer), any
written agreement between the Borrower or its Affiliates and Target to the extent material to the
interests of the Lenders (as reasonably determined by the Borrower) in relation to the consummation of
the Target Acquisition (in each case, upon such documents or agreements being entered into by a
member of the Consolidated Group), and all other material announcements and documents published
by the Borrower or delivered by the Borrower to the Panel pursuant to the Takeover Offer or Scheme
(other than the cash confirmation) and all legally binding agreements entered into by the Borrower in
connection with a Takeover Offer or Scheme, in each case to the extent the Borrower, acting
reasonably, anticipates they will be material to the interests of the Lenders in connection with the
Transactions, except to the extent it is prohibited by legal (including contractual) or regulatory
obligations from doing so.
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(xi)
In the event that a Scheme is switched to a Takeover Offer or vice versa, (which the
Borrower shall be entitled to do on multiple occasions provided that it complies with the terms of this
Agreement), (i) within the applicable time periods provided in the definition of “Mandatory
Cancellation Event”, procure that an Offer Press Announcement or Scheme Press Release, as the case
may be, is issued, and (ii) except as consented to by the Lead Arrangers and the Arranger in writing
where such matters are material to the interests of the Lenders (such consent not to be unreasonably
withheld, delayed or conditioned), ensure that (A) where the Target Acquisition is then proceeding by
way of a Takeover Offer, the terms and conditions contained in the Offer Document include the
Acceptance Condition and (B) except
for any reference in the Scheme Documents to the
recommendation of the Target Acquisition and the Scheme to the Scheme Shareholders by the board of
directors of the Target, the conditions to be satisfied in connection with the Target Acquisition and
contained in the Offer Documents or the Scheme Documents (whichever is applicable) are otherwise
consistent in all material respects with those contained in the Offer Documents or Scheme Documents
(whichever applied to the immediately preceding manner in which it was proposed that the Target
Acquisition would be effected) (to the extent applicable for the legal form of a Takeover Offer or
Scheme, as the case may be), in each case other than (i) in the case of clause (B), any changes
permitted or required by the Panel or the City Code or any court of competent jurisdiction or are
required to reflect the change in legal form to a Takeover Offer or Scheme or (ii) changes that could
have been made to the Scheme or a Takeover Offer in accordance with the relevant provisions of this
Agreement or which reflect the requirements of the terms of this Agreement and the manner in which
the Target Acquisition may be effected, including, without limitation, changes to the price per Target
Share which are made in accordance with the relevant provisions of this Agreement or any other
agreement between the Borrower and the Lead Arrangers and the Arranger.
(xii)
In the case of a Takeover Offer, (i) not declare the Takeover Offer unconditional as to
acceptances until the Acceptance Condition has been satisfied and (ii) promptly upon the Borrower
acquiring Target Shares which represent not less than 90% in nominal value of the Target Shares to
which the Takeover Offer relates or, if the Takeover Offer relates to Target Shares of different classes,
not less than 90% in nominal value of the shares of any class to which the Takeover Offer relates,
ensure that notices under Article 117 of the Jersey Companies Law in respect of Target Shares that the
Borrower has not yet agreed to directly or indirectly acquire are issued.
(xiii)
In the case of a Scheme, within 90 days of the Scheme Effective Date, and in relation to
a Takeover Offer, within 90 days after the later of (i) the Closing Date and (ii) the date upon which the
Borrower (directly or indirectly) owns and/or has agreed to own or acquire and has received valid
acceptances (which have not been withdrawn or cancelled) of Target Shares (excluding any shares held
in treasury) in respect of, which, when aggregated with all other Target Shares owned by the Borrower
(directly or indirectly), represent not less than 75% of all Target Shares (excluding any shares held in
treasury), procure that such action as is necessary is taken to de-list the Target Shares from the Official
List of the Financial Conduct Authority and to cancel trading in the Target Shares on the main market
for listed securities of the London stock exchange and as soon as reasonably practicable thereafter, and
subject always to the Jersey Companies Law and any applicable listing rules, use its reasonable
endeavors to re-register Target as a private limited company.
(xiv)
Except as consented by the Lead Arrangers and the Arranger in writing, not give its
consent with respect to any frustrating action of the Target pursuant to Rule 21.1(c)(ii) of the City
Code.
(k)
Use of Proceeds. The proceeds of the Advance will be used in accordance with the provisions
of Section 2.16. No part of the proceeds of the Advance will be used, whether directly or indirectly, for any
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purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. The
Borrower will not request the Borrowing, and the Borrower shall not use, and the Borrower shall procure
that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the
proceeds of the Borrowing (i) for payments to any Person in violation of any Anti-Corruption Laws, (ii) for
the purpose of funding, financing or facilitating any activities, business or transaction of or with any
Sanctioned Person, or in any Sanctioned Country, to the extent such activities, businesses or transaction
would be prohibited by Sanctions if conducted by a corporation incorporated in the United States, Japan, the
United Kingdom or in a European Union member state or (iii) in any other manner that would result in the
violation of any Sanctions applicable to any party hereto.
(l)
Anti-Social Conduct; Anti-Social Groups. Each party hereto shall ensure that (i) it is not
classified as an Anti-Social Group, nor shall any such party have any Anti-Social Relationship nor engage in
any Anti-Social Conduct, whether directly or indirectly through a third party and (ii) it shall not make any
claim against any other party hereto for any damages or losses suffered or incurred as a result of such other
party exercising its rights under this Agreement as a result of any breach of this clause (l) or any
misrepresentation in connection with Section 4.02.
(m)
Pari Passu Ranking. Notwithstanding anything to the contrary contained herein or in any other
provision of this Agreement, the Borrower shall ensure that the Advance and all related obligations of the
Borrower under this Agreement rank at least pari passu with the claims of all its other unsecured and
unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general
application to companies.
The Borrower hereby acknowledges that the Administrative Agent, the Lead Arrangers and/or the Arranger will
make available to the Lenders materials and/or information provided by or on behalf of the Borrower hereunder
(collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar secure
electronic system (the “Platform”).
Certain of the Lenders (each, a “Public Lender”) may have personnel who do not wish to receive material non-
public information with respect to the Borrower or its respective Affiliates, or the respective securities of any of
the foregoing, and who may be engaged in investment and other market-related activities with respect to such
Persons’ securities. The Borrower hereby agrees that (w) all Borrower Materials that are to be made available to
Public Lenders shall be clearly and conspicuously marked “PUBLIC”; (x) by marking Borrower Materials
“PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent and the Lenders to treat
the Borrower Materials as not containing any material non-public information with respect to the Borrower or its
securities for purposes of the FIEA or United States Federal and state securities laws (provided, however, that to
the extent the Borrower Materials constitute Information, they shall be treated as set forth in Section 9.08); (y) all
Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform
designed “Public Side Information”; and (z) the Administrative Agent and the Lead Arrangers and the Arranger
shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting
on a portion of the Platform not designated “Public Side Information.” Notwithstanding the foregoing, the
Borrower shall be under no obligation to mark any Borrower Materials “PUBLIC.”
For purposes of the foregoing paragraph, with respect to the Borrower or its affiliates or securities, the term
“material non-public information” shall include, without limitation (i) “material facts” (juyo jijitsu) as prescribed in
Paragraph 2, Article 166 (Prohibited Acts of Corporate Insiders) of the FIEA and/or (iii) “issuer related
information” (hojin kankei jyouho) as defined in Item 14, Paragraph 4, Article 1 of the Cabinet Office Ordinance on
Financial Instruments Business, etc. (Cabinet Office Ordinance No. 52 of August 6, 2007), meaning any
information relating to the operation, business or asset of the Borrower which is material non-public information
and, if it were made public, would likely to have an effect on the investment decision of the investors and any non-
public information in relation to a launch or a cancellation of a TOB of shares of common stock of the Borrower.
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SECTION 5.02
Negative Covenants. So long as any portion of the Advance shall remain unpaid or
any Lender shall have any Commitment hereunder, the Borrower will not:
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(a)
Liens, Etc. Incur, issue, assume or guarantee, or permit any member of the Consolidated Group
to incur, issue, assume or guaranty, at any time, any Borrowed Debt secured by a Lien on any property or
asset now owned or hereafter acquired by the Borrower or any member of the Consolidated Group (other
than Unrestricted Margin Stock), without effectively providing that the Advance outstanding at such time
(together with, if the Borrower shall so determine, any other Borrowed Debt of the Borrower or such
member of the Consolidated Group existing at such time or thereafter created that is not subordinate to the
Advance) shall be secured equally and ratably with (or prior to) such secured Borrowed Debt, so long as
such secured Borrowed Debt shall be so secured, unless, after giving effect thereto, the aggregate amount of
all such secured Borrowed Debt would not exceed $2,500,000,000; provided, however,
this
Section 5.02(a) shall not apply to, and there shall be excluded from secured Borrowed Debt in any
computation under this Section 5.02(a), Borrowed Debt secured by:
that
(i)
Liens on property of, or on any shares of stock or Borrowed Debt of, any Person existing at
the time such Person becomes a member of the Consolidated Group;
(ii)
Liens in favor of any member of the Consolidated Group;
(iii)
Liens incurred in the ordinary course of business to secure the performance of tenders,
statutory or regulatory obligations, surety, stay, customs and appeal bonds, statutory bonds, bids,
leases, government contracts, trade contracts, performance and return of money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv)
Liens on property of a member of the Consolidated Group in favor of the United States or
any State thereof, or any department, agency or instrumentality or political subdivision of the United
States or any State thereof, or in favor of any other country, or any political subdivision thereof, to
secure partial, progress, advance or other payments pursuant to any contract or statute;
(v)
Liens on property (including that of the Target and its Subsidiaries), shares of stock or
Borrowed Debt existing at the time of acquisition thereof (including acquisition through merger or
consolidation) or to secure the payment of all or any part of the purchase price or construction or
improvement cost thereof or to secure any Debt incurred prior to, at the time of, or within 180 days
after, the acquisition of such property or shares or Borrowed Debt or the completion of any such
construction or improvement for the purpose of financing all or any part of the purchase price or
construction or improvement cost thereof;
(vi)
Liens existing on the Effective Date;
(vii)
revocation,
rights of setoff,
(x) bankers’ Liens,
refund, chargeback or overdraft
protection, and other similar Liens existing solely with respect to cash and cash equivalents on deposit
in one or more accounts maintained by the Borrower or any member of the Consolidated Group, in
each case granted in the ordinary course of business in favor of the bank or banks with which such
accounts are maintained, securing amounts owing to such bank with respect to cash management and
operating account arrangements, including those involving pooled accounts and netting arrangements
and (y) Liens or rights of setoff against credit balances of the Borrower or any member of the
Consolidated Group with credit card issuers or credit card processors or amounts owing by payment
card issuers or payment card processors to Borrower or any member of the Consolidated Group in the
ordinary course of business;
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(viii)
Liens arising from any monetization, securitization or other financing of accounts
receivable or other receivables (including any related rights or claims) or in connection with factoring
programs entered into in the ordinary course of business and consistent with past practice and on a non-
recourse basis to the Borrower and its Subsidiaries; provided, that such Liens do not encumber any
property or assets other than the accounts receivable or other receivables (including any related rights
or claims) subject to such monetization, securitization, financing or factoring arrangement and any
proceeds of the foregoing; provided, further, that the aggregate principal amount of the obligations
secured by such Liens shall not exceed (x) prior to the Closing Date, $750,000,000 or (y) on or after
the Closing Date, $1,500,000,000.
(ix)
Liens incurred in connection with pollution control,
industrial revenue or similar
financing;
(x)
survey exceptions and such matters as an accurate survey would disclose, easements,
trackage rights, leases, licenses, special assessments, rights of way covenants, conditions, restrictions
and declarations on or with respect to the use of real property, servicing agreements, development
agreements, site plan agreements and other similar encumbrances incurred in the ordinary course of
business and title defects or irregularities that are of a minor nature and that, in the aggregate, do not
interfere in any material respect with the ordinary conduct of the business of the Borrower or any
member of the Consolidated Group; and
(xi)
renewal or
any extension,
renewals or
replacement
replacements), as a whole or in part, of any Borrowed Debt secured by any Lien referred to in
subclauses (i) through (x) of this Section 5.02(a); provided, that (i) such extension renewal or
replacement Lien shall be limited to all or a part of the same property, shares of stock or Debt that
secured the Lien extended, renewed or replaced (plus improvements on such property) and (ii) the
Borrowed Debt secured by such Lien at such time is not increased.
successive extensions,
(or
(b)
Mergers, Etc. Merge or consolidate with or into, or convey, transfer, lease or otherwise dispose
of (whether in one transaction or in a series of transactions) all or substantially all of its assets (other than
Unrestricted Margin Stock) (whether now owned or hereafter acquired) to, any Person, or permit any
member of the Consolidated Group to do so, except that:
(i)
any member of (x) the Consolidated Group other than the Borrower may merge or
consolidate with or into or (y) the Consolidated Group may dispose of assets to, in each case, any other
member of the Consolidated Group;
(ii)
the Borrower may merge with any other Person so long as (A) the Borrower is the
surviving entity or (B) the surviving entity shall succeed, by agreement reasonably satisfactory in form
and substance to the Required Lenders, to all of the businesses and operations of the Borrower and
shall assume all of the rights and obligations of the Borrower under this Agreement and the other Loan
Documents (it being understood that notwithstanding the foregoing,
the consummation of the
Transactions shall not be prohibited by this Section 5.02(b) or otherwise pursuant hereto);
(iii)
any member of the Consolidated Group (other than the Borrower) may merge or
consolidate with or into another Person, convey, transfer, lease or otherwise dispose of all or any
portion of its assets so long as (A) the consideration received in respect of such merger, consolidation,
conveyance, transfer, lease or other disposition is at least equal to the fair market value of such assets
and (B) no Material Adverse Effect would reasonably be expected to result from such merger,
consolidation, conveyance, transfer, lease or other disposition;
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provided, in the cases of clause (i), (ii) and (iii) hereof, that no Default or Event of Default (or, during the Certain
Funds Period, no Certain Funds Default) shall have occurred and be continuing at the time of such proposed
transaction or would result therefrom.
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(c)
Accounting Changes. Change the Borrower’s fiscal year-end from March 31 of each calendar
year; provided that the Borrower may change its fiscal year-end to December 31 of each calendar year in
connection with the Transactions.
(d)
Change in Nature of Business. Make any material change in the nature of the business of the
Consolidated Group, taken as a whole, from that carried out by the Borrower and its Subsidiaries (other than
the Target and its Subsidiaries) on the Effective Date and by Target and its Subsidiaries on the Closing
Date; it being understood that this Section 5.02(d) shall not prohibit (i) the Transactions or (ii) members of
the Consolidated Group from conducting any business or business activities incidental or related to such
business as carried on as of the Effective Date (in the case of the Borrower and its Subsidiaries other than
the Target and its Subsidiaries) or as of the Closing Date (in the case of the Target and its Subsidiaries) or
any business or activity that is reasonably similar or complementary thereto or a reasonable extension,
development or expansion thereof or ancillary thereto.
(e)
other than:
Subsidiary Debt. Permit any of its Subsidiaries to create or suffer to exist any Borrowed Debt
(i)
Borrowed Debt existing on the Effective Date and disclosed to the Lenders prior to the
date hereof (the “Existing Debt”);
(ii)
Borrowed Debt of any Person (including the Target or any of its Subsidiaries) that
becomes a Subsidiary after the date hereof; provided that such Borrowed Debt exists at the time such
Person becomes a Subsidiary of the Borrower and is not created in contemplation of or in connection
with such Person becoming a Subsidiary of the Borrower;
(iii)
Borrowed Debt of any Subsidiary owed to any member of the Consolidated Group;
(iv)
Borrowed Debt secured by Liens of the type described in and to the extent permitted by
Sections 5.02(a)(iii), (iv), (v), (ix) and (xi) (to the extent it applies to Borrowed Debt secured by Liens
referred to in Sections 5.02(a)(iii), (iv), (v) or (ix));
(v)
Borrowed Debt under ordinary course working capital or overdraft facilities;
(vi)
Borrowed Debt consisting of commercial paper;
(vii) Borrowed Debt consisting of purchase money indebtedness; and
(viii) Borrowed Debt in an aggregate outstanding principal amount at any time not exceeding the
greater of (x) $2,500,000,000 and (y) 15% of Consolidated Tangible Assets (determined by reference
to the financial statements most recently delivered pursuant to Section 5.01(i) (or prior to the first such
delivery, the financial statements referred to in Section 4.01(e)));
For purposes of calculating the aggregate principal amount of the Consolidated Tangible Assets of the
Borrower on any date, the currency exchange rate used for such calculation shall be the rate used in the annual or
semi-annual financial statements for such date; provided, however, that if the Borrower determines that an
average exchange rate is a more accurate reflection of the value of such currency over such four consecutive
fiscal quarter period, the currency exchange rate used may be, at the option of the Borrower, the currency
exchange rate used for the statement of income of the Borrower for such fiscal half year.
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SECTION 5.03
Financial Covenant. Consolidated Net Debt to Consolidated EBITDA. Beginning
on the later of (i) the last day of the first fiscal half year ending at least one full fiscal quarter after the Closing
Date (which, for the avoidance of doubt, shall be no later than March 31, 2020) and (ii)(A) if the fiscal year-end
is December 31, June 30, 2019 or (B) if the fiscal year-end is March 31, September 30, 2019 and on the last day
of each fiscal half year ending thereafter, the Borrower will not permit, as of the last day of any such fiscal half
year (each such date, the “Testing Date”), the ratio of (x) Consolidated Net Debt at such time to (y) Consolidated
EBITDA of the Borrower for the four consecutive fiscal quarter period ending as of such date to exceed the ratio
level set forth in the applicable table below for such applicable Testing Date:
Testing Date (if fiscal year-end is March 31)
September 30, 2019 (if the Closing Date occurs on or
prior to June 30, 2019)
March 31, 2020 and September 30, 2020
Testing Date (if fiscal year-end is December 31)
June 30, 2019 (if the Closing Date occurs on or prior to
March 31, 2019) and December 31, 2019
June 30, 2020
Ratio Level
5.95 to 1.00
5.35 to 1.00
Ratio Level
5.95 to 1.00
5.35 to 1.00
If a Testing Date would have occurred in the fiscal quarter in which the Borrower changed its fiscal
year-end to December 31 (the “Fiscal Year Change”) but does not because of such Fiscal Year Change, the last
day of such fiscal quarter shall be a Testing Date notwithstanding the Fiscal Year Change.
Notwithstanding the foregoing, in the event that the Borrower incurs indebtedness in an amount no less
than $5,000,000,000 in connection with an Acquisition and the Borrower’s Public Debt Rating is equal to or
higher than each of (x) Baa3 from Moody’s and (y) BBB- from S&P, then the Borrower shall be permitted on
one (1) occasion during the term of this Agreement to allow the maximum ratio of Consolidated Net Debt to
Consolidated EBITDA permitted pursuant this Section 5.03 to be increased to 5.00 to 1.00 (if the then applicable
required ratio level is lower than 5.00 to 1.00); provided that on the second Testing Date after the Testing Date
on which such maximum ratio was increased to 5.00 to 1.00,
the maximum ratio permitted under this
Section 5.03 shall be 4.50 to 1.00 and on the fourth Testing Date after the Testing Date on which such maximum
ratio was increased to 5.00 to 1.00, the maximum ratio permitted under this Section 5.03 shall be 4.00 to 1.00.
For purposes of calculating the aggregate principal amount of the Consolidated Net Debt of the
Borrower on any such date, the currency exchange rate used for such calculation shall be the rate used in the
annual or semi-annual financial statements for such date; provided, however, that if the Borrower determines that
an average exchange rate is a more accurate reflection of the value of such currency over such four consecutive
fiscal quarter period, the currency exchange rate used may be, at the option of the Borrower, the currency
exchange rate used for the statement of income of the Borrower for such fiscal half year.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01
Events of Default. If any of the following events (“Events of Default”) shall occur
and be continuing:
(a)
The Borrower shall fail (i) to pay any principal of the Advance when the same becomes due
and payable or (ii) to pay any interest on the Advance or make any payment of fees or other amounts
payable under this Agreement within five Business Days after the same becomes due and payable; or
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(b)
Any representation or warranty made by the Borrower herein or in any other Loan Document
(or any of its officers or directors) in connection with this Agreement or in any certificate or other document
furnished pursuant to or in connection with this Agreement, if any, in each case shall prove to have been
incorrect in any material respect when made or deemed made; or
(c)
(i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in
Section 5.01(d)(i), 5.01(i)(iv), 5.01(j), 5.02(a), 5.02(b), 5.02(d), 5.03 or (ii) the Borrower shall fail to
perform or observe any term, covenant or agreement contained in Section 5.01(e) or clauses (i)-(iii) or (v)-
(vii) of Section 5.01(i) if such failure shall remain unremedied for 10 Business Days after written notice
thereof shall have been given to the Borrower by the Administrative Agent or any Lender, or (iii) the
to perform or observe any other term, covenant or agreement contained in this
Borrower shall fail
Agreement, if any, in each case on its part to be performed or observed if such failure shall remain
unremedied for 30 days after written notice thereof shall have been given to the Borrower by the
Administrative Agent or any Lender; or
(d)
The Borrower or any Significant Subsidiary shall fail to pay any principal of or premium or
interest on any Debt that is outstanding in a principal amount, or, in the case of any Hedge Agreement,
having a maximum Agreement Value, of at least $200,000,000 in the aggregate (but excluding Debt
outstanding hereunder) of the Borrower or such Significant Subsidiary, when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified in the agreement or instrument
relating to such Debt; or any other event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in
such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or
required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or
redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be
required to be made, in each case prior to the stated maturity thereof; it being understood and agreed that
notwithstanding the foregoing, the delivery of a notice of prepayment by one or more lenders under the
Existing Target Indebtedness as a result of the occurrence of the Target Acquisition will not result in an
Event of Default under this clause (d); provided that this clause (d) will apply to the extent there is a failure
to make any such prepayment when the same becomes due and payable; or
(e)
The Borrower or any Significant Subsidiary shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or
any Significant Subsidiary seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order
for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted
by it), such proceeding shall remain undismissed or unstayed for a period of 60 days; or the Borrower or any
Significant Subsidiary shall take any corporate action to authorize any of the actions set forth above in this
Section 6.01(e). With respect to the Borrower or any Significant Subsidiary organized under the laws of
Japan, the following shall constitute an Event of Default: if (i) the Borrower makes an express declaration or
implicit declaration of its inability to pay its debts to its creditors generally (shiharai teishi); (ii) a bank
clearinghouse refuses to process the Borrower’s checks (tegata torihiki teishi shobun); or densai.net Co.,
Ltd. (iii) an order is issued by a court for the attachment (whether preliminary or otherwise) or preservation
of the Borrower’s material property, estate or other right and is not discharged within sixty (60) days; (iv) a
receiver or trustee is appointed for all or a portion of the property or estate of the Borrower; (v) an
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involuntary petition for commencement of bankruptcy (hasan), corporate reorganization (kaisha kosei), civil
rehabilitation (minji saisei), special liquidation (tokubetsu seisan) or similar proceedings are filed against
the Borrower and are not discharged within sixty (60) days; (vi) the Borrower files a voluntary petition
(including a petition filed by a director of the Borrower) to commence, or a court of competent jurisdiction
approves an involuntary petition with respect to and commences the procedure of, any of the proceedings
specified in subparagraph (v) above; (vii) a voluntary petition to commence a special conciliation
proceeding (tokutei choutei); or (viii) the Borrower adopts a resolution for liquidation at a meeting of its
shareholders; or
(f)
Any one or more judgments or orders for the payment of money in excess of $200,000,000
shall be rendered against a member of the Consolidated Group and either (i) enforcement proceedings shall
have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 60
consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; provided, however, that, for purposes of determining whether an
Event of Default has occurred under this Section 6.01(f), the amount of any such judgment or order shall be
reduced to the extent that (A) such judgment or order is covered by a valid and binding policy of insurance
between the defendant and the insurer covering payment thereof and (B) such insurer, which shall be rated
at least “A” by A.M. Best Company, has been notified of, and has not disputed the claim made for payment
of, such judgment or order; or
(g)
Any Person shall become an owner (hoyusha) or two or more Persons shall become joint
owners (kyodo hoyusha) (in each case within the meaning of Articles 27-23 of the FIEA) of Voting Stock of
the Borrower (or other securities convertible into or exchangeable for such Voting Stock) representing 50%
or more of the combined voting power of all Voting Stock of the Borrower (as calculated pursuant to Article
27-23, Paragraph 4 of the FIEA); or
(h)
One or more of the following shall have occurred or is reasonably expected to occur, which in
each case would reasonably be expected to result in a Material Adverse Effect: (i) any ERISA Event; (ii) the
partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan; or
(iii) the termination of a Multiemployer Plan; or
(i)
This Agreement shall cease to be valid and enforceable against the Borrower (except to the
extent it is terminated in accordance with its terms) or the Borrower shall so assert in writing;
then, and in any such event (subject to Section 3.04), the Administrative Agent (i) shall at the request, or may
with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Lender to
make the Advance to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower, declare the Advance, all interest
thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the
Advance, all such interest and all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, (but for the avoidance of doubt, always subject to Section 3.04) that in the event of
an Event of Default under Section 6.01(e), (A) the Commitment of each Lender shall automatically be terminated
and (B) the Advance, all such interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the
Borrower.
Notwithstanding anything in this Agreement to the contrary, for a period commencing on the Closing Date
and ending on the date falling 180 days after the Closing Date (the “Clean-up Date”), notwithstanding any other
provision of any Loan Document, any breach of covenants, misrepresentation or other default which arises with
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respect to the Target Group will be deemed not to be a breach of representation or warranty, a breach of covenant
or an Event of Default, as the case may be, if:
(i)
it is capable of remedy and reasonable steps are being taken to remedy it;
the circumstances giving rise to it have not knowingly been procured by or approved by the Borrower;
(ii)
and
(iii) it is not reasonably likely to have a Material Adverse Effect.
If the relevant circumstances are continuing on or after the Clean-up Date,
there shall be a breach of
representation or warranty, breach of covenant or Event of Default, as the case may be, notwithstanding the
above.
ARTICLE VII
THE AGENTS
SECTION 7.01
Authorization and Action. Each Lender hereby irrevocably appoints Sumitomo
Mitsui Banking Corporation (or any branch or Affiliate thereof designated by it) to act on its behalf as the
Administrative Agent hereunder and authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such
actions and powers as are reasonably incidental thereto. The provisions of this Article VII (other than the third
sentence of Section 7.04) are solely for the benefit of the Administrative Agent and the Lenders, and the
Borrower shall not have rights as a third party beneficiary of any of such provisions (other than the third sentence
of Section 7.04).
SECTION 7.02
Administrative Agent Individually . The Person serving as the Administrative
Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall,
unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the
Administrative Agent hereunder in its individual capacity as a Lender. Such Person and its Affiliates may accept
deposits from, own securities of, lend money to, act as the financial advisor or in any other advisory capacity for
and generally engage in any kind of business with any member of the Consolidated Group or other Affiliate
thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor
to the Lenders.
SECTION 7.03
Duties of Administrative Agent; Exculpatory Provisions.
(a)
The Administrative Agent’s duties hereunder and under the other Loan Documents are solely
ministerial and administrative in nature, and the Administrative Agent shall not have any duties or obligations
except those expressly set forth herein or in any other Loan Document. Without limiting the generality of the
foregoing, the Administrative Agent shall not have any duty to take any discretionary action or exercise any
discretionary powers but shall be required to act or refrain from acting (and shall be fully protected in so acting
or refraining from acting) upon the written direction of the Required Lenders (or such other number or
percentage of the Lenders as shall be expressly provided for herein or in any other Loan Document); provided
that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its
counsel, may expose the Administrative Agent or any of its Affiliates to liability or that is contrary to any Loan
Document or applicable law, including for the avoidance of doubt, any action that may be in violation of the
automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of
property of a Defaulting Lender in violation of any Debtor Relief Law.
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(b)
The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the
consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be
necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances
as provided in Section 9.01 or 6.01) or (ii) in the absence of its own gross negligence or willful misconduct. The
Administrative Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until
the Borrower or any Lender shall have given notice to the Administrative Agent describing such Default or Event
of Default.
(c)
The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty, representation or other information made or supplied in or in connection with
this Agreement or any other Loan Document or the information memorandum distributed in connection with the
syndication of the Commitments and the Advance hereunder, (ii) the contents of any certificate, report or other
document delivered hereunder or thereunder or in connection herewith or therewith or the adequacy, accuracy
and/or completeness of the information contained therein, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default,
(iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any
other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article III or
elsewhere herein, other than (but subject to the foregoing clause (ii)) to confirm receipt of items expressly
required to be delivered to the Administrative Agent.
(d)
Nothing in this Agreement or any other Loan Document shall require the Administrative Agent
or any of its Related Parties to carry out any “know your customer” or other checks in relation to any person on
behalf of any Lender, and each Lender confirms to the Administrative Agent that it is solely responsible for any
such checks it is required to carry out and that it may not rely on any statement in relation to such checks made
by the Administrative Agent or any of its Related Parties.
SECTION 7.04
Reliance by Administrative Agent. The Administrative Agent shall be entitled to
rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement,
instrument, document or other writing (including any electronic message, Internet or intranet website posting or
other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the
proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In
determining compliance with any condition hereunder to the Effective Date, the making of the Advance or the
Closing Date that by its terms must be fulfilled to the satisfaction of a Lender, each Lender shall be deemed to
have consented to, approved or accepted such condition unless (i) an officer of the Administrative Agent
responsible for the transactions contemplated hereby shall have received notice to the contrary from such Lender
prior to the occurrence of the Effective Date, the making of the Advance or the Closing Date, as applicable, and
(ii) in the case of a condition to the making of an Advance, such Lender shall not have made available to the
Administrative Agent such Lender’s ratable portion of such Borrowing. The Administrative Agent may consult
with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected
by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
SECTION 7.05
Delegation of Duties. The Administrative Agent may perform any and all of its
duties and exercise its rights and powers hereunder by or through any one or more sub agents appointed by the
Administrative Agent. The Administrative Agent and any such sub agent may perform any and all of its duties
and exercise its rights and powers by or through their respective Related Parties. Each such sub agent and the
Related Parties of the Administrative Agent and each such sub agent shall be entitled to the benefits of all
provisions of this Article VII and Section 9.04 (as though such sub-agents were the “Administrative Agent”
under this Agreement) as if set forth in full herein with respect thereto.
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SECTION 7.06
Resignation of Administrative Agent.
(a)
The Administrative Agent may at any time give notice of its resignation to the Lenders and the
Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right (with the
consent of the Borrower, provided that no consent of the Borrower shall be required if an Event of Default has
occurred and is continuing), to appoint a successor, which shall be a bank with an office in the United States or
Tokyo, or an Affiliate of any such bank with an office in the United States or Tokyo. If no such successor shall
have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after
the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the
Required Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not
be obligated to), on behalf of the Lenders (and with the consent of the Borrower, provided that no consent of the
Borrower shall be required if an Event of Default has occurred and is continuing), appoint a successor
Administrative Agent meeting the qualifications set forth above. Whether or not a successor has been appointed,
such resignation shall become effective in accordance with such notice on the Resignation Effective Date.
(b)
With effect from the Resignation Effective Date (i) the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder and under the other Loan Documents and (ii) except for any
indemnity payments owed to the retiring Administrative Agent, all payments, communications and
determinations to be made by, to or through the Administrative Agent shall instead be made by or to each Lender
directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided
for above. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor
shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring
Administrative Agent (other than any rights to indemnity payments owed to the retiring Administrative Agent),
and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder and
under the other Loan Documents. The fees payable by the Borrower to a successor Administrative Agent shall be
the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.
After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the
provisions of this Article VII and Section 9.04 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub agents and their respective Related Parties in respect of any actions taken or
omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.
SECTION 7.07
Non-Reliance on Administrative Agent and Other Lenders. Each Lender
acknowledges and agrees that the extensions of credit made hereunder are commercial loans and not investments
in a business enterprise or securities. Each Lender further represents that it is engaged in making, acquiring or
holding commercial loans in the ordinary course of its business and has, independently and without reliance upon
the Administrative Agent, any arranger of the credit facilities evidenced by this Agreement or any other Lender
and their respective Related Parties and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement as a Lender, and to make, acquire or hold
the Advance hereunder. Each Lender shall, independently and without reliance upon the Administrative Agent,
any arranger of the credit facilities evidenced by this Agreement or any amendment thereof or any other Lender
and their respective Related Parties and based on such documents and information (which may contain material,
non-public information within the meaning of the United States securities laws concerning the Borrower and its
Affiliates) as it shall from time to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any related agreement or any document furnished hereunder
or thereunder and in deciding whether or to the extent to which it will continue as a Lender or assign or otherwise
transfer its rights, interests and obligations hereunder. Nothing in this Agreement shall oblige the Administrative
Agent to conduct any “know your customer” or other procedures in relation to any Person or any check on the
extent to which any transaction contemplated by this Agreement might be unlawful for any Lender, on behalf of
any Lender and each Lender confirms to the Administrative Agent that it is solely responsible for any such
procedures or check it is required to conduct and that it shall not rely on any statement in relation to such
procedures or check made by the Administrative Agent.
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SECTION 7.08
Indemnification. The Lenders agree to indemnify the Administrative Agent (to the
extent not reimbursed by the Borrower), ratably according to the respective principal amounts of the Advance
made by each of them (or, if the Advance is not at the time outstanding, ratably according to the respective
amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Administrative Agent under this Agreement, in each case,
acting in the capacity of Administrative Agent; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent’s gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrative Agent in
connection with the preparation, execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Administrative Agent is not promptly reimbursed for
such expenses by the Borrower.
SECTION 7.09
Other Agents. None of the Lenders identified on the facing page or signature pages
of this Agreement as an “arranger” or “book runner” shall have any right, power, obligation,
liability,
responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting
the foregoing, none of the Lenders so identified shall have or be deemed to have any fiduciary relationship with
any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so
identified in deciding to enter into this Agreement or in taking or not taking action hereunder.
ARTICLE VIII
[RESERVED]
ARTICLE IX
MISCELLANEOUS
SECTION 9.01
Amendments, Etc.
(a)
Except as provided in Section 2.08(c), no amendment or waiver of any provision of this
Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Required Lenders and the Borrower and acknowledged by the
Administrative Agent, and then such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in
writing, do any of the following:
(i)
waive any of the conditions specified in Section 3.01, 3.02 or 3.03 unless signed by each
Lender directly and adversely affected thereby;
(ii)
increase or extend the Commitments of a Lender or subject a Lender to any additional
obligations, unless signed by such Lender;
(iii)
reduce the principal of, or stated rate of interest on, the Advance, the stated rate at
which any fees hereunder are calculated or any other amounts payable hereunder, unless signed by
each
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Lender directly and adversely affected thereby; provided that only the consent of the Required Lenders
shall be necessary to amend the definition of “Default Interest” or to waive any obligation of the
Borrower to pay Default Interest (except that no amendment entered into pursuant to the terms of
Section 2.08(c) shall constitute a reduction in the rate of interest or fees for purposes of this clause (ii));
(iv)
postpone any date fixed for any payment of principal of, or interest on, the Advance or
any fees or other amounts payable hereunder, unless signed by each Lender directly and adversely
affected thereby;
(v)
change the percentage of the Commitments or of the aggregate unpaid principal amount
of the Advance, or the number of Lenders, that, in each case, shall be required for the Lenders or any of
them to take any action hereunder, unless signed by all Lenders; or
(vi)
amend this Section 9.01, unless signed by all Lenders.
and provided further that no amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of
the Administrative Agent under this Agreement. Notwithstanding the foregoing, the Administrative Agent and
the Borrower may amend any Loan Document
to correct any errors, mistakes, omissions, defects or
inconsistencies, or to effect administrative changes that are not adverse to any Lender, and such amendment shall
become effective without any further consent of any other party to such Loan Document other than the
Administrative Agent and the Borrower.
(b)
[reserved].
(c)
If, in connection with any proposed amendment, waiver or consent requiring the consent of “all
Lenders,” “each Lender” or “each Lender directly and adversely affected thereby,” the consent of the Required
Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent
is necessary but not obtained being referred to herein as a “Non-Consenting Lender”), then the Borrower may
elect to replace a Non-Consenting Lender as a Lender party to this Agreement; provided that, concurrently with
such replacement, (i) another bank or other entity (which is reasonably satisfactory to the Borrower and the
Administrative Agent) shall agree, as of such date, to purchase at par for cash the Advance and other obligations
under the Loan Documents due to the Non-Consenting Lender pursuant to an Assignment and Acceptance and to
become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting
Lender to be terminated as of such date, and (ii) the Borrower shall pay to such Non-Consenting Lender in same
day funds on the day of such replacement all principal, interest, fees and other amounts then accrued but unpaid
to such Non-Consenting Lender by the Borrower to and including the date of termination. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
Each party hereto agrees that an assignment required pursuant to this paragraph may be effected pursuant to an
Assignment and Acceptance executed by the Borrower, the Administrative Agent and the assignee (or, to the
extent applicable, an agreement incorporating an Assignment and Acceptance by reference pursuant to an
approved electronic platform as to which the Administrative Agent and such parties are participants), and (b) the
Lender required to make such assignment need not be a party thereto in order for such assignment to be effective
and shall be deemed to have consented to an be bound by the terms thereof; provided that, following the
effectiveness of any such assignment, the other parties to such assignment agree to execute and deliver such
documents necessary to evidence such assignment as reasonably requested by the applicable Lender, provided
that any such documents shall be without recourse to or warranty by the parties thereto.
Notices, Etc. (a) All notices and other communications provided for hereunder
shall be in writing (including telecopier) and mailed, telecopied or hand delivered, if to the Borrower or the
SECTION 9.02
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Administrative Agent, to the address or telecopier number specified for such Person on Schedule II; or, as to the
Borrower or the Administrative Agent, at such other address as shall be designated by such party in a written
notice to the other parties and, as to each other party, at such other address as shall be designated by such party in
a written notice to the Borrower and the Administrative Agent. All such notices and communications shall be
effective three Business Days after being deposited in the mails, postage prepaid, or upon confirmation of receipt
(except that if electronic confirmation of receipt is received at a time that the recipient is not open for business,
the applicable notice or communication shall be effective at the opening of business on the next business day of
the recipient), respectively, except that notices and communications to the Administrative Agent pursuant to
Article II, III or VII shall not be effective until received by the Administrative Agent. Delivery by telecopier or
other electronic communication of an executed counterpart of any amendment or waiver of any provision of this
Agreement or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a
manually executed counterpart thereof.
(b)
IMPLIED OR STATUTORY,
THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT
PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE
BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM
LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY
OF ANY KIND, EXPRESS,
INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY
AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no
event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any
liability to the Borrower, any Lender or any other Person for losses, claims, damages, liabilities or expenses of
any kind (whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative Agent’s
transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages,
liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment
to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in
no event shall any Agent Party have any liability to the Borrower, any Lender or any other Person for indirect,
special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
(c)
Each Lender agrees that notice to it (as provided in the next sentence) (a “Notice”) specifying
that any communication has been posted to the Platform shall constitute effective delivery of such information,
documents or other materials to such Lender for purposes of this Agreement. Each Lender agrees to notify the
Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective
address, contact name, telephone number and telecopier number to which notices and other communications may
be sent and (ii) accurate wire instructions for such Lender. Furthermore, each Public Lender agrees to cause at
least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side
Information” or similar designation on the content declaration screen of the Platform in order to enable such
Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable
Law, including United States federal and state securities Laws, to make reference to Borrower Materials that are
not made available through the “Public Side Information” portion of the Platform and that may contain material
non-public information with respect to the Borrower or its securities for purposes of United States federal or state
securities laws.
(d)
With respect to notices and other communications hereunder from the Borrower to any Lender,
the Borrower shall provide such notices and other communications to the Administrative Agent, and the
Administrative Agent shall promptly deliver such notices and other communications to any such Lender in
accordance with subsection (b) above or otherwise.
No Waiver; Remedies. No failure on the part of any Lender or the Administrative
Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any
SECTION 9.03
60
single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by
applicable law.
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SECTION 9.04
Costs and Expenses. (a) The Borrower agrees to pay, upon demand, all reasonable
and documented out-of-pocket costs and expenses of each Agent in connection with the preparation, execution,
delivery, administration, modification and amendment of this Agreement and the other documents to be delivered
hereunder, including, (i) due diligence expenses, syndication expenses, travel expenses and (ii) the reasonable
and documented out-of-pocket fees, charges and expenses of a single primary counsel (and one local counsel in
each relevant jurisdiction) for the Administrative Agent with respect thereto and with respect to advising the
Agents as to their respective rights and responsibilities under this Agreement. The Borrower further agrees to
pay, upon demand, all reasonable and documented out-of-pocket costs and expenses of the Agents and the
Lenders,
legal proceedings or
otherwise) of this Agreement and the other documents to be delivered hereunder, including, without limitation,
reasonable and documented out-of-pocket fees and expenses of a single primary counsel and an additional single
local counsel in any relevant jurisdictions for the Agents and the Lenders and, solely in the case of an actual or
perceived conflict of interest where the Agents notify the Borrower of the existence of such conflict in writing,
one additional counsel, in connection with the enforcement of rights under this Agreement.
in connection with the enforcement (whether through negotiations,
if any,
(b)
The Borrower agrees to indemnify and hold harmless each Agent and each Lender and each of
their Affiliates and their respective officers, directors, employees, agents and advisors (each, an “Indemnified
Party”) from and against any and all claims, damages, losses, penalties, liabilities and expenses (provided, that,
the Borrower’s obligations to the Indemnified Parties in respect of fees and expenses of counsel shall be limited
to the reasonable and documented out-of-pocket fees and expenses of one primary counsel for all Indemnified
Parties, taken together, (and, if reasonably necessary, one local counsel in any relevant jurisdiction) and, solely in
the case of an actual or potential conflict of interest of which the Borrower is notified in writing, of one
additional counsel for all Indemnified Parties, taken together (and, if reasonably necessary, one local counsel in
any relevant jurisdiction) (all such claims, damages, losses, penalties, liabilities and reasonable expenses being,
collectively, the “Losses”) that may be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of,
any investigation, litigation or proceeding arising out of, related to or in connection with (i) this Agreement, any
of the transactions contemplated hereby or the actual or proposed use of the proceeds of the Advance or (ii) the
actual or alleged presence or release of Hazardous Materials on any property of the Consolidated Group or any
Environmental Action relating in any way to the Consolidated Group, in each case whether or not such
investigation, litigation or proceeding is brought by the Borrower, its directors, shareholders or creditors or an
Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not
the transactions contemplated hereby are consummated, except to the extent Losses (A) are found in a final,
nonappealable judgment by a court of competent jurisdiction to have resulted from the gross negligence, bad
faith or willful misconduct of such Indemnified Party or any of its Related Indemnified Parties (including any
breach of its obligations under this Agreement), (B) result from any dispute between an Indemnified Party and
one or more other Indemnified Parties (other than against an Agent the Lead Arrangers, and/or the Arranger
acting in such a role) or (C) result from the claims of one or more Lenders solely against one or more other
Lenders (and not claims by one or more Lenders against any Agent acting in its capacity as such except, in the
case of Losses incurred by any Agent or any Lender as a result of such claims, to the extent such Losses are
found in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party’s gross negligence, bad faith or willful misconduct (including any breach of its obligations
under this Agreement)) not attributable to any actions of a member of the Consolidated Group and for which the
members of the Consolidated Group otherwise have no liability. The Borrower further agrees that no Indemnified
Party shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Borrower or any of
its shareholders or creditors for or in connection with this Agreement or any of the transactions contemplated
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hereby or the actual or proposed use of the proceeds of the Advance, except to the extent such liability is found in
a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified
Party’s gross negligence, bad faith or willful misconduct (including any breach of its obligations under this
Agreement). In no event, however, shall any Indemnified Party or the Borrower be liable on any theory of
liability for any special, indirect, consequential or punitive damages (including, without limitation, any loss of
profits, business or anticipated savings); provided that nothing in this sentence shall limit the Borrower’s
indemnity and reimbursement obligations to the extent that such special, indirect, consequential or punitive
damages are included in any claim by a third party unaffiliated with any of the Indemnified Parties with respect
to which the applicable Indemnified Party is entitled to indemnification as set forth in the immediately preceding
sentence. As used above, a “Related Indemnified Party” of an Indemnified Party means (1) any Controlling
Person or Controlled Affiliate of such Indemnified Party, (2) the respective directors, officers, or employees of
such Indemnified Party or any of its Controlling Persons or Controlled Affiliates and (3) the respective agents,
advisors or representatives of such Indemnified Party or any of its Controlling Persons or Controlled Affiliates,
in the case of this clause (3), acting at the instructions of such Indemnified Party, Controlling Person or
Controlled Affiliate; provided that each reference to a Controlling Person, Controlled Affiliate, director, officer
or employee in this sentence pertains to a Controlling Person, Controlled Affiliate, director, officer or employee
involved in the structuring, arrangement, negotiation or syndication of the Bridge Facility and this Agreement.
Notwithstanding the foregoing, this section 9.04(b) shall not apply with respect to Taxes other than any Taxes
that represent losses, claims, damages, etc. arising from any non-Tax claim.
(c)
If any payment of principal of, or Conversion of, a Eurocurrency Rate Advance is made by the
Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Advance, as a
result of (i) a payment or Conversion pursuant to Section 2.06, 2.08(b), 2.08(c), 2.10 or 2.12, (ii) acceleration of
the maturity of the Advance pursuant to Section 6.01, (iii) a payment by an Eligible Assignee to any Lender other
than on the last day of the Interest Period for such Advance upon an assignment of the rights and obligations of
such Lender under this Agreement pursuant to Section 9.07 as a result of a demand by the Borrower pursuant to
Section 9.07(a) or (iv) for any other reason, the Borrower shall, upon demand by such Lender (with a copy of
such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any
amounts required to compensate such Lender for any additional reasonable losses, costs or expenses that it may
reasonably incur as a result of such payment or Conversion or as a result of any inability to Convert or exchange
in the case of Section 2.08 or 2.12, including, without limitation, any reasonable loss (excluding loss of
anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other
funds acquired by any Lender to fund or maintain such Advance. In the case where the principal is repaid any
day other than on the last day of the Interest Period for such Advance, and the Reinvestment Rate falls below the
applicable interest rate, the amount shall be calculated as the principal amount with respect to which such
repayment was made, multiplied by the difference between the Reinvestment Rate and the Eurocurrency Rate,
and the actual number of days of the Remaining Period. “Remaining Period” means the period commencing on
(and including) the day on which the repayment was made and ending on (and including) the Maturity Date, and
the “Reinvestment Rate” means the interest rate reasonably determined by an applicable Lender as the interest
rate to be applied on the assumption that the prepaid principal amount will be reinvested in the Tokyo interbank
market, etc. during the Remaining Period. The calculation method for such Break Funding Cost shall be on a per
diem basis, inclusive of the first day and exclusive of the last day, wherein divisions shall be done at the end of
the calculation, and fractions less than 1 Yen shall be rounded down.
(d)
Without prejudice to the survival of any other agreement of the Borrower hereunder, the
agreements and obligations of the Borrower contained in Sections 2.11, 2.14 and 9.04 shall survive the payment
in full of principal, interest and all other amounts payable hereunder.
Right of Setoff. Subject to Section 3.04, upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by
SECTION 9.05
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Section 6.01 to authorize the Administrative Agent to declare the Advance due and payable pursuant to the
provisions of Section 6.01, each Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such
Lender or such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations
of the Borrower now or hereafter existing under this Agreement, whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. Each Lender agrees promptly to
notify the Borrower after any such setoff and application is made by such Lender; provided that the failure to
give such notice shall not affect the validity of such setoff and application. The rights of each Lender and its
Affiliates under this Section 9.05 are in addition to other rights and remedies (including, without limitation, other
rights of setoff) that such Lender and its Affiliates may have.
SECTION 9.06
Binding Effect. This Agreement shall become effective upon the satisfaction (or
waiver in accordance with Section 9.01) of the conditions set forth in Section 3.01 and, thereafter, shall be
binding upon and inure to the benefit of, and be enforceable by, the Borrower, the Administrative Agent and each
Lender and their respective successors and permitted assigns, except that the Borrower shall have no right to
assign their rights hereunder or any interest herein without the prior written consent of the Lenders, and any
purported assignment without such consent shall be null and void.
SECTION 9.07
Assignments and Participations. (a) Each Lender may, with the consent of the
Borrower and the Administrative Agent, which consents shall not be unreasonably withheld or delayed (it being
agreed that notwithstanding anything herein, including the proviso set forth below, during the Certain Funds
Period the Borrower may withhold such consent in its sole discretion unless a Certain Funds Default is
continuing) and, in the case of the Borrower, (A) shall not be required while an Event of Default (or during the
Certain Funds Period a Certain Funds Default) has occurred and is continuing and (B) shall be deemed given if
the Borrower shall not have objected within 10 Business Days following its receipt of notice of such assignment
(and, within five days after demand by the Borrower (with a copy of such demand to the Administrative Agent)
to (i) any Defaulting Lender, (ii) any Lender that has made a demand for payment pursuant to Section 2.11 or
2.14, (iii) any Lender that has asserted pursuant to Section 2.08(b) or 2.12 that it is impracticable or unlawful for
such Lender to make a Eurocurrency Rate Advance or (iv) any Lender that fails to consent to an amendment or
waiver hereunder for which consent of all Lenders (or all affected Lenders) is required and as to which the
Required Lenders shall have given their consent, such Lender will), assign to one or more Persons (other than
natural persons) all or a portion of its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitment and the Advance owing to it); provided, however, that:
(A)
such consent shall not be required in the case of an assignment to any other Lender or an
Affiliate of any Lender, provided that (i) notice thereof shall have been given to the Borrower and the
Administrative Agent and (ii) solely with respect to assignments during the Certain Funds Period, such
Affiliate has a rating for its long term unsecured and non-credit enhanced debt obligations which is not less
than that of the relevant assigning Lender;
(B)
each such assignment shall be of a constant, and not a varying, percentage of all rights and
obligations under this Agreement;
(C)
except in the case of an assignment to a Person that, immediately prior to such assignment, was
a Lender or an assignment of all of a Lender’s rights and obligations under this Agreement, the amount of
the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of
the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than
100 million Yen;
(D)
each such assignment shall be to an Eligible Assignee;
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(E)
each such assignment made as a result of a demand by the Borrower pursuant
to this
Section 9.07(a) shall be arranged by the Borrower with the approval of the Administrative Agent (which
approval shall not be unreasonably withheld) and shall be either an assignment of all of the rights and
obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and
obligations made concurrently with another such assignment or other such assignments that,
in the
aggregate, cover all of the rights and obligations of the assigning Lender under this Agreement;
(F)
no Lender shall be obligated to make any such assignment as a result of a demand by the
Borrower pursuant to this Section 9.07(a), (1) so long as a Default shall have occurred and be continuing
and (2) unless and until such Lender shall have received one or more payments from one or more Eligible
Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the
Advance owing to such Lender, together with accrued interest thereon to the date of payment of such
principal amount, and from the Borrower or one or more Eligible Assignees in an aggregate amount equal to
all other amounts accrued to such Lender under this Agreement (including, without limitation, any amounts
owing under Sections 2.11, 2.14 or 9.04(c)) and (3) unless and until the Borrower shall have paid (or caused
to be paid) to the Administrative Agent a processing and recordation fee of 500,000 Yen; provided,
however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and
recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire; and
(G)
the parties to each such assignment (other than, except in the case of a demand by the
Borrower pursuant to this Section 9.07(a), the Borrower) shall execute and deliver to the Administrative
Agent, for its acceptance and recording in the Register, an Assignment and Acceptance and, if such
assignment does not occur as a result of a demand by the Borrower pursuant to this Section 9.07(a) (in
which case the Borrower shall pay the fee required by subclause (F)(3) of this Section 9.07(a)), a processing
and recordation fee of 500,000 Yen; provided, however, that the Administrative Agent may, in its sole
discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if
it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.
Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement, except that such assigning Lender shall continue to be
entitled to the benefit of Section 9.04(a) and (b) with respect to matters arising out of the prior involvement of
such assigning Lender as a Lender hereunder (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall
cease to be a party hereto).
(b)
By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder
and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows:
(i)
other than as provided in such Assignment and Acceptance, such assigning Lender
makes no representation or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or
document furnished pursuant hereto;
(ii)
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the performance or observance
by the Borrower of any of its obligations under this Agreement or any other instrument or document
furnished pursuant hereto;
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(iii)
such assignee confirms that it has received a copy of this Agreement, together with
copies of the financial statements referred to in Section 4.01(e) and such other documents and
information as it has deemed appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance;
(iv)
such assignee will, independently and without reliance upon any Agent, such assigning
Lender or any other Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking action under this
Agreement;
(v)
such assignee confirms that it is an Eligible Assignee;
(vi)
such assignee appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to
the Administrative Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto; and
(vii)
such assignee agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be performed by it as a Lender.
(c)
Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an
assignee representing that it is an Eligible Assignee, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit B hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof
to the Borrower; provided that the Administrative Agent shall only be required to execute any such Assignment
and Acceptance once it has satisfied and complied with all necessary “know your customer” or similar checks
under all applicable laws and regulations in relation to the proposed assignment to the assignee.
(d)
The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the
Borrower, shall maintain at its address as set forth on Schedule II a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and
the Commitment of, and principal amount (and stated interest) of the Advance owing to, each Lender from time
to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agents and the Lenders shall treat each Person whose name is recorded in
the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e)
Each Lender may sell participations to one or more banks or other entities (other than the
Borrower or any of its Affiliates or any natural person) in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its Commitment and the Advance owing to it)
without the consent of the Administrative Agent or the Borrower; provided, however, that:
(i)
such Lender’s obligations under this Agreement (including, without limitation, its
Commitment) shall remain unchanged;
(ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations;
(iii)
Agreement;
such Lender shall remain the Lender of the Advance for all purposes of this
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(iv)
the Borrower, the Agents and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and obligations under this
Agreement; and
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(v)
no participant under any such participation shall have any right
to approve any
amendment or waiver of any provision of this Agreement, or any consent to any departure by the
Borrower herefrom or therefrom, except to the extent that such amendment, waiver or consent would
reduce the principal of, or stated rate of interest on, the Advance or the stated rate at which any fees or
any other amounts payable hereunder are calculated, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal of, or interest on, the Advance or
to such
any fees or any other amounts payable hereunder,
participation.
in each case to the extent subject
Each Lender shall promptly notify the Borrower after any sale of a participation by such Lender pursuant to this
Section 9.07(e); provided that the failure of such Lender to give notice to the Borrower as provided herein shall
not affect the validity of such participation or impose any obligations on such Lender or the applicable
participant.
Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the
Borrower, maintain a register on which it enters the name and address of each participant and the principal
amounts (and stated interest) of each participant’s interest in the Advance or other obligations under the Loan
Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any
portion of the Participant Register (including the identity of any participant or any information relating to a
participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan
Document) to any Person except
that such disclosure is necessary to establish that such
commitment,
letter of credit or other obligation is in registered form under Treasury Regulations
loan,
Section 5f.103-1(c) and Proposed Treasury Regulations 1.163-5(b) (or any amended or successor version). The
entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each
Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of
this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent
(in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
to the extent
The Borrower agrees that each participant shall be entitled to the benefits of Sections 2.11, 2.14 and 9.04(c)
(subject to the requirements and limitations therein, including the requirements under Section 2.14(f) (it being
understood that the documentation required under Section 2.14(f) shall be delivered to the participating Lender))
to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section; provided that such participant (A) agrees to be subject to the provisions of Section 2.20 as if it were
an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment
under Section 2.11 or 2.14, with respect to any participation, than its participating Lender would have been
entitled to receive, except to the extent such entitlement to receive a greater payment results from the occurrence,
after the participant acquired the applicable participation, of any of the following: (i) the adoption or taking effect
of any law, rule, regulation or treaty or (ii) any change in any law, rule, regulation or treaty or in the
administration, interpretation, implementation or application thereof by any Governmental Authority.
(f)
Any Lender may, in connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower;
provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall
agree to preserve the confidentiality of any Information relating to the Borrower received by it from such Lender
as more fully set forth in Section 9.08.
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(g)
Notwithstanding any other provision set forth in this Agreement, any Lender may at any time
create a security interest in all or any portion of its rights under this Agreement (including, without limitation and
the Advance owing to it) to secure obligations of such Lender, including, without limitation, any pledge or
assignment to secure obligations in favor of any Federal Reserve Bank in accordance with Regulation A of the
Board or any central bank having jurisdiction over such Lender.
SECTION 9.08
Confidentiality. Each of the Administrative Agent and the Lenders agrees to
maintain the confidentiality of the Information (as defined below), except that Information may be disclosed
(a) to its Affiliates and to its and its Affiliates’ respective managers, administrators, trustees, partners, directors,
officers, employees, agents, advisors and other representatives (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent requested by any regulatory authority purporting to have
jurisdiction over it or its Affiliates (including any self-regulatory authority, such as the National Association of
Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or
similar legal process (provided that the Administrative Agent or such Lender, as applicable, agrees that it will, to
the extent practicable and other than with respect to any audit or examination conducted by bank accountants or
any governmental bank regulatory authority exercising examination or regulatory authority, notify the Borrower
promptly thereof, unless such notification is prohibited by law, rule or regulation), (d) to any other party hereto,
(e) in connection with the exercise of any remedies hereunder or any action or proceeding relating to this
Agreement or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or obligations under this Agreement, (ii) any actual or
prospective party (or its managers, administrators, trustees, partners, directors, officers, employees, agents,
advisors and other representatives) to any swap or derivative or similar transaction under which payments are to
be made by reference to the Borrower and its obligations, this Agreement or payments hereunder, (iii) any rating
agency, (iv) the CUSIP Service Bureau or any similar organization or (v) any Person to whom or for whose
benefit such Lender has created a security interest in all or any portion of its rights under this Agreement
pursuant to Section 9.07(g), (g) with the consent of the Borrower or (h) to the extent such Information
(x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the
Administrative Agent, any Lender or any of their respective Affiliates on a non-confidential basis from a source
other than the Borrower. Each Lender acknowledges that its ability to disclose information concerning the
Transactions is restricted by the City Code and the Panel and that Section 9.08 is subject to those restrictions.
For purposes of this Section, “Information” means this Agreement and the other Loan Documents and
all information received from the Consolidated Group relating to the Consolidated Group or any of their
respective businesses, other than any such information that is available to the Administrative Agent or any
Lender on a non-confidential basis prior to disclosure by the Consolidated Group and other than information
pertaining to this Agreement routinely provided by arrangers to data service providers, including league table
providers, that serve the lending industry. Any Person required to maintain the confidentiality of Information as
provided in this Section shall be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
SECTION 9.09
Debt Syndication during the Certain Funds Period. Each of the Lenders and the
Administrative Agent confirms that it is aware of the terms and requirements of Practice Statement No. 25 (Debt
Syndication during Offer Periods) issued by the Panel.
SECTION 9.10
Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
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SECTION 9.11
Execution in Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of
an executed counterpart of a signature page to this Agreement by telecopier, facsimile or in a .pdf or similar file
shall be effective as delivery of a manually executed counterpart of this Agreement.
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(a) Each of
SECTION 9.12
Jurisdiction, Etc.
the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive jurisdiction of the United States District
Court of the Southern District of New York, located in the Borough of Manhattan (or if such court lacks subject
matter jurisdiction, the Supreme Court of the State of New York sitting in the Borough of Manhattan), and any
appellate court from any such court, in any action or proceeding arising out of or relating to this Agreement, or
for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or proceeding shall be heard and determined
in any such New York State court or, to the extent permitted by law, in any such federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by law.
(b)
Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any New York State or federal court. Each of
the parties hereto hereby irrevocably waives,
the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such court.
to the fullest extent permitted by law,
(c)
Each party to this Agreement irrevocably consents to service of process in the manner provided
for notices in Section 9.02. The Borrower irrevocably designates and appoints the Service of Process Agent, with
offices on the date of this Agreement at 111 Eighth Avenue, 13th Floor, New York, New York 10011, as its
authorized agent, to accept and acknowledge on its behalf, service of any and all process which may be served in
any suit, action or proceeding of the nature referred to in Section 9.12(a) in any federal or New York State court
sitting in New York City. Said designation and appointment shall be irrevocable by the Borrower. The Borrower
hereby consents to process being served in any suit, action or proceeding of the nature referred to in
Section 9.12(a) in any federal or New York State court sitting in New York City by service of process upon the
Service of Process Agent, with offices on the date of this Agreement at 111 Eighth Avenue, 13th Floor, New
York, New York 10011, as provided in this Section 9.12(c); provided that, to the extent lawful and possible,
notice of said service upon such agent shall be mailed by registered or certified air mail, postage prepaid, return
receipt requested, to the Service of Process Agent, and to the Borrower (with a copy thereof to the Service of
Process Agent) at the address specified for such Person on Schedule II or at such other address as shall be
designated by such party in a written notice to the Administrative Agent. The Borrower irrevocably waives, to
the fullest extent permitted by law, all claim of error by reason of any such service in such manner and agrees
that such service shall be deemed in every respect effective service of process upon the Borrower in any such
suit, action or proceeding and shall, to the fullest extent permitted by law, be taken and held to be valid and
personal service upon and personal delivery to the Borrower. To the extent the Borrower has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process (whether from service or notice,
attachment prior to judgment, attachment in aid of execution of a judgment, execution or otherwise), the
Borrower hereby irrevocably waives such immunity in respect of its obligations under the Loan Documents.
Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.
SECTION 9.13
Patriot Act Notice. Each Lender and the Administrative Agent (for itself and not
on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the Patriot Act, it is
required to obtain, verify and record information that identifies the Borrower, which information includes the
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name and address of the Borrower and other information that will allow such Lender or the Administrative
Agent, as applicable, to identify the Borrower in accordance with the Patriot Act. The Borrower shall provide, to
the extent commercially reasonable, such information and take such actions as are reasonably requested by the
Administrative Agent or any Lenders in order to assist the Administrative Agent and the Lenders in maintaining
compliance with the Patriot Act.
SECTION 9.14
No Advisory or Fiduciary Responsibility. The Borrower acknowledges and agrees,
and acknowledges its Subsidiaries’ understanding, that no Credit Party will have any obligations except those
obligations expressly set forth herein and in the other Loan Documents and each Credit Party is acting solely in
the capacity of an arm’s length contractual counterparty to the Borrower with respect to the Loan Documents and
the transaction contemplated therein and not as a financial advisor or a fiduciary to, or an agent of, the Borrower
or any other person. The Borrower agrees that it will not assert any claim against any Credit Party based on an
alleged breach of fiduciary duty by such Credit Party in connection with this Agreement and the transactions
contemplated hereby. Additionally, the Borrower acknowledges and agrees that no Credit Party is advising the
Borrower as to any legal, tax, investment, accounting, regulatory or any other matters in any jurisdiction. The
Borrower shall consult with its own advisors concerning such matters and shall be responsible for making its own
independent investigation and appraisal of the transactions contemplated hereby, and the Credit Parties shall have
no responsibility or liability to the Borrower with respect thereto.
The Borrower further acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that
each Credit Party, together with its Affiliates, is a full service securities or banking firm engaged in securities
trading and brokerage activities as well as providing investment banking and other financial services. In the
ordinary course of business, any Credit Party may provide investment banking and other financial services to,
and/or acquire, hold or sell, for its own accounts and the accounts of customers, equity, debt and other securities
and financial instruments (including bank loans and other obligations) of, the Borrower and other companies with
which the Borrower may have commercial or other relationships. With respect to any securities and/or financial
instruments so held by any Credit Party or any of its customers, all rights in respect of such securities and
financial instruments, including any voting rights, will be exercised by the holder of the rights, in its sole
discretion.
In addition, the Borrower acknowledges and agrees, and acknowledges its Subsidiaries’ understanding,
that each Credit Party and its affiliates may be providing debt financing, equity capital or other services
(including financial advisory services) to other companies in respect of which the Borrower may have conflicting
interests regarding the transactions described herein and otherwise. No Credit Party will use confidential
information obtained from the Borrower by virtue of the transactions contemplated by the Loan Documents or its
other relationships with the Borrower in connection with the performance by such Credit Party of services for
other companies, and no Credit Party will furnish any such information to other companies. The Borrower also
acknowledges that no Credit Party has any obligation to use in connection with the transactions contemplated by
the Loan Documents, or to furnish to the Borrower, confidential information obtained from other companies.
SECTION 9.15
Waiver of Jury Trial. Each of the Borrower, the Administrative Agent and the
Lenders hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether
based on contract,
tort or otherwise) arising out of or relating to this Agreement or the actions of the
Administrative Agent or any Lender in the negotiation, administration, performance or enforcement thereof.
SECTION 9.16
Conversion of Currencies. If, for the purpose of obtaining judgment in any court, it
is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to
the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance
with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other
currency on the Business Day immediately preceding the day on which final judgment is given.
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CONFORMED COPY
The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the
obligations owing hereunder (the “Applicable Creditor”) shall, notwithstanding any judgment in a currency (the
“Judgment Currency”) other than the currency in which such sum is stated to be due hereunder (the “Agreement
Currency”), be discharged only to the extent that, on the Business Day following receipt by the Applicable
Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance
with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment
Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor
the Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of
the Borrower contained in this Section 9.16 shall survive the termination of this Agreement and the payment of
all other amounts owing hereunder.
in the Agreement Currency,
SECTION 9.17
Acknowledgement and Consent
Institutions.
Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or
understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial
Institution arising under any Loan Document may be subject to the Write-Down and Conversion Powers of an
EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
to Bail-In of EEA Financial
(a)
the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any
such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA
Financial Institution; and
(b)
the effects of any Bail-In Action on any such liability, including, if applicable:
(i)
a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in
such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or
otherwise conferred on it, and that such shares or other instruments of ownership will be accepted
by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan
Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and
Conversion Powers of any EEA Resolution Authority.
SECTION 9.18
Certain ERISA Matters.
(a) Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to,
and (y) covenants, from the date such Person became a Lender party hereto to the date such Person
ceases being a Lender party hereto, for the benefit of, the Administrative Agent, the Lead Arrangers
and the Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the
benefit of the Borrower, that at least one of the following is and will be true:
(i)
(ii)
such Lender is not using “plan assets” (within the meaning of Plan Asset Regulations) of one or
more Benefit Plans in connection with the Commitments or the Advance;
the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption
for certain transactions determined by independent qualified professional asset managers), PTE
95-60 (a class exemption for certain transactions involving insurance company general accounts),
PTE 90-1 (a class exemption for certain transactions involving insurance company pooled
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CONFORMED COPY
separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank
collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined
to such Lender’s entrance into,
by in-house asset managers),
participation in, administration of and performance of the Advance, the Commitments and this
Agreement, and the conditions for exemptive relief thereunder are and will continue to be satisfied
in connection therewith,
is applicable with respect
(iii) (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager”
(within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager
made the investment decision on behalf of such Lender to enter into, participate in, administer and
perform the Commitments, the Advance and this Agreement, (C) the entrance into, participation
in, administration of and performance of the Commitments, the Advance and this Agreement
satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the
best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are
satisfied with respect to such Lender’s entrance into, participation in, administration of and
performance of the Commitments, the Advance and this Agreement; or
(iv) such other representation, warranty and covenant as may be agreed in writing between the
Administrative Agent, in its sole discretion, and such Lender.
(b)
In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect to a
Lender or if such Lender has not provided another representation, warranty and covenant as provided
in sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and
warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date
such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto,
for the benefit of, the Administrative Agent, the Lead Arrangers and the Arranger and their respective
Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower, that:
(i)
(ii)
none of the Administrative Agent,
the Lead Arrangers or the Arranger or their respective
Affiliates is a fiduciary with respect to the assets of such Lender (including in connection with the
reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan
Document or any documents related to hereto or thereto),
the Person making the investment decision on behalf of such Lender with respect to the entrance
into, participation in, administration of and performance of the Commitments, the Advance and
this Agreement is independent (within the meaning of 29 CFR § 2510.3-21) and is a bank, an
insurance carrier, an investment adviser, a broker-dealer or other person that holds, or has under
management or control, total assets of at least $50 million, in each case as described in 29 CFR §
2510.3-21(c)(1)(i)(A)-(E),
(iii) the Person making the investment decision on behalf of such Lender with respect to the entrance
into, participation in, administration of and performance of the Commitments, the Advance and
this Agreement is capable of evaluating investment risks independently, both in general and with
regard to particular transactions and investment strategies,
(iv) the Person making the investment decision on behalf of such Lender with respect to the entrance
into, participation in, administration of and performance of the Commitments, the Advance and
this Agreement
to the
Commitments, the Advance and this Agreement and is responsible for exercising independent
judgment in evaluating the transactions hereunder, and
is a fiduciary under ERISA or the Code, or both, with respect
71
CONFORMED COPY
(v) no fee or other compensation is being paid directly to the Administrative Agent, the Lead
Arrangers or the Arranger or any their respective Affiliates for investment advice (as opposed to
other services) in connection with the Commitments, the Advance or this Agreement.
(c) The Administrative Agent, each Lead Arranger and the Arranger hereby informs the Lenders that each
such Person is not undertaking to provide impartial investment advice, or to give advice in a fiduciary
capacity, in connection with the transactions contemplated hereby, and that such Person has a financial
interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may
receive interest or other payments with respect to the Commitments, the Advance and this Agreement,
(ii) may recognize a gain if it extended the Commitments or the Advance for an amount less than the
amount being paid for an interest in the Commitments or the Advance by such Lender or (iii) may
receive fees or other payments in connection with the transactions contemplated hereby, the Loan
Documents or otherwise, including structuring fees, commitment fees, arrangement fees, facility fees,
upfront fees, underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees,
utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate
transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees,
breakage or other early termination fees or fees similar to the foregoing.
(d) The representations in this Section 9.18 are intended to comply with United States Department of
Labor Regulations codified at 29 C.F.R. § 2510.3-21(a) and (c)(1) as promulgated on April 8, 2016
(81 Fed. Reg. 20,997). To the extent these regulations are revoked, repealed or no longer effective,
these representations shall be deemed to be no longer in effect.
SECTION 9.19
Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any
time the interest rate applicable to the Advance, together with all fees, charges and other amounts which are
treated as interest on such Advance under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the
Lender holding the Advance in accordance with applicable law, the rate of interest payable in respect of such
Advance hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate
and, to the extent lawful, the interest and Charges that would have been payable in respect of the Advance but
were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other periods shall be increased (but not above the Maximum Rate therefor)
until such cumulated amount, together with interest thereon at the Cost of Funds Rate to the date of repayment,
shall have been received by such Lender. Notwithstanding the forgoing, if the Lender shall have received interest
and/or Charges in an amount that exceeds the Maximum Rate, the excess interest and Charges shall be (i) applied
to the principal of the Advance, or (ii) if it exceeds the principal of the Advance, refunded to the Borrower. The
Borrower represents and warrants to the Lenders that, as of the date of this Agreement, it falls into Article 2,
Paragraph 1, Item 1 of the Act on Specified Commitment Line Contract (Act No. 4 of 1999).
SECTION 9.20
English Language.
(a) Save where this Agreement expressly provides to the contrary, any notice given under or in connection
with this Agreement must be:
(i)
in English; or
(ii)
in any other language required in respect of such notice by applicable law and accompanied by a
certified English translation at the cost of the Borrower, which English translation will prevail in
all circumstances.
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CONFORMED COPY
(b) All other documents provided under or in connection with this Agreement must be:
(i)
in English; or
(ii)
if not in English, and if so required by the Administrative Agent, accompanied by a certified
English translation at the cost of the Borrower and, in this case, the English translation will prevail
in all circumstances unless the document is a constitutional, statutory or other official document.
(c) Notwithstanding the foregoing, the Adminstrative Agent, the Lenders and the Borrower hereby agree
that notices and other communication customarily made in the Japanese language by the
Administrative Agent to the Lenders and/or the Borrower (primarily, those of an administrative nature,
such as with respect to base rate determinations, applicable interest rate, interest payment amount, etc.)
may be made solely in the Japanese language as between the relevant parties, as determined at the sole
discretion of the Administrative Agent.
[SIGNATURE PAGES FOLLOW]
73
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of the date first above written.
CONFORMED COPY
TAKEDA PHARMACEUTICAL COMPANY LIMITED,
as Borrower
By: /s/ Costa Saroukos
Name: Costa Saroukos
Title: Chief Financial Officer
Signature Page to
Senior Short-Term Loan Facility Agreement
CONFORMED COPY
SUMITOMO MITSUI BANKING CORPORATION, as
Administrative Agent
By: /s/ Makoto Takashima
Name: Makoto Takashima
Title: Representative Director
SUMITOMO MITSUI BANKING CORPORATION, as
a Lender
By: /s/ Makoto Takashima
Name: Makoto Takashima
Title: Representative Director
Signature Page to
Senior Short-Term Loan Facility Agreement
CONFORMED COPY
MUFG BANK, LTD., as a Lender
By: /s/ Ichiro Numajima
Name: Ichiro Numajima
Title: Executive Officer
Signature Page to
Senior Short-Term Loan Facility Agreement
CONFORMED COPY
MIZUHO BANK, LTD, as a Lender
By: /s/ Koji Fujiwara
Name: Koji Fujiwara
Title: Chairman of the Board of Directors
Signature Page to
Senior Short-Term Loan Facility Agreement
CONFORMED COPY
THE NORINCHUKIN BANK, as a Lender
By: /s/ Kazuto Oku
Name: Kazuto Oku
Title: President and Chief Executive Officer
Signature Page to
Senior Short-Term Loan Facility Agreement
CONFORMED COPY
SUMITOMO MITSUI TRUST BANK, LIMITED, as a
Lender
By: /s/ Shigenori Ikemura
Name: Shigenori Ikemura
Title: Executive Officer
Signature Page to
Senior Short-Term Loan Facility Agreement
CONFORMED COPY
SCHEDULE I
COMMITMENTS
LENDER
COMMITMENTS
SUMITOMO MITSUI BANKING CORPORATION
150,000,000,000 Yen
MUFG BANK, LTD.
MIZUHO BANK, LTD
THE NORINCHUKIN BANK
150,000,000,000 Yen
100,000,000,000 Yen
50,000,000,000 Yen
SUMITOMO MITSUI TRUST BANK, LIMITED
50,000,000,000 Yen
AGGREGATE COMMITMENTS
500,000,000,000 Yen
SCHEDULE II
CONFORMED COPY
ADMINISTRATIVE AGENT’S OFFICE; CERTAIN ADDRESSES FOR NOTICE
BORROWER:
Takeda Pharmaceutical Company Limited
Corporate Finance Department
12-10, Nihonbashi 2-chome, Chuo-ku, Tokyo 103-8668 Japan
Attention: Chief Financial Officer
Telephone: 03-3278-2284
Facsimile: 03-3278-2198
cc:
Takeda Pharmaceutical Company Limited
One Takeda Parkway
Deerfield, IL 60015
Attention: General Counsel
Facsimile No.: (224) 554-7831
CONFORMED COPY
ADMINISTRATIVE AGENT:
In the case of requests for the Borrowing and other notices
Sumitomo Mitsui Banking Corporation
13-6, Nihonbashi-Kodenma-cho, Chuo-ku
Tokyo 103-0001
Attention: Inter-Market Settlement Dept. Syndication Group
Tel: 03-5640-6688
Fax: 03-5695-5214
EXHIBIT A
FORM OF NOTICE OF BORROWING
CONFORMED COPY
Sumitomo Mitsui Banking Corporation
as Administrative Agent
Sumitomo Mitsui Banking Corporation
13-6, Nihonbashi-Kodenma-cho, Chuo-ku
Tokyo 103-0001
Attention: Inter-Market Settlement Dept. Syndication Group
Tel: 03-5640-6688
Fax: 03-5695-5214
[Date]
Ladies and Gentlemen:
Reference is hereby made to the Senior Short-Term Loan Facility Agreement dated as of October 26, 2018
(as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Takeda Pharmaceutical Company Limited (the “Borrower”), the Lenders from time to time
party thereto and Sumitomo Mitsui Banking Corporation, as administrative agent (in such capacity,
the
“Administrative Agent”). Capitalized terms used but not defined herein shall have the meanings assigned to such
terms in the Credit Agreement. This notice constitutes the Notice of Borrowing and the Borrower hereby requests
an Advance under the Credit Agreement, and in that connection the Borrower specifies the following information
with respect to the Advance requested hereby:
1.
Principal amount of Advance:
2. Date of Advance (which is a Business Day):
3. Maturity Date:
(1, 2, 3 or 6 months from Date of Advance)
4.
Location and number of
disbursed:
the Borrower’s account
to which proceeds of Advance are to be
I, [
], hereby certify that I am the duly elected, qualified and acting [
] of the Borrower, and
that, as such, I am authorized to execute and deliver this certificate on behalf of the Borrower. I further certify
that, as of the date hereof, (x) no Certain Funds Default is continuing or would result from the borrowing
requested herein and (y) all the Certain Funds Representations are true, or, if a Certain Funds Representation
does not include a materiality construct, true in all material respects.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned has caused this Notice of Borrowing to be executed and
delivered as of the date first above written.
CONFORMED COPY
Very truly yours,
TAKEDA PHARMACEUTICAL COMPANY LIMITED,
as the Borrower
By:
Name:
Title:
Exhibit A-2
EXHIBIT B
FORM OF ASSIGNMENT AND ACCEPTANCE
CONFORMED COPY
This Assignment and Acceptance (the “Assignment and Acceptance”) is dated as of the Assignment
Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert
name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given
to them in the Credit Agreement identified below (as amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee.
The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated
herein by reference and made a part of this Assignment and Acceptance as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the
Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the
Standard Terms and Conditions and the Credit Agreement, as of the Assignment Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a
Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the
extent related to the amount and percentage interest identified below of all of such outstanding rights and
obligations of the Assignor under the respective facilities identified below and (ii) to the extent permitted to be
assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its
capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the
Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract
claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the
rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned
pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale
and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and
Acceptance, without representation or warranty by the Assignor.
1.
2.
3.
4.
5.
Assignor:
Assignee:
[and is an Affiliate of [identify Lender]1]
Borrower:
Takeda Pharmaceutical Company Limited
Administrative Agent:
Sumitomo Mitsui Banking Corporation, as the administrative agent under
the Credit Agreement
Credit Agreement:
The Senior Short-Term Loan Facility Agreement dated as of October 26,
2018 among Takeda Pharmaceutical Company Limited, as borrower, the
Lenders parties thereto and Sumitomo Mitsui Banking Corporation, as
Administrative Agent
6.
Assigned Interest:
1 Select as applicable.
Aggregate Amount of Commitment/Advance
for all Lenders
[JPY]
[JPY]
[JPY]
Amount of
Commitment/Advance Assigned
Percentage Assigned of
Commitment/Advance2
[JPY]
[JPY]
[JPY]
%
%
%
CONFORMED COPY
Assignment Date:
[TO BE INSERTED BY ADMINISTRATIVE AGENT AND
WHICH SHALL BE THE ASSIGNMENT DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFOR.]
, 20
The Assignee agrees to deliver to the Administrative Agent a completed Administrative Questionnaire in
which the Assignee designates one or more credit contacts to whom all syndicate-level information (which may
contain material non-public information about
the Borrower and their Related Parties or their respective
securities) will be made available and who may receive such information in accordance with the Assignee’s
compliance procedures and applicable laws, including U.S. Federal and state securities laws.
The terms set forth in this Assignment and Acceptance are hereby agreed to:
ASSIGNOR
[NAME OF ASSIGNOR]
By:
Name:
Title:
ASSIGNEE
[NAME OF ASSIGNEE]
By:
Name:
Title:
[Consented to and]3 Accepted:
SUMITOMO MITSUI BANKING CORPORATION,
as Administrative Agent
By:
Name:
Title:
2 Set forth, to at least 9 decimals, as a percentage of the Commitment/Advance of all Lenders thereunder.
3 To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.
Exhibit B-2
[Consented to:]4
TAKEDA PHARMACEUTICAL COMPANY LIMITED
By:
Name:
Title:
CONFORMED COPY
4 To be added only if the consent of the Borrower is required by the terms of the Credit Agreement.
Exhibit B-3
CONFORMED COPY
ANNEX I
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ACCEPTANCE
1. Representations and Warranties.
1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of
the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim
and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this
Assignment and Acceptance and to consummate the transactions contemplated hereby; and (b) assumes no
responsibility with respect to (i) any statements, warranties or representations made in or in connection with the
Credit Agreement, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement or any collateral
thereunder, (iii) the financial condition of the Borrower, any of its
Subsidiaries or Affiliates or any other Person obligated in respect of the Credit Agreement or (iv) the
performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of
their respective obligations under the Credit Agreement.
1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and
has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the
transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire
the Assigned Interest and become a Lender, (iii) from and after the Assignment Date, it shall be bound by the
provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have
the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the
type represented by the Assigned Interest and either it, or the Person exercising discretion in making its decision
to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the
Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01
thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance and to purchase the Assigned Interest
on the basis of which it has made such analysis and decision independently and without reliance on the
Administrative Agent, any Lead Arranger or Arranger or any other Lender and their respective Related Parties,
and (vi) attached to the Assignment and Acceptance is any documentation required to be delivered by it pursuant
to the terms of the Credit Agreement, duly completed and executed by the Assignee; (b) makes for itself as of the
date hereof rather than the Effective Date, the representation and warranty concerning each Lender set forth in
Section 9.18 of the Credit Agreement and (c) agrees that (i) it will, independently and without reliance on the
Administrative Agent, any Lead Arranger or Arranger, the Assignor or any other Lender and their respective
Related Parties, and based on such documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking action under the Credit Agreement, and (ii) it will
perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Lender.
2. Payments. From and after the Assignment Date, the Administrative Agent shall make all payments
in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the
Assignor for amounts which have accrued to but excluding the Assignment Date and to the Assignee for amounts
which have accrued from and after the Assignment Date.
3. General Provisions. This Assignment and Acceptance shall be binding upon, and inure to the benefit
of, the parties hereto and their respective successors and assigns. This Assignment and Acceptance may be
Exhibit B-4
executed in any number of counterparts, which together shall constitute one instrument. Acceptance and adoption
of the terms of this Assignment and Acceptance by the Assignee and the Assignor by Electronic Signature or
delivery of an executed counterpart of a signature page of this Assignment and Acceptance by any Electronic
System shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance.
This Assignment and Acceptance shall be governed by, and construed in accordance with, the law of the State of
New York.
CONFORMED COPY
Exhibit B-5
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
CONFORMED COPY
Sumitomo Mitsui Banking Corporation
as Administrative Agent
Sumitomo Mitsui Banking Corporation
13-6, Nihonbashi-Kodenma-cho, Chuo-ku
Tokyo 103-0001
Attention: Inter-Market Settlement Dept. Syndication Group
Tel: 03-5640-6688
Fax: 03-5695-5214
[Date]
Ladies and Gentlemen:
Reference is hereby made to the Senior Short-Term Loan Facility Agreement dated as of October 26, 2018
(as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Takeda Pharmaceutical Company Limited (the “Borrower”), the Lenders from time to time
party thereto and Sumitomo Mitsui Banking Corporation, as administrative agent (in such capacity,
the
“Administrative Agent”). Capitalized terms used but not defined herein shall have the meanings assigned to such
terms in the Credit Agreement.
The undersigned is the [Chief Executive Officer / Chief Financial Officer / Treasurer] of the Borrower
(the “Authorized Officer”) and, as such, the undersigned is authorized to execute and deliver this Compliance
Certificate to the Administrative Agent on behalf of the Borrower in accordance with Section 5.01(i)(iii) of the
Credit Agreement. The Authorized Officer hereby certifies as follows, in his/her capacity as an officer of the
Borrower and not in his/her individual capacity:
1.
2.
I have reviewed the terms of the Credit Agreement and I have made, or caused to be made under my
supervision, a review in reasonable detail of the transactions and conditions of the Consolidated Group
during the accounting period covered by the financial statements attached hereto as Annex I [for
quarterly financial statements add: and such financial statements have been prepared in accordance
with IFRS (subject to the absence of footnotes and year end audit adjustments); [and]
The examinations described in paragraph 1 did not disclose[, except as set forth below], and I have no
knowledge of the existence of any condition or event which constitutes a Default or Event of Default
during or at the end of the accounting period covered by the attached financial statements or as of the
date of this Compliance Certificate; [and]
a.
[Please specify in reasonable detail each condition or event which constitutes a Default
or Event of Default and any action taken or proposed to be taken with respect thereto];
[and]
3.
[The Borrower is in compliance with the Consolidated Net Debt to Consolidated EBITDA covenant
contained in Section 5.03 of the Credit Agreement as shown in the calculations attached hereto as
Annex II.]
CONFORMED COPY
ANNEX I
FINANCIAL STATEMENTS FOR PERIOD ENDING [
]
[To be attached.]
Exhibit C-2
CALCULATION OF CONSOLIDATED NET DEBT TO CONSOLIDATED EBITDA RATIO
[To be attached.]
CONFORMED COPY
ANNEX II
Exhibit C-3
Exhibit 10.10
[English Translation solely for Information Purposes
– Japanese language original shall govern and control]
SUBORDINATED SYNDICATED LOAN AGREEMENT
dated October 26, 2018
among
TAKEDA PHARMACEUTICAL COMPANY LIMITED
as Borrower
SUMITOMO MITSUI BANKING CORPORATION
MUFG BANK, LTD.
as Lead Arrangers and Bookrunners
MIZUHO BANK, LTD.
as Arranger and Bookrunner
THE NORINCHUKIN BANK
SUMITOMO MITSUI TRUST BANK, LIMITED
as Arrangers
SUMITOMO MITSUI BANKING CORPORATION
MUFG BANK, LTD.
MIZUHO BANK, LTD.
THE NORINCHUKIN BANK
SUMITOMO MITSUI TRUST BANK, LIMITED
as Lenders
and
SUMITOMO MITSUI BANKING CORPORATION
as Agent
TABLE OF CONTENTS
Chapter 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 1-1
(Definitions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 2 Commitment Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 2-1
(Primary Commitment Terms)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 2-2
(Conditions Precedent to Lending Obligation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 2-3
(Terms and Conditions of Extending the Loan)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 2-4
(Exemption of Lender)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 2-5
(Increased Costs and Illegality) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 2-6
(Payment of Commitment Fees) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 2-7
(Optional Deferral of Interest Payment) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 3 Representations and Warranties of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 3-1
(Representations and Warranties of the Borrower) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 4 Obligations of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 4-1
(Obligations of the Borrower) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 5 No Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 5-1
(No Acceleration)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 6 Termination of the Commitment Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 6-1
(Termination of the Commitment Period) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 7 Terms and Conditions of Repayment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 7-1
(Performance of Obligations of the Borrower) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 7-2
(Subordination) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 8 Terms and Conditions to Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 8-1
(Terms and Conditions to Prepayment) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter 9 Syndication Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 9-1
(Rights and Obligations of the Lenders) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 9-2
(Distributions to the Lenders) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 9-3
(Rights and Obligations of the Agent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 9-4
(Resignation and Dismissal of the Agent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 9-5
(Decisions of Majority Lenders) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 9-6
(Collection from a Third Party) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 9-7
(Assignment of Position) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 9-8
(Assignment of Loan Claim) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 9-9
(Miscellaneous) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
1
6
6
10
10
11
12
12
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21
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32
i
Attachment 1
Contact Details of Parties, Initial Commitment Amounts of Lenders, and Method of Notices
Attachment 2
Principal Payment Schedule, Interest Payment Date Schedule
Attachment 3
Form of Drawdown Notice
Attachment 4
Exclusion of Anti-Social Forces
ii
SUBORDINATED SYNDICATED LOAN AGREEMENT
This Agreement
is made as of October 26, 2018 among TAKEDA PHARMACEUTICAL COMPANY
LIMITED, as the borrower (the “Borrower”) and the financial institutions set out in the lenders column of
Attachment 1 as the lenders (collectively the “Lenders” and each a “Lender”), and Sumitomo Mitsui Banking
Corporation, as the agent (the “Agent”), as follows:
Chapter 1
Definitions1
Article 1-1
(Definitions)
The following terms shall, except where the context clearly indicates otherwise, have the meanings given below
in this Agreement.
1.
2.
3.
4.
5.
6.
7.
8.
“Business Day”
Means a day other than a day designated as a holiday for banks in Japan.
“Lending Obligation” Means the obligation of each Lender to make an Individual Loan in response to a
request of borrowing delivered by the Borrower in accordance with the terms
and subject to the conditions set out in this Agreement.
“Loan Impossibility
Event”
Means (i) a situation where Yen lending transactions cannot generally be made
by banks in the Tokyo interbank market, or (ii) a situation where due to an act of
God or an outbreak of war, a terrorist attack, an interruption or difficulty in the
electrical, communications or various settlement systems and any other event not
attributable to the Lenders, the drawdown of loans from all or any of the Lenders
becomes impossible, and the Majority Lenders (or if obtaining the decision of
the Majority Lenders is burdensome, the Agent) shall determine the occurrence
and resolution of such event, acting reasonably.
“Drawdown Notice” Means a drawdown notice substantially in the form of Attachment 3 delivered to
the Agent or sent by facsimile transmission for the purpose of requesting loans
under this Agreement.
“Longstop Drawdown
Notice Date”
“Available
Prepayment Date”
“Mandatory Payment
Reference Period”
Has the meaning in Article 2-1(2).
Means the Interest Payment Date falling after the sixth (6th) anniversary of the
Drawdown Date (including such date) and each subsequent Interest Payment
Date in each year.
Means, with respect to an Interest Payment Date, the period commencing on
(and including) the day fifteen (15) Business Days before the Interest Payment
Date immediately preceding the relevant Interest Payment Date (or, in the case
of the initial Interest Payment Date, the Drawdown Date) and ending fifteen
(15) Business Days before the relevant Interest Payment Date.
“Taxes and Public
Charges”
Means income taxes, corporate taxes, and other taxes and all public taxes and/or
public charges which may be imposed in Japan.
1 Note to draft: Defined terms are in the order presented in the Japanese original and therefore are not in
alphabetical order in the translation.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
1
9.
“Individual Loan”
Means the loan transactions made by each Lender pursuant to the Drawdown
Notice.
10.
“Individual Loan
Advance”
Means the proceeds advanced by the Lenders to the Borrower as an Individual
Loan. Furthermore, “Individual Loan Advance Amount” means the amount of
such Individual Loan Advance (i.e. the amount calculated by applying the total
amount set out in the relevant Drawdown Notice pro rata to each Lender in
accordance with its relevant Participation Ratio).
11.
12.
13.
“Outstanding
Individual Loan
Amount”
Means the principal, interest, default interest, Break Funding Costs relating to an
Individual Loan and any other amount for which the Borrower bears a payment
obligation with respect to such Individual Loan.
“Commitment Period
Termination Event”
Has the meaning in Article 6.1(1).
“Commitment
Amount”
Means the maximum amount of Lending Obligation each Lender bears under
this Agreement to the Borrower.
14.
“Commitment Fee”
Means the fee payable by the Borrower to each of the Lenders in accordance
with the terms of this Agreement in consideration for the Lending Obligation
provided by the Lenders.
15.
“Most Preferred
Stock”
Means the shares issued or to be issued by the Borrower, which rank senior to
the common stock issued by the Borrower with respect to the right to receive
dividends from surplus and distribution of residual assets (if the Borrower has
more than one class of stock outstanding which ranks senior to the common
stock issued by the Borrower, then the class of stock ranking most senior with
respect to the right to receive distribution of residual assets).
16.
“Participation Ratio” Means the percentage of the Commitment Amount of each Lender to the Total
Commitment Amount.
17.
“Requested Drawdown
Date”
Means a business day during the Commitment Period on which the Borrower
requests the disbursement of a loan, as set out in the relevant Drawdown Notice.
18.
“Drawdown Date”
Means the date on which an Individual Loan is disbursed.
19.
“Due Time”
Means noon of the Repayment Date in the case where a Repayment Date is
specified in this Agreement.
20.
“Equity Credit Change
Event”
Means an event
in which the Rating Agents (which means Rating and
Investment Information, Inc., S&P Global Ratings Japan K.K. and Moody’s
Japan K.K., or any company succeeding to the rating business thereof; the same
shall apply hereinafter) announce or give the Borrower a written notice to the
effect that each such Rating Agent has decided to treat any obligation under this
thereof
Agreement as having a lower equity credit
estimated by each such Rating Agent at the time of the execution of this
Agreement due to a revision of the evaluation standards for equity credit of the
obligations under this Agreement.
than the equity credit
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
2
21.
“Break Funding Cost” Means the amount to be settled in the case where the principal is repaid on any
day other than an Interest Payment Date, and the Reinvestment Rate falls below
the Applicable Interest Rate, which amount shall be calculated as the principal
amount with respect to which such repayment was made, multiplied by the
difference between the Reinvestment Rate and the Applicable Interest Rate, and
the actual number of days of the Remaining Period. “Remaining Period” means
the period commencing on (and including) the day on which the repayment was
made and ending on (and including) the upcoming Interest Payment Date, and
the “Reinvestment Rate” means the interest rate reasonably determined by the
Lenders as the interest rate to be applied on the assumption that the prepaid
principal amount will be reinvested in the Tokyo interbank market, etc. during
the Remaining Period. The calculation method for such Break Funding Cost
shall be on a per diem basis, inclusive of the first day and exclusive of the last
day, wherein divisions shall be done at the end of the calculation, and fractions
less than one Yen (¥1) shall be rounded down.
22.
“Total Loan Balance” Means the aggregate principal portion of the Outstanding Individual Loan
Amounts of all of the Lenders under this Agreement.
23.
“Tax Event”
24.
“Increased Costs”
25.
26.
“Increased Costs
Lender”
“Total Commitment
Amount”
27.
“Damages”
the Borrower suffers a significant
Means an event in which, by the laws and ordinances of Japan or application or
interpretation thereof,
tax disadvantage,
interest under this Agreement shall not be counted in
including such that
deductible expenses prescribed in Article 22, Paragraph 3 of the Corporate Tax
Act (Act No. 34 of 1965, as amended) in the calculation of corporate tax
imposed on the Borrower, which cannot be avoided by the Borrower making
reasonable efforts.
Means the increased portion of lending expenses (the amount reasonably
calculated by the relevant Lender), in the case where the Lender’s burden of
Lending Obligation and the lending expenses required in connection with this
Agreement are substantially increased (excluding any increase caused by a
change in tax rates on taxable income of such Lender) due to any enactment or
amendment of Laws and Ordinances, or any change in the interpretation or
application thereof, establishment or increase in capital reserves, or change in the
restrictions under, or implementation of, the accounting rules.
Means a Lender that has incurred Increased Costs.
Means the aggregate amount of the Commitment Amounts of all of the Lenders.
Means damages, losses and expenses (including, without limitation, any costs
incurred in order not to suffer from damages or losses, costs incurred to recover
damages or losses, and attorney’s fees).
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
3
28.
“Majority Lenders”
29.
“Temporary Advance
Cost”
Means one or more Lenders whose Participation Ratio(s) amount to sixty six
point seven percent (66.7%) or more in total as of the Decision Seeking Time
(provided, however, that with respect to any Lender whose Lending Obligation
has been cancelled but has Outstanding Individual Loan Amounts, for purposes
its Commitment
of calculating its Participation Ratio during such period,
Amount shall be deemed equivalent to the principal portion of such Outstanding
Individual Loan Amount as of the Decision Seeking Time. If the Lending
Obligation is cancelled with respect to all Lenders but the repayment of all
the
amounts due and payable under
Participation Ratio for each Lender during such period shall be equivalent to its
pro rata share of the Total Loan Balance with respect to the principal portion of
the Outstanding Individual Loan Amount for such Lender. “Decision Seeking
Time” means, in the case where the Lenders determine that an event requiring
the instruction of the Majority Lenders has occurred, the point in time when the
Agent receives a notice of a request for a decision of the Majority Lenders under
this Agreement from the relevant Lender, and in the case where the Agent
determines it necessary to seek a decision of the Majority Lenders, the point in
time when the Agent gives notice to such effect.
this Agreement has not occurred,
Means, in the case where the Agent makes a Temporary Advance, the amount
calculated as the amount of the Temporary Advance multiplied by the Funding
Rate, and the actual number of days of the Temporary Advance Period.
“Temporary Advance Period” means the period commencing on (and including)
the day on which a Temporary Advance is made and ending on (and including)
the day on which such Temporary Advance is repaid in full, and the “Funding
Rate” means the interest rate that the Agent reasonably determines as the interest
rate to fund the amount of Temporary Advance throughout the Temporary
Advance Period. The calculation method for such Temporary Advance Cost
shall be on a per diem basis, inclusive of the first day and exclusive of the last
day with divisions done at the end of the calculation, and fractions less than one
Yen (¥1) shall be rounded down.
30.
“Temporary
Advance”
Means, with respect to a repayment by the Borrower on a Repayment Date, the
act of payment by the Agent to the Lenders of an amount equivalent to the
amount to be distributed to the Lenders pursuant to this Agreement before the
completion of the payment from the Borrower.
31.
32.
“Equivalent
Securities”
“Equivalent
Subordinated Debt”
Means the Most Preferred Stock and the Equivalent Subordinated Debt.
Means the obligations of the Borrower (i) which have conditions that are
substantially similar to the conditions provided for in Article 7-2, Paragraphs
(1) through (5) and (ii) for which the rights with respect to interest and the
conditions of
to those
redemption or
provided for in this Agreement.
repayment are substantially similar
33.
“Non-Preferred
Stock”
Means the common stock of the Borrower and the shares to be issued by the
Borrower which rank junior to the Equivalent Securities with respect to the right
to receive dividends from surplus and distribution of residual assets.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
4
34.
“Repayment Date”
Means, with respect to a principal payment relating to an Individual Loan, the
Principal Payment Date, with respect to interest, the Interest Payment Date, and
with respect
to the Commitment Fee or any other amount payable by the
Borrower hereunder, the day specified as a day on which the payment shall be
made pursuant to this Agreement.
35.
“Laws and Ordinances” Means
the treaties,
laws, ordinances, municipal ordinances, ministerial
ordinances,
judgments, decisions, arbitral awards,
directives, and policies of relevant authorities, which apply to this Agreement,
the transactions under this Agreement, and/or the parties to this Agreement.
rules, announcements,
36.
“Target Acquisition”
Has the meaning given to “Target Acquisition” in the SSTL.
37.
“Subordinated Claims” Means the claims (i) which have conditions that are substantially similar to the
conditions provided for in Article 7-2, Paragraphs (1) through (5) and (ii) for
which the rights with respect to interest and the conditions of redemption or
repayment are substantially similar to those provided for in this Agreement,
together with the claims under this Agreement.
38.
“Unused Commitment
Amount”
39.
“Subordination
Event”
40.
“SSTL”
Means the amount remaining after deduction of the aggregate amount of the
Individual Loans from the Commitment Amount (without regard for whether
any Individual Loans have been repaid). However, where a Borrower has refused
a proposed disbursement of an Individual Loan by a Loan Impossibility Lender,
such unfunded amount shall be deemed to be disbursed and shall be counted
toward the aggregate amount of Individual Loans for purposes of calculating the
Unused Commitment Amount.
Means any of the events set forth in Article 7-2, Paragraphs (1) through (5).
Means that certain senior short-term loan facility agreement dated as of
October 26, 2018 among Takeda Pharmaceutical Company Limited,, the lenders
that are parties hereto, and Sumitomo Mitsui Banking Corporation, as
administrative agent for the lenders.
41.
“SSTL Maturity
Date”
Has the meaning given to “Maturity Date” in the SSTL.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
5
Chapter 2
Commitment Terms
Article 2-1
(Primary Commitment Terms)
(1) Lending Obligation
Each Lender agrees to bear the Lending Obligation to the Borrower under this Agreement, in accordance with the
terms set out below.
Total Commitment Amount
The Total Commitment Amount as of the execution date of this
Agreement is as set out below (the Commitment Amount with respect to
each Lender is listed in Attachment 1.).
Commitment Start Date
October 26, 2018
JPY 500 billion
Commitment Termination Date
The earlier of (i) the SSTL Maturity Date or (ii) six months from the date
of drawdown on the SSTL.
Commitment Period
Number of Drawdowns
From (and including) the Commitment Start Date until (and including)
the Commitment Termination Date. Provided, however, that in the event
that (i) the Lending Obligation is cancelled with respect to all of the
(ii) a
Lenders prior
Commitment Period Termination Event occurs, then the Commitment
Period shall end on such earlier date of termination (inclusive).
to the Commitment Termination Date or
Each Lender agrees to one (1) drawdown of Individual Loans in response
to the Borrower’s request of a loan drawdown, in accordance with the
terms of this Agreement.
Commitment Fee Percentage
0.15% per annum from Commitment Start Date until (and excluding)
drawdown date of SSTL
0.20% per annum from drawdown date of SSTL until (and including)
either Commitment Termination Date (in the event that the Commitment
Period ends before the Commitment Termination Date, the last day of the
Commitment Period)
Commitment Fee Calculation
Period
From (and including) the Commitment Fee Calculation Period Start Date
until (and including) the Commitment Fee Calculation Period End Date,
each Calculation Period applicable therein:
No. Commitment Fee Calculation
Period Start Date
Commitment Fee Calculation
Period End Date
1
2
3.
Commitment Start Date
Last day of December 2018
The date immediately following
Commitment Fee Calculation
Period End Date No. 1
The date immediately following
Commitment Fee Calculation
Period End Date No. 2
Last day of March 2019
Last day of June 2019
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
6
4.
5.
6.
The date immediately
following Commitment Fee
Calculation Period End Date
No. 3
The date immediately
following Commitment Fee
Calculation Period End Date
No. 4
The date immediately
following Commitment Fee
Calculation Period End Date
No. 5
Last day of September 2019
Last day of December 2019
Commitment Termination
Date (in the event that the
Commitment Period ends
before the Commitment
Termination Date, the last
day of the Commitment
Period)
Borrower may, by submitting a written request at least 5 days in advance
of the proposed effective date setting out (i) the request for reduction of
the Commitment Amounts, (ii) the reduction amount (to be a minimum
of 100 million yen and in increments of 100 million yen thereafter) and
(iii) the proposed effective date of the reduction, reduce the Total
Commitment Amount by the said Commitment Amounts. Reductions to
the Total Commitment Amount shall be pro rata across the Commitment
Amounts in accordance with the Participation Ratio of Lenders.
The Total Commitment Amount of this Agreement shall be reduced by
any incurrence of any Equivalent Subordinated Debt by the Borrower
during the Commitment Period (provided, however, that this provision
shall not apply with respect to incurrence of any Equivalent Subordinated
Debt denominated in a currency other than Yen) upon the date of funding
(if notes or bonds) or execution of loan agreement (if loans) for such
Equivalent Subordinated Debt, by the same amount as such funding or
loan agreement (in the case of incurrence of such debt denominated in
any currency other than yen, such amount as translated into yen at the
Exchange Rate as defined in the SSTL on such date.). Reductions to the
Total Commitment Amount shall be pro rata across the Commitment
Amounts in accordance with the Participation Ratio of Lenders.
Voluntary Reduction of
Commitment Amount
Mandatory Reduction of
Commitment Amount
(2) Individual Loans
The Borrower may request the disbursement of Individual Loans in accordance with the applicable terms of this
Agreement and under the terms set out below, and the Lenders agree to make such Individual Loans.
Purpose of funds
Solely for repayment of the debt borrowed pursuant to the SSTL on or
before the SSTL Maturity Date.
The Agent and each Lender shall have no obligation to confirm that the
Borrower uses the loan proceeds for such purpose.
Deadline for submitting Drawdown
Notice
By 10:00 am 3 Business Days prior to the applicable Requested
Drawdown Date.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
7
Deadline for delivery of Drawdown
Notice to Lender
3 Days prior to the applicable Requested Drawdown Date.
Longstop Drawdown Notice Date
3 Business Days prior to the SSTL Maturity Date.
Drawdown Notice Amounts
To be a minimum of 100 million yen and in increments of 100 million
yen thereafter; provided that the foregoing is not required to be applied in
the case of a request of a loan drawdown for the amount of the requested
loan equal to the reasonably anticipated balance of the loan under the
SSTL as of the Requested Drawdown Date.
Maturity Date
The date that is the sixtieth (60th) anniversary of the Drawdown Date.
Principal Payment Date
Means the Maturity Date.
Method of repayment of principal
Principal in the Principal Payment Amount (as set out in Attachment 2)
shall be paid in a lump sum on the Principal Payment Date.
Prepayment
Interest Period
Base Rate
As separately provided in this Agreement.
The calculation period for interest to be paid on an Interest Payment Date
shall be as follows: the interest calculation period for the interest to be
paid on the first Interest Payment Date (the “First Interest Period”; the
same calculation method shall apply to the second and each subsequent
Interest Period thereafter) shall be the period from (and including) the
Drawdown Date to (and including) the first Interest Payment Date. The
Interest Period shall be from (and
second, and each subsequent,
including) the last day of the preceding Interest Period to (and including)
the succeeding Interest Payment Date.
The six (6) month Japanese Yen TIBOR Rate for such Interest Period
published by the JBA TIBOR Administration (or in the event that the
Japanese Yen TIBOR Rate-setting operations are assumed by a successor
organization, such successor organization) on Telerate Screen “17097” or
successor page at 11:00 a.m., Tokyo time, or the nearest possible time
after 11:00 a.m., Tokyo time, on the second (2nd) Business Day prior to
(i) the Drawdown Date for the First Interest Period and (ii) the Interest
Payment Date for the immediately preceding Interest Period for the
second, and each subsequent, Interest Period (in each case, the “Interest
Determination Date”); provided, however, that, in the case where (i) the
calculation and publication of the Japanese Yen TIBOR Rate has been
permanently ceased or the decision for such cessation has been made, the
Borrower and the Lenders shall consult in good faith regarding the
application of an alternative rate to Japanese Yen TIBOR Rate, or (ii) the
Japanese Yen TIBOR Rate or the rate determined in accordance with leg
(i) hereof as a result of the permanent cessation of the calculation and
publication of the Japanese Yen TIBOR Rate as set out thereunder, is not
published for any reason, the Base Rate shall be the rate (indicated as per
annum rate) that is reasonably determined by the Agent as the offered
rate applicable for a loan in Yen for six (6) months in the interbank
market as of the Interest Determination Date.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
8
Spread
(1) From (and including) the Drawdown Date to (but excluding) the tenth
(10th) anniversary of the Drawdown Date:
2.00% per annum
(2) From (and including) the tenth (10th) anniversary of the Drawdown
Date to (but excluding) the twenty-sixth (26th) anniversary of the
Drawdown Date
2.25% per annum
(3) After (and including) the twenty-sixth (26th) anniversary of the
Drawdown Date
3.00% per annum
Applicable Interest Rate
The rate that is the sum of the Base Rate and the Spread.
Interest Payment Date
Interest Payment Method
Handling of holidays
(3) Miscellaneous
Base day count
Syndicate Account
With respect to the first Interest Payment Date, the date falling six
(6) months following the Drawdown Date. For the second Interest
Payment Date, the date falling one (1) year following the Drawdown
Date, and for subsequent Interest Payment Dates up to the Maturity Date,
the date falling every six (6) months thereafter.
Interest calculated on the principal portion of the Outstanding Individual
Loan Amount for each Interest Period, multiplied by the Applicable
Interest Rate and the actual number of days during the Interest Period
(inclusive of the first day and exclusive of the last day) on a per diem
basis for each Lender (with divisions done at the end of the calculation
and fractions less than one Yen (¥1) shall be rounded down) shall be paid
on the Interest Payment Date for the relevant Interest Period. Where per
diem calculation is to be undertaken, calculation shall be done on the
basis of a year of three hundred sixty five (365) days.
In the case where a Repayment Date for the principal and/or interest will fall
on a day other than a Business Day, such Repayment Date shall instead be
the next immediately succeeding Business Day, except if such succeeding
Business Day falls in the succeeding calendar month, in which case the
Repayment Date shall be the immediately preceding Business Day.
In the case where per diem calculation is to be undertaken under this
Agreement, calculation shall be done on the basis of a year of three
hundred sixty five (365) days, unless otherwise provided in this
Agreement.
The current deposit account of the Borrower with Sumitomo Mitsui
Banking Corporation, Tokyo Business Department
(Account No.:
239439, Account Holder: Takeda Pharmaceutical Company Limited).
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
9
Article 2-2
(Conditions Precedent to Lending Obligation)
Each Lender’s Lending Obligation shall be subject to each of the following conditions precedent:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
The relevant request for a loan drawdown satisfies the requirements set forth in this Agreement.
The Lender’s Lending Obligation not been excused under Paragraph (4) of this Article.
the matters represented and warranted by the Borrower in this Agreement are in all material
aspects true and correct;
the Borrower is not in violation of any provision of this Agreement and no such violation is
realistically and specifically threatened to occur after the applicable Requested Drawdown
Date;
The Target Acquisition is completed and the drawdown on the SSTL has occurred; and
the Borrower has submitted all the following documents to the Agent and all Lenders:
(a)
(b)
(c)
(d)
(e)
evidence reasonably satisfactory to the Agent
that any amounts borrowed and
outstanding under the SSTL shall be paid in full on the applicable Requested Drawdown
Date (e.g., a payoff letter in connection with early repayment);
a certificate of seal of the Borrower representative who affixes his/her name and seal to
this Agreement (one issued within three (3) months prior to the day of receipt and valid
as of the date of execution of this Agreement);
a certified copy of commercial registration or a certificate of all matters presently
recorded or certificate of all matters historically recorded (one issued within three
(3) months prior to the day of receipt and valid as of the date of execution of this
Agreement);
a report of a seal or a signature in the form designated by the Agent; and
a document certifying that the appropriate internal procedures have been completed with
respect to the execution of and the borrowing under this Agreement.
Article 2-3
(Terms and Conditions of Extending the Loan)
(1)
To request a loan drawdown under this Agreement, the Borrower shall notify the Agent of such request by
delivering the original of the Drawdown Notice or transmitting a copy of such notice via facsimile to the
Agent by no later than the applicable deadline for submitting such Drawdown Notice set out in this
Agreement. If the Borrower has submitted the Drawdown Notice via facsimile transmission addressed to the
Agent, the Borrower shall confirm the Drawdown Notice was received by the Agent, by telephone or other
method. The amount of the requested loan (which must be an amount that is consistent with the Drawdown
Notice Amount and does not exceed the Total Commitment Amount, and in no event less than the
reasonably anticipated balance of the loan under the SSTL as of the date of the Requested Drawdown Date
(excluding, however, any amounts that are reasonably anticipated to be repaid from proceeds of Equivalent
Subordinated Debt by (and including) the Requested Drawdown Date)) set out in a Drawdown Notice and
the applicable Maturity Date shall be prescribed in such notice in accordance with this Agreement, and the
requested amount of any Individual Loan to be made by the Lenders in a Drawdown Notice shall not exceed
the Commitment Amount of the relevant Lender as of the Requested Drawdown Date.
(2)
Notwithstanding anything in the foregoing, if on the Longstop Drawdown Notice Date, (i) it is reasonably
anticipated that there will be outstanding balance of the loan under the SSTL on the SSTL Maturity Date
(excluding, however, any amounts that are reasonably anticipated to be repaid from proceeds of
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
10
(3)
(4)
(5)
(6)
(7)
(8)
Equivalent Subordinated Debt by (and including) the SSTL Maturity Date) and (ii) the Borrower has not
submitted a Drawdown Notice under this Agreement as of such date, the Borrower shall deliver a
Drawdown Notice with the Requested Drawdown Date being the SSTL Maturity Date in accordance with
Paragraph (1) of this Article on the Longstop Drawdown Date.
The Borrower’s notice requesting a drawdown of the loans set out in the preceding two Paragraphs with
respect to any Drawdown Notice shall take effect against each of the Lenders upon delivery of the
relevant Drawdown Notice to, or receipt of such Drawdown Notice by, the Agent. The Borrower hereby
acknowledges that upon delivery of a Drawdown Notice to, or receipt of such Drawdown Notice by, the
Agent in accordance with the preceding Paragraph, such Drawdown Notice shall be irrevocable and shall
not be cancelled or modified with respect to any of the Lenders for any reason. Upon delivery of a
Drawdown Notice to, or receipt of such Drawdown Notice by, the Agent, the Agent shall notify each of
the Lenders of the submission of the Drawdown Notice and its provisions by sending each of them a copy
of such Drawdown Notice within the time period prescribed in this Agreement.
On the condition that all of the Lending Obligation conditions precedent set out in this Agreement have
been fulfilled as of the applicable Drawdown Date for an Individual Loan (whether or not a notice of
non-lending has been issued under Paragraph (7) of this Article), during the Commitment Period, each
Lender shall bear the Lending Obligation. Whether the conditions precedent are fulfilled or not shall be
judged by each Lender, and neither the other Lenders nor the Agent shall be responsible for the judgment
made by such Lender, including any decision of non-lending.
If a request of a loan drawdown has been received in accordance with Paragraph (1) or (2) of this Article
and all Lending Obligation conditions precedent set out in this Agreement have been fulfilled as of the
Drawdown Date for the relevant Individual Loan, each Lender shall deposit
the Individual Loan
Drawdown Amount to the Syndicate Account on such Drawdown Date. The Individual Loan of the
relevant Lender shall be deemed to have been made as of the time of the deposit of such amount into the
Syndicate Account.
In the case where a loan is extended under the preceding Paragraph, the Borrower shall promptly send a
receipt setting out the amount of the loan and the details of the Individual Loan to the Agent. The Agent
shall, when it receives such receipt, promptly deliver a copy to the Lenders extending the Individual
Loan. The Agent shall retain the original of the receipt on behalf of the Lenders until the repayment of the
full amount of the Outstanding Individual Loan Amount for the Individual Loan.
A Lender that has decided not to make a loan for the reason that all or a part of the Lending Obligation
conditions precedent have not been fulfilled (the “Non-lending Lender”) may notify the Agent, the
Borrower, and all other Lenders of the decision not to lend with the reason therefor; provided that, in the
case where such Individual Loan is not made even though all conditions precedent are fulfilled, the
Non-lending Lender shall not be excused of liability for violation of the Lending Obligation.
In the case where Damages are incurred by the Lender and/or the Agent as a result of the Lender not
being able to extend an Individual Loan, the Borrower shall bear such Damages; provided, however that
this shall not apply in the case where the non-lending of the Individual Loan is attributable to a violation
of the Lending Obligation by the Lender, in which case the Borrower shall be entitled to demand from
such Non-lending Lender compensation for Damages, etc. within the range of reasonable causation in
connection with such violation.
Article 2-4
(Exemption of Lender)
(1)
In the event that it is determined by the Majority Lenders or the Agent that a Loan Impossibility Event
has occurred with respect to any Lender, the Agent shall promptly notify the Borrower and each of the
Lenders in writing.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
11
(2)
(3)
Following the issuance of a notice in accordance with the preceding Paragraph, if the Majority Lenders or
the Agent determine that there has been a cessation of the relevant Loan Impossibility Event, the Agent
shall promptly notify the Borrower and each of the Lenders in writing of such cessation of the Loan
Impossibility Event.
During the period from (and including) the date upon which the Borrower receives a notice pursuant to
Paragraph (1) of this Article until (and including) the date upon which the Borrower receives a notice
pursuant to Paragraph (2) of this Article (the “Loan Impossibility Period”), the affected Lender shall be
excused from its Lending Obligation. In this case, the Borrower shall not be required to pay to such
Lender affected by the Loan Impossibility Event the amount of its Commitment Fee that is calculated by
applying the Commitment Fee Percentage to the total amount of the Unused Commitment Amounts for
each of the days during the Loan Impossibility Period and dividing such total amount by 365 (and
fractions less than one Yen (¥1) shall be rounded down). In the event that a Lender has already received
payment of such Commitment Fee amount, upon the end of the relevant Loan Impossibility Period, the
Lender shall promptly refund such amount by directly depositing funds equivalent to such amount into
the Syndicate Account for the account of the Borrower.
Article 2-5
(Increased Costs and Illegality)
(1)
(2)
An Increased Costs Lender may, by notifying the Borrower in writing through the Agent and attaching a
reasonable cause for the occurrence of the Increased Costs, request the Borrower to bear the Increased
Costs.
In the case where a request from an Increased Costs Lender has been made under the preceding
Paragraph, the Borrower shall consult with the Increased Costs Lender and determine how to respond to
such event. If the Borrower decides to bear the Increased Costs, the Borrower shall notify the Increased
Costs Lender of such decision in writing through the Agent. The Borrower shall pay to the Increased
Costs Lender, on the day that is five (5) Business Days after the day such notice has been received by the
Increased Costs Lender, funds equivalent to such Increased Costs as calculated in accordance with this
Agreement.
(3)
If the execution and performance of this Agreement and any transactions hereunder violate the Laws and
Ordinances binding on any of the Lenders, the relevant Lender shall consult with the Borrower and all
other Lenders, through the Agent, and determine how to respond to such event.
Article 2-6
(Payment of Commitment Fees)
(1)
The Borrower shall pay, on the day that is ten (10) Business Days following the last day of the preceding
Commitment Fee Calculation Period, a Commitment Fee in an amount calculated by applying the
Commitment Fee Percentage to the total amount of the Unused Commitment Amount on each day within
such Commitment Fee Calculation Period (provided that with respect to any day where the Commitment
Amount has been adjusted in accordance with Article 9-7 Paragraph (2) Item (2),
the Unused
Commitment Amount following such adjustment shall be used as the reference) and dividing such total
amount by 365 (and fractions less than one Yen (¥1) shall be rounded down). However, in the event that
the Commitment Period ends before the Commitment Termination Date, with respect to the Commitment
Fee Calculation Period that ended on the last day of the Commitment Period, the Borrower shall pay as
Commitment Fees for such Commitment Fee Calculation Period, an amount calculated by applying the
Commitment Fee Percentage to the total amount of the Unused Commitment Amount on each day
starting from (and including) the Commitment Fee Calculation Period Start Date of such Commitment
Fee Calculation Period until (and including) the last day of the Commitment Period (provided that with
respect to any day where the Commitment Amount has been adjusted in accordance with Article 9-7
Paragraph (2) Item (2), the Unused Commitment Amount following such adjustment shall be used as the
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
12
(2)
reference) and dividing such total amount by 365 (and fractions less than one Yen (¥1) shall be rounded
down), on the day that is two (2) Business Days following the Commitment Fee Calculation Period End
Date with respect to such Commitment Fee Calculation Period as set out in in the table set out in the
section titled “Commitment Fee Calculation Period” in Article 2-1 Paragraph (1) of this Agreement, and
no Commitment Fees shall be payable by the Borrower thereafter. Unless otherwise provided in this
Agreement, Borrower has no right to demand a refund of any Commitment Fees that have been paid to
the Lenders.
In the event a Loan Impossibility Event occurs with respect to any Lender, the Borrower shall not be
required to pay to the affected Lender (the “Loan Impossibility Lender”) the amount of its Commitment
Fee that is calculated by applying the Commitment Fee Percentage to the total amount of the Unused
Commitment Amount on each day within the relevant Loan Impossibility Period (provided that with
respect to any day where the Commitment Amount has been adjusted in accordance with Article 9-7
Paragraph (2) Item (2), the Unused Commitment Amount following such adjustment shall be used as the
reference) and dividing such total amount by 365 (fractions less than one Yen (¥1) shall be rounded
down). In the event that a Lender has already received payment of the relevant Commitment Fee amount,
upon the cessation of the relevant Loan Impossibility Period, the Lender shall promptly refund such
amount by directly depositing such amount into the Syndicate Account for the account of the Borrower.
For the purposes of this Paragraph, “Loan Impossibility Period” means the period from (and including)
the date upon which the relevant Loan Impossibility Event occurs until (and including) the day
immediately before the Loan Impossibility End Date. The Loan Impossibility End Date shall be
determined as set out below:
(i)
Where the Loan Impossibility Lender proposes to the Borrower through the Agent that with
respect to a Drawdown Notice that is subject to the relevant Loan Impossibility Event, it intends to
disburse its Individual Loan at a later date, the Borrower gives its consent to such proposal, and
the Individual Loan is thereafter disbursed, the date of the disbursement of such Individual Loan;
(ii) Where a proposal pursuant to the preceding Item is made but consent is withheld by the Borrower,
the date of the Borrower’s refusal. In the event that a proposal is made in accordance with the
preceding Item and the Agent does not receive a notice of consent from the Borrower within three
(3) Business Days thereafter, consent to such proposal shall be deemed to have been withheld by
the Borrower; and
(iii)
In any other circumstance not covered by the preceding two Items, on such date as agreed to
among the Borrower, the Loan Impossibility Lender and the Agent upon mutual consultation.
With respect
to Item (ii), for purposes of determining Commitment Fees payable to the Loan
Impossibility Lender after (and including) the Loan Impossibility End Date, the unutilized Commitment
shall be calculated as if the Individual Loan that was to be made under the Drawdown Notice affected by
the Loan Impossibility Event had been disbursed.
Article 2-7
(Optional Deferral of Interest Payment)
(1) With respect to each Interest Payment Date, the Borrower may, at its discretion, by giving a written notice
to the Agent and all Lenders by (and including) the day ten (10) Business Days before such Interest
Payment Date, defer all or part of the interest under this Agreement to be paid on such Interest Payment
Date (the “Optional Deferred Interest Payment Date”) (such deferral of interest shall be hereinafter
referred to as an “Optional Deferral,” and any amount of interest under this Agreement so deferred due to
an Optional Deferral shall be hereinafter referred to as an “Optional Deferred Payment Amount”)
provided that in the case of any Optional Deferral with respect to a part of the interest due on the
applicable Optional Deferred Interest Payment Date by the Borrower pursuant hereto, the amount of such
Optional Deferral Payment Amount shall be applied pro rata to each Lender in accordance with its
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
13
(2)
applicable Participation Ratio. Any Optional Deferred Payment Amount shall bear interest at the rate
equivalent to the Applicable Interest Rate for the period from (and including) the Optional Deferred
Interest Payment Date to (and including) the date on which the Optional Deferred Payment Amount is
paid in full (the “Additional Interest”; and the Optional Deferred Payment Amount and the Additional
Interest thereon shall be hereinafter collectively referred to as the “Optional Outstanding Payment
Amount”) (For the avoidance of doubt, the amount of such Additional Interest in respect of such Optional
Deferred Payment shall not bear interest itself.). The calculation method for such Additional Interest shall
be on a per diem basis, inclusive of the first day and exclusive of the last day, wherein divisions shall be
done at the end of the calculation, and fractions less than one Yen (¥1) shall be rounded down.
Notwithstanding the provisions of Paragraph (1) of this Article, if any of the following events (a
“Non-Preferred Stock Mandatory Payment Event”) occurs during a Mandatory Payment Reference
Period, the Borrower shall pay, on the Interest Payment Date immediately following the end of the
Mandatory Payment Reference Period (referred to in this Article as the “Mandatory Payment Date”) or
the Interest Payment Date immediately following the Mandatory Payment Date (referred to in this Article
as the “Mandatory Payment Deadline Date”), the entire balance of the Optional Outstanding Payment
Amount as of such Mandatory Payment Date, provided, however, that with respect to any such Optional
Outstanding Payment Amount as of the relevant Mandatory Payment Date that is paid on the applicable
Mandatory Payment Deadline Date pursuant to this Article, no Additional Interest shall be accrued and
payable with respect to the period from (and including) the applicable Mandatory Payment Date to (and
including) the applicable Mandatory Payment Deadline Date:
(i)
(ii)
if the Borrower resolves to pay or makes payment of dividends from surplus (including interim
dividends set forth in Article 454, Paragraph 5 of the Companies Act and less than full dividends)
on the Non-Preferred Stock of the Borrower; or
if the Borrower repurchases or acquires any Non-Preferred Stock of the Borrower (excluding the
case where any of the below items apply):
(a) Article 155, Items 8 through 13 of the Companies Act;
(b)
(c)
(d)
(e)
(f)
purchase demand by a shareholder with less than 1 unit of stock under Article 192,
Paragraph 1 of the Companies Act;
purchase demand by an opposing shareholder under Article 469, Paragraph 1; Article 785,
Paragraph 1; Article 797, Paragraph 1; and/or Article 806, Paragraph 1 of the Companies
Act;
purchase demand by an opposing shareholder under Article 116, Paragraph 1 of the
Companies Act;
from subsidiaries pursuant to Article 163 of the Companies Act in response to Article 135,
Paragraph 3 of the Companies Act;
any other acquisition to satisfy the Borrower’s purchase obligations pursuant to the Laws
and Ordinances, etc.;
(g) with respect to any acquisition under Articles 156, 160 and/or 165 of the Companies Act,
where such stock was acquired with the intent of being disposed for a stock ownership plan
or other stock compensation or in exchange for the exercise of share warrants. The
Borrower, upon the request of any Lender and/or the Agent, shall provide documents, etc.
that reasonably provide evidence of such intent with respect to the relevant acquisition of
the Non-Preferred Stock of the Borrower, and deliver such evidence to the relevant Lender
and/or the Agent.
(3)
Notwithstanding the provisions of Paragraph (1) of this Article, if dividends or interest have been paid in
respect of the Equivalent Securities (excluding, however, any such payments made in connection with the
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
14
repayment of any Equivalent Securities) during the period from (and including) an Optional Deferred
Interest Payment Date to (and excluding) the Interest Payment Date immediately following such Optional
Deferred Interest Payment Date (such event shall be hereinafter referred to as the “Equivalent Securities
Mandatory Payment Event”),
the Borrower shall pay, on the Interest Payment Date immediately
following such Optional Deferred Interest Payment Date (referred to in this Article as the “Equivalent
Securities Mandatory Interest Payment Date”), the entire Optional Outstanding Payment Amount as of
the Equivalent Securities Mandatory Interest Payment Date related to such Optional Deferred Interest
Payment Date.
Notwithstanding the provisions of Paragraph (1) of this Article, if the interest payable under this
Agreement on an Interest Payment Date immediately following an Optional Deferred Interest Payment
Date has not been made into an Optional Deferral, the Borrower shall pay the entire balance of any
Optional Deferred Payment Amount on such Interest Payment Date.
[Intentionally Omitted].
[Intentionally Omitted].
If the Borrower pays only a part of the Optional Outstanding Payment Amount, such payment shall be
applied to the Optional Outstanding Payment Amount in sequential order, from those with the earliest
Optional Deferred Interest Payment Date to the latest, and if the Optional Deferred Interest Payment
Dates fall on the same day, then firstly to Additional Interest and secondly to the Optional Deferred
Payment Amount. Upon such application, if the amount available for application falls short of the amount
of any Additional Interest or Optional Deferred Payment Amount, such amount shall be applied to such
item, in proportion to the amount of each payment obligation owed by the Borrower regarding such item,
which have become due and payable.
Notwithstanding the provisions of Paragraphs (1) through (7) of this Article, the Borrower shall pay the
entire Optional Outstanding Payment Amount on the Maturity Date.
If the Borrower makes payment as provided for in this Article, the Borrower shall give to the Agent and
all Lenders a prior written notice of the amount desired for payment and the desired payment date, by ten
(10) Business Days prior to the desired payment date. Such notice shall be irrevocable by the Borrower.
(4)
(5)
(6)
(7)
(8)
(9)
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
15
Chapter 3
Representations and Warranties of the Borrower
Article 3-1
(Representations and Warranties of the Borrower)
The Borrower represents and warrants to the Lenders and the Agent that each of the following matters is
true and correct as of the execution date of this Agreement and the Drawdown Date of Individual Loans
and if it is found out that such representations and warranties are not true on any later date, then
immediately notify the Lenders and the Agent of such effect in writing and bear any and all Damages
within the range of reasonable causation incurred by the Lenders or the Agent arising therefrom:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
The Borrower is a stock company duly incorporated and validly existing under the laws of Japan;
The Borrower does not fall under any of Items (a) through (i) of Paragraph (1) of Attachment 4
and has no relationship set forth in any of Items (a) through (e) of Paragraph (2) of Attachment 4.
The Borrower has all necessary complete legal power and right to execute and perform this
Agreement, and the execution and performance of this Agreement, and the transactions hereunder,
are within the corporate purposes of the Borrower, and the Borrower has duly completed all
procedures necessary therefor under the Laws and Ordinances, the Articles of Incorporation and
other internal company rules of the Borrower;
The execution and performance of this Agreement, and the transactions hereunder, do not violate
(a) any Laws and Ordinances which bind the Borrower, (b) the Articles of Incorporation and other
internal company rules of the Borrower, and (c) any third-party contract to which the Borrower is
a party or which binds the Borrower, or its assets;
The person who signed or attached his/her name and seal to this Agreement as the representative
of the Borrower is authorized to sign or attach his/her name and seal to this Agreement as the
representative of the Borrower by all procedures necessary pursuant to the Laws and Ordinances,
the Articles of Incorporation or other internal company rules of the Borrower;
Each of this Agreement and the SSTL constitutes legal, valid and binding obligations of the
Borrower, and is enforceable against it in accordance with its terms, and the Borrower has not
asserted to the contrary in writing;
The financial statements (consolidated and non-consolidated) contained in the annual reports,
semi-annual reports, quarterly reports, extraordinary reports, amended reports, etc. set forth in the
Financial Instruments and Exchange Act (each of the above documents shall be referred to as the
“Reports”) prepared by the Borrower are duly prepared in accordance with generally accepted
accounting principles and with the opinion of appropriateness after the audit (including the
quarterly review) of the audit corporation;
(viii) From the last day of the business year ending June 2018, no material change, which might cause a
deterioration of the business, assets, or financial condition of the Borrower as described in the
Reports of that business year and which may materially affect the performance of the obligations
under this Agreement, has occurred;
(ix)
As of the execution date of this Agreement, the Borrower is a company which is required to
submit annual securities reports (yuuka shouken houkoku teishutsu kaisha), and is a corporation
that
is required to obtain audit certificates as prescribed by the Financial Instruments and
Exchange Act (Kin’yuu shouhin torihiki hou) of Japan, and which falls within any of the items set
out in Article 2, Paragraph 1 of the Act on Specified Commitment Line Contract (Tokutei
yuushiwaku keiyaku ni kansuru houritsu).
(x)
No lawsuit, arbitration, administrative procedure, or any other dispute has commenced or is
actually and specifically threatened with respect to the Borrower which will or may materially
cause adverse effects on the performance of its obligations under this Agreement; and
(xi)
No Subordination Event has arisen, or is likely to arise.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
16
Chapter 4
Obligations of the Borrower
Article 4-1
(Obligations of the Borrower)
(1)
The Borrower covenants to perform, at its expense and responsibility, the matters described in each of the
following Items on and after the date of this Agreement, until the later of the termination of this
Agreement or when the Borrower performs its obligations under this Agreement to the Lenders and the
Agents in full:
(i)
(ii)
On the occurrence of any Subordination Event, Tax Event, Equity Credit Change Event,
Non-Preferred Stock Mandatory Payment Event or Equivalent Securities Mandatory Payment
Event, or the likelihood thereof, it shall immediately inform the fact thereof to the Agent and all
Lenders;
In the case where the Borrower prepares Reports, it shall submit a copy of such Reports together
with the audit report (including the quarterly review report) to the Agent and all Lenders promptly
after filing with the Director General of the competent finance bureau; in the case where electronic
disclosure of Reports is made on the electronic disclosure system for disclosure documents such
as securities reports, etc. under the Financial Instruments and Exchange Act (EDINET: http://
info.edinet.go.jp/), the above disclosure will be deemed fulfilled at the time of such disclosure,
without any notice to the Agent and all Lenders or other action required; provided that, in the case
where any Lender requires a copy of Reports, a copy shall be provided to the relevant Lender;
(iii) When based on reasonable cause requested by the Agent or any Lender through the Agent, the
Borrower shall promptly, to the extent reasonably practicable, provide the Agent and all Lenders
with a report regarding the assets, management, and business circumstances of the Borrower, and
its subsidiaries, etc. (meaning a subsidiary and affiliate company as provided in the Regulations
Concerning Terminology, Forms and Method of Preparation of Financial Statements, etc.; for the
definition of “subsidiaries, etc.”, it will not matter if the Reports of the Borrower are prepared in
accordance with such Regulations;
the same shall apply hereinafter), or provide necessary
cooperation for an audit thereof to the extent reasonably practicable and as long as it does not
interfere with the business operations of the Borrower and its subsidiaries;
(iv)
(v)
(vi)
In the case where a material change occurs to the assets, management, and business circumstances
of the Borrower and its subsidiaries, etc., or such change is actually and specifically likely to
occur with the passage of time, or in the case of a lawsuit, arbitration, administrative procedure, or
any other dispute, which will materially affect the performance of the obligations of the Borrower
under this Agreement, has commenced, or is likely to commence, it shall promptly report the fact
thereof to the Agent and all Lenders;
In the case where the representations and warranties of the Borrower made under this Agreement
are discovered to be contrary to fact, it shall promptly report the fact thereof to the Agent and all
Lenders; and
In the case where, in addition to any Equity Credit Change Event, where a rating is newly
assigned or an existing rating is withdrawn, suspended, or deferred, it shall immediately notify the
Agent and all Lenders of the fact thereof.
(vii) Upon completion of the Target Acquisition and drawdown on the SSTL, the Borrower shall
promptly notify the Agent and all the Lenders of the fact thereof (including without exception the
drawdown date, disbursement amount and maturity date, etc.).
(viii)
If the Borrower intends to make any prepayment of the SSTL, the Borrower shall immediately
notify the Agent and all the Lenders of the fact thereof (including without exception the proposed
prepayment date and amount, etc.).
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
17
(ix)
If the Borrower has incurred, prior to the Drawdown Date, any other subordinated debt of the
same priority as the Loan Claims under this Agreement, the Borrower shall immediately notify the
Agent and all the Lenders of the fact thereof (including without exception the date of incurrence,
the amount of incurrence, whether equity, etc.).
The Borrower shall not offer any security to secure all or any part of its obligations under this Agreement
for the benefit of any Lender on and after the date of this Agreement and until the later of the termination
of this Agreement or the Borrower performs all of its obligations under this Agreement to the Lenders and
the Agent in full. For the purpose of this Article, the offer of security shall mean the creation of a security
interest on any asset of the Borrower, or the promise to create a security interest on an asset of the
Borrower, and does not include any lien and reserved right, etc., established as a matter of course under
Laws and Ordinances.
The Borrower shall, on and after the date of execution of this Agreement, and until the later of the
termination of this Agreement or the Borrower performs all of its obligations under this Agreement to
each Lender and the Agent in full, affirmatively covenants to comply with the matters described in the
Items below:
(i)
(ii)
(iii)
(vi)
(v)
The Borrower shall maintain licenses and other similar permits that are necessary to conduct its
main business, and continue to carry out its business in compliance with all Laws and Ordinances,
provided, however, that any such failure to maintain licenses and other similar permits or
non-compliance with Laws and Ordinances that does not materially impact the performance of its
obligations under this Agreement shall not constitute a breach of this provision;
The Borrower shall not change its main business in a manner that would have, or threaten to have,
a non-immaterial adverse effect with respect to the performance of its obligations under this
Agreement;
The Borrower shall not, until the Borrower performs all of its obligations under this Agreement to
Lenders and the Agent in full, subordinate the payment of any of its debts under this Agreement to
the payment of any other Equivalent Securities outstanding as of the Repayment Date thereof, or
at least will treat them pari passu;
The Borrower shall not fall under any of Items (a) through (i) of Paragraph (1) of Attachment 4
and shall not have any relationship set forth in any of Items (a) through (e) of Paragraph (2) of
Attachment 4; and
The Borrower shall not engage in any conduct itself or through a third party falling under any of
Items (a) through (e) of Paragraph (3) of Attachment 4.
The Borrower shall immediately notify all Lenders through the Agent in writing upon receipt of any
attachment
attachment
service
(hozen-sashiosae), or attachment (sashiosae) with respect to the loan claim related to an Individual Loan,
together with a photocopy of such order.
(kari-sashiosae),
preservative
provisional
order
for
an
of
The Borrower, upon obtaining knowledge of any Default or Event of Default (in each case as defined in
the SSTL) under the SSTL, shall immediately notify the Agent and all Lenders of the fact thereof.
(2)
(3)
(4)
(5)
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
18
Chapter 5
No Acceleration
Article 5-1
(No Acceleration)
The Agent or any Lender may, in no event, accelerate any payment by the Borrower with respect to any
of its obligations under this Agreement.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
19
Chapter 6
Termination of the Commitment Period
Article 6-1
(Termination of the Commitment Period)
(1)
If any of the events set out in the Items below occur (a “Commitment Period Termination Event”), the
Lending Obligations of all of the Lenders shall be cancelled, and the Commitment Period with respect to
all of the Lenders shall automatically terminate. Notwithstanding the occurrence of any such event, the
Borrower shall repay principal and interest on outstanding Individual Loans on the applicable Repayment
Date. Until the Borrower performs all of its obligations under this Agreement to each Lender and the
Agent in full, the relevant terms and conditions of this Agreement shall continue to apply and be in effect
with respect to the fulfillment of any outstanding obligations:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
The Commitment Termination Date arrives;
The total number of drawdowns of the loan with respect to each Lender has become one (1);
The total amount of loans that have been drawn down is equivalent to the Total Commitment
Amount;
The Borrower in writing (a) requests the termination of the Commitment Period, (b) gives the
reason for such request, and (c) sets out the proposed Commitment Period termination date and
provides such written request to the Agent and all of the Lenders at least 5 Business Days prior to
the proposed Commitment Period termination date;
This Agreement and/or the SSTL shall cease to be valid and enforceable against the Borrower or
the Borrower shall so assert in writing;
Any advances made pursuant to the SSTL has been accelerated, or the Commitment Termination
Date has occurred without the occurrence of a drawdown of loans under the SSTL; or
(vii) A Subordination Event has occurred.
(2)
[Intentionally Omitted.]
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
20
Chapter 7
Terms and Conditions of Repayment of Obligations
Article 7-1
(Performance of Obligations of the Borrower)
(1)
(2)
(3)
In order to repay its obligations under this Agreement, the Borrower shall transfer the relevant amount to
the Syndicate Account by the Due Time, for those obligations for which a Repayment Date is provided
under this Agreement, or immediately upon the request of the Agent, for those obligations for which the
Repayment Date is not provided under this Agreement. In such case, the obligation of the Borrower to
the Agent or the Lenders shall be deemed to have been performed upon the withdrawal by the Agent of
the relevant amount from the Syndicate Account. The Agent shall make the withdrawal on the
Repayment Date for those obligations for which the Repayment Date is provided under this Agreement,
or promptly after the date of transfer of such amount for those without a provision of the Repayment
Date.
The Borrower grants to the Agent the authority to withdraw amounts from the Syndicate Account in
accordance with the preceding Paragraph, and waives the right to cancel such delegation (the Borrower
shall not need to issue any check or demand for withdrawal in order to make such withdrawal).
Unless otherwise provided for in this Agreement, if a payment of obligations under this Agreement by
the Borrower is made directly to the Lenders without going through the Agent in violation of Paragraph
(1) of this Article, such payment shall not be deemed to constitute a performance of obligations under
this Agreement. In this case, the Lender receiving such payment shall immediately pay the money it
receives to the Agent, and the obligations with respect to such money shall be deemed to have been
performed upon the receipt by the Agent of such money. The Borrower may not perform its obligations
under this Agreement by accord and satisfaction (daibutsu-bensai) unless the Agent and all Lenders give
their prior written consent.
(4)
Payments by the Borrower under this Article shall be applied in the order set forth below (for purposes
of this Agreement, such order shall be referred to as the “Order of Allocation”):
(i)
the expenses the Agent has incurred in place of the Borrower which are to be borne by the
Borrower under this Agreement, and the Agency Fee;
(ii)
the expenses payable to a third party which are to be borne by the Borrower under this Agreement;
(iii) the expenses any Lender has incurred in place of the Borrower which are to be borne by the
Borrower under this Agreement;
(iv) default interest and Break Funding Cost;
(v) Commitment Fees;
(vi) interest on the loans, other than the Optional Deferred Payment Amount and the Additional
Interest;
(vii) the Optional Deferred Payment Amount and the Additional Interest; and
(viii) principal of the loans.
(5)
Upon the application as set forth in the preceding Paragraph, in the case where the amount to be applied
falls short of the amount under any of the Items, with respect to the first Item not fully covered (the
“Deficient Item”), the amount remaining after the application to the Items of the higher order of priority
shall be applied pro rata in proportion to the amount of individual payment obligations owed by
Borrower under the Deficient Item which have become due and payable (provided that Item (vi) shall be
subject to Article 2-7, Paragraph (7)) (such allocation method shall be hereinafter referred to as the
“Deficient Item Allocation Method”).
(6)
Unless required by the Laws and Ordinances, the Borrower shall not deduct Taxes and Public Charges
from the amount of obligations to be paid pursuant to this Agreement. In the case where it is necessary
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
21
to deduct Taxes and Public Charges from the amount payable by the Borrower, the Borrower shall
additionally pay the amount necessary in order for the relevant Lender or the Agent to be able to receive
the amount that it would receive if no Taxes and Public Charges were imposed. In such case, the
Borrower shall, within thirty (30) days from the date of payment by itself, directly send to such Lender
or Agent a certificate of tax payment in relation to withholding taxes issued by the tax authorities or
other competent governmental authorities in Japan.
Article 7-2
(Subordination)
(1)
In the case where, with respect to the Borrower, the liquidation proceedings (including ordinary
liquidation and special liquidation under the Companies Act; the same shall apply hereinafter) have been
commenced and such liquidation proceedings continue, the right to payment of the claims under this
Agreement shall take effect when the conditions precedent set forth below are fulfilled.
(Conditions precedent)
In the liquidation proceedings against the Borrower, the full amount of all claims other than the
Subordinated Claims among the claims held by the Borrower’s creditors who have the rights to receive
payments or repayment before commencement of the distribution of residual assets to the shareholders is
fully paid in accordance with the provisions of the Companies Act or the full amount of the same is
satisfied by any other method.
(2)
In the case where, with respect to the Borrower, commencement of the bankruptcy proceedings has been
decided and such bankruptcy proceedings continue, the right to payment of the claims under this
Agreement shall take effect when the conditions precedent set forth below are fulfilled.
(Conditions precedent)
The full amount of all claims other than the Subordinated Claims among the claims to be added to the
distribution, which are described in the distribution list (if amended, the amended distribution list)
prepared by the bankruptcy trustee for the final distribution in such bankruptcy proceedings is fully paid,
or the full amount of the same is satisfied by any other method (including distribution and statutory
deposit).
(3)
In the case where, with respect to the Borrower, commencement of reorganization proceedings has been
decided and such reorganization proceedings continue, the right to payment of the claims under this
Agreement shall take effect when the conditions precedent set forth below are fulfilled.
(Conditions precedent)
In the reorganization proceedings of the Borrower, the fixed amount of all claims other than the
Subordinated Claims among the claims to be modified, which are described in the reorganization plan at
the time when a decision of approval of the reorganization plan is final and binding, is fully paid, or the
full amount of the same is satisfied by any other method.
(4)
In the case where, with respect to the Borrower, commencement of rehabilitation proceedings has been
decided and the rehabilitation proceedings continue without a decision on simplified rehabilitation or
consensual rehabilitation, the right to payment of the claims under this Agreement shall take effect when
the conditions precedent set forth below are fulfilled.
(Conditions precedent)
In the rehabilitation proceedings of the Borrower, the fixed amount of all the claims other than the
Subordinated Claims among the claims to be modified, which are described in the rehabilitation plan at
the time when a decision of approval of the rehabilitation plan is final and binding, is fully paid, or the
full amount of the same is satisfied by any other method.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
22
(5)
(6)
(7)
(8)
(9)
(10)
(11)
In the case where, with respect to the Borrower, commencement of liquidation proceedings, bankruptcy
proceedings, reorganization proceedings, rehabilitation proceedings or proceedings equivalent thereto is
decided in a foreign country in accordance with laws other than the laws of Japan, the right to payment
of the claims under this Agreement shall procedurally take effect in such proceedings when conditions
corresponding to the conditions precedent set forth in Paragraphs (1) through (4) of this Article are
fulfilled; provided, however, that, in the case where such conditions are not procedurally allowed to be
attached, such right shall take effects without such fulfillment.
In the case where after a Subordination Event, there is a commencement of liquidation proceedings,
rehabilitation proceedings or proceedings
bankruptcy proceedings,
equivalent thereto in a foreign country in accordance with laws other than the laws of Japan, each
Lender, with respect to its Individual Loan shall be deemed to have a payment claim under this
Agreement for an amount calculated in accordance with the items below, and the Borrower shall not be
obligated to pay each Lender beyond such amount:
reorganization proceedings,
(i)
(ii)
the principal amount of its Individual Loans outstanding at the time of the occurrence of the
Subordination Event; and
the Optional Outstanding Payment Amount and Default Interest accrued on the principal amount
of its Individual Loans as of such date and interest on the unpaid balance, if such date falls on the
same date as an Interest Payment Date;
Any amendment to any of the provisions of this Agreement to the disadvantage of the creditors of the
Borrower other than the creditors of the Subordinated Claims is prohibited by any means, and any
agreement on such amendment takes no effect by any means and with respect to any person.
In the case where a Subordination Event has occurred and continues, the right to payment of the claims
under this Agreement shall be the sum derived by multiplying the total amount of cash available for
repayment from all of the Equivalent Securities (where Most Preferred Stock exists, the amount that is
the aggregate of the distributions that would be paid out of the residual assets of the Borrower if all of
the Subordinated Claims were composed of the Most Preferred Stock) by (i) the amount of such
payment claims under this Agreement divided by (ii) the amount of all of the payment claims with
respect to such Equivalent Securities (in the case of the Most Preferred Stock, capped the amount where
if it is anticipated there is no shortfall of cash available for repayment, distributions out of the residual
assets of the Borrower) and such payment claims shall only be exercised within the range of such
amount.
In the case where a Subordination Event has occurred and continues, if, despite the fact that the right to
payment of the claims under this Agreement do not
in accordance with Paragraphs
(1) through (5) of this Article, all or a part of the claims are paid to the Lenders, the payment shall be
invalid and the Lenders shall immediately return such payment to the Borrower through the Agent.
take effect
As long as the right to payment of the claims under this Agreement has not taken effect in accordance
with Paragraphs (1) through (5) of this Article, the right to payment of the claims under this Agreement
may not be used for setoff. However, even in the event that the right to payment of the claims under this
Agreement has taken effect in accordance with Paragraphs (1) through (5) of this Article, the right to
payment of the claims under this Agreement may only be used for setoff within the range for the
exercise of such rights permitted under Paragraph 8 of this Article.
In the case where payments of any obligation under this Agreement are delayed to the Repayment Date
since the right to payment of the claims under this Agreement has not taken effect in accordance with
Paragraphs (1) through (5) of this Article, the Lenders may not claim interest or any other payment in
connection with the delay.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
23
Chapter 8
Terms and Conditions to Prepayment
Article 8-1
(Terms and Conditions to Prepayment)
(1)
(2)
(3)
The Borrower may not make any prepayment of the principal of an Individual Loan, except for (i) in the
case where, after the occurrence of a Subordination Event, the conditions precedent regarding such
Subordination Event have been fulfilled, or (ii) in the cases set forth in Paragraphs (2) through (3) of this
Article.
Except for the case where a Subordination Event has occurred and continues, if the Borrower gives to
the Agent and all Lenders a written notice of its intention to make a prepayment (including the
information regarding (a) the amount desired for the prepayment and (b) the desired date to make the
prepayment; the same shall apply in this Article) by ten (10) Business Days prior to an Available
Prepayment Date, the Borrower may repay to the Lenders all or a part (which shall be one hundred
million Yen (¥100,000,000) or more with an increment of one hundred million Yen (¥100,000,000); the
same shall apply in this Article) of the principal amount of the Individual Loans on the Available
Prepayment Date, as well as the payment of the interest payable on the day on which such prepayment is
to be made. If there is any Optional Outstanding Payment Amount on the day on which such prepayment
is to be made, the Borrower shall pay, with respect to all Optional Outstanding Payment Amount, the
Optional Deferred Payment Amount obtained by multiplying the Optional Outstanding Payment
Amount by the percentage of the aggregate principal amount of the Individual Loans subject to such
prepayment to the aggregate principal amount of the Outstanding Individual Loan Amount, together
with the Additional Interest thereon (if any).
In the case where a Tax Event or an Equity Credit Change Event has occurred, except for the case where
a Subordination Event has occurred and continues, the Borrower may, by giving to the Agent and all
Lenders a written notice of its intention to make a prepayment by thirty (30) Business Days prior to the
desired date to make such prepayment (which shall be a Business Day), repay to the Lenders all or a part
of the principal amount of the Individual Loans, as well as the payment of the interest payable on the
day on which such prepayment is to be made and the Break Funding Cost (if any). If there is any Break
Funding Cost, each Lender shall notify the Agent of the Break Funding Cost by two (2) Business Days
prior to the day on which such prepayment is to be made, and the Agent shall notify the Borrower of the
details of such notice by the Business Day immediately preceding the day on which such prepayment is
to be made. If there is any Optional Outstanding Payment Amount on the day on which such prepayment
is to be made, the Borrower shall pay, with respect to all Optional Outstanding Payment Amount, the
Optional Deferred Payment Amount obtained by multiplying the Optional Outstanding Payment
Amount by the percentage of the aggregate principal amount of the Individual Loans subject to such
prepayment to the aggregate principal amount of the Outstanding Individual Loan Amount, together
with the Additional Interest thereon (if any).
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
24
Chapter 9
Syndication Terms
Article 9-1
(Rights and Obligations of the Lenders)
(1)
(2)
Unless otherwise provided in this Agreement, the obligations of the Lenders under this Agreement shall
be independent, and a Lender shall not be released from its obligations under this Agreement for the
reason that any other Lender fails to perform such obligations. A Lender shall not be responsible for the
failure of any other Lender to perform its obligations under this Agreement.
If a Lender, in breach of its Lending Obligation, fails to extend the Individual Loan on the Requested
Drawdown Date, such Lender shall, upon request by the Borrower, immediately compensate the
Borrower for all Damages incurred by the Borrower as a result of such breach of the Lending
Obligation; provided, however, that the compensation to the Borrower for such Damages shall be
limited to the maximum of the difference between the interest and other expenses that are required or
would be required to be paid when the Borrower separately borrows money as a result of the Individual
Loan not being made on the Requested Drawdown Date and the interest and other expenses that would
have been required to be paid if the Individual Loan were made on the Requested Drawdown Date.
(3)
Unless otherwise provided in this Agreement, the rights of the Lenders under this Agreement are
independent and each Lender may exercise its rights under
this Agreement separately and
independently.
Article 9-2
(Distributions to the Lenders)
(1)
In the case where any amount remains after deducting the amounts under Items (i) and (ii) of the Order
of Allocation from the amount withdrawn from the Syndicate Account
in accordance with this
Agreement, the Agent shall immediately distribute such remaining amount to each Lender in accordance
with the provisions of this Article; provided, however, that if such amount was withdrawn from the
Syndicate Account as Increased Costs to an Increased Costs Lender, notwithstanding the provisions of
this Article, the Agent shall promptly distribute such money to the Increased Costs Lender. If an order
for provisional attachment (kari-sashiosae), preservative attachment (hozen-sashiosae) or attachment
(sashiosae) with respect to the deposit claim in the Syndicate Account is served on the Agent prior to a
withdrawal from the Syndicate Account, the Agent shall have no responsibility to make any withdrawal
from the Syndicate Account or any distribution under this Article. In the case where the Agent makes a
distribution under this Article in spite of such service of an order, absent willful act or gross negligence
on the part of the Agent, the Lenders who received such distribution will return to the Agent the amounts
that were distributed immediately upon the request of the Agent. In the case where the refund of
distribution is made by the Lenders and the Agent returns the money to the Syndicate Account, the
obligations paid by such money by the Borrower shall retroactively become unperformed as of the time
of withdrawal of such money from the Syndicate Account.
(2)
In the case where, prior to a distribution by the Agent to the Lenders in accordance with this Article,
(i) an order for provisional attachment (kari-sashiosae), preservative attachment (hozen-sashiosae) or
attachment (sashiosae) with respect to a loan claim related to the Individual Loans is served on the
Borrower, or (ii) a loan claim related to the Individual Loans is assigned, the rights and obligations of
the Borrower, the Agent and the Lenders shall be subject to the following provisions:
(a)
(I)
In the case where the Agent completes the distribution to the Lenders pursuant to this Article
before receiving a notice from the Borrower that an order for provisional attachment (kari-
sashiosae), preservative attachment (hozen-sashiosae) or attachment (sashiosae) with respect
to a loan claim was served on the Agent:
In this case, even if the creditor obtaining an order for provisional attachment (kari-
sashiosae), preservative attachment
the
(hozen-sashiosae), or attachment
(sashiosae),
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
25
Borrower, the Lenders or any other third party suffers any Damages as a result of such
distribution by the Agent and the withdrawal from the Syndicate Account prior to such
distribution, the Agent shall not be liable in relation thereto, and the relevant Lender with
respect to such loan claim shall deal with the matter at its own cost and liability. The relevant
Lender with respect to such loan claim shall compensate the Agent for any Damages, if any,
incurred by the Agent due to such withdrawal and distribution.
(II)
In the case where the Agent, after the withdrawal of the relevant amount from the Syndicate
Account in accordance with this Agreement and before the completion of a distribution to the
Lenders pursuant to this Article, receives a notice from the Borrower that an order for
(hozen-sashiosae), or
(kari-sashiosae), preservative attachment
provisional attachment
attachment (sashiosae) with respect to the loan claim for which such distribution was made
was served on the Agent:
In this case, (i) with respect to the amount subject to such notice, the Agent may withhold the
distribution pursuant to this Article, and may take other measures in the manner that the
Agent deems reasonable; and (ii) the Agent shall distribute the money withdrawn from the
Syndicate Account other than the money subject to such notice to all Lenders other than the
Lenders subject to such notice. If the creditor obtaining an order for provisional attachment
(kari-sashiosae), preservative attachment (hozen-sashiosae), or attachment (sashiosae), the
Borrower, the Lender or any other third party suffers any Damages as a result of the
distribution and the withdrawal from the Syndicate Account prior to such distribution by the
Agent pursuant to (i) of this Item, the Agent shall not be liable in relation thereto, and the
relevant Lender with respect to such loan claim shall deal with the matter at its own cost and
liability. The relevant Lender with respect to such loan claim shall compensate the Agent for
any Damages, if any, incurred by the Agent due to such withdrawal and distribution.
(III)
In the case where the Agent receives a notice from the Borrower of receipt of a service of an
order for provisional attachment (kari-sashiosae), preservative attachment (hozen-sashiosae),
or attachment (sashiosae) with respect to a loan claim under this Agreement prior to a
withdrawal from the Syndicate Account in accordance with this Agreement:
(kari-sashiosae), preservative attachment
In this case, (i) the Agent shall not withdraw the money subject to such notice from the
Syndicate Account in accordance with this Agreement; provided that, notwithstanding such
notice, in the case where the notice of the receipt of the service of an order for provisional
(hozen-sashiosae), or attachment
attachment
(sashiosae) is not received from the Borrower in accordance with this Agreement by the
Business Day immediately preceding the day of withdrawal by the Agent, the Agent may
make the withdrawal from the Syndicate Account and distribution, and (ii) the Agent shall
distribute the money withdrawn from the Syndicate Account other than the money subject to
such notice to all Lenders other than the Lenders subject to such notice. If the creditor
obtaining an order for provisional attachment (kari-sashiosae), preservative attachment
(hozen-sashiosae), or attachment (sashiosae), the Borrower, the Lender, or any other third
party suffers any Damages as a result of the distribution and the withdrawal from the
Syndicate Account prior to the distribution by the Agent pursuant to the proviso to (i) of this
Item, the Agent shall not be liable in relation thereto, and the relevant Lender with respect to
such loan claim shall deal with the matter at its own cost and liability. The relevant Lender
with respect to such loan claim shall compensate the Agent for any Damages, if any, incurred
by the Agent due to such withdrawal and distribution.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
26
(b)
If the assignor and the assignee, in their joint names, or the Borrower individually, notifies the
Agent of an assignment of the loan claim pursuant to this Agreement:
In this case, the Agent shall, after receiving either of such notice(s), immediately commence all
administrative procedures necessary in order to treat such assignee as the creditor of such loan
claim, and the Agent shall not be held liable, insofar as the Agent treats the previous Lender as the
party in interest until the Agent notifies the Borrower, the assignor, and the assignee that such
procedures have been completed. If the assignee or any other third party suffers any Damages due
to such treatment by the Agent, the Agent shall not be liable in relation thereto, and the assignor of
such loan claim shall deal with the matter at their own cost and liability. The assignor of such loan
claim shall compensate the Agent for any Damages, if any, incurred by the Agent arising out of
this Item.
A distribution by the Agent to the Lenders shall be made in the order of Items (iii) to (viii) of the Order
of Allocation. If a Deficient Item arises in the amounts to be distributed, the allocation and distribution
with respect to such Deficient Item shall be made in accordance with the Deficient Item Allocation
Method.
Notwithstanding the provisions regarding the Order of Allocation and the Deficient Item Allocation
Method, if, after the occurrence of a Subordination Event, the conditions precedent regarding such
Subordination Event was fulfilled and the obligations hereunder were paid, the Agent shall distribute the
amount remaining after deducting the amounts described under Items (i) and (ii) of the Order of
Allocation from the amount paid by the Borrower, in proportion to the amount of the obligations that the
Borrower owes to the Lenders under this Agreement, and the Agent shall bear no liability to the extent
that the Agent makes such distribution. In this case, the allocation shall be made in the order and the
method that the Lender deems appropriate, and the Lender shall promptly report to the Agent contents of
allocation.
If the remittance of money by the Borrower to the Syndicate Account is made later than the Due Time,
the Agent shall be under no obligation to make the distribution under Paragraph (1) of this Article on the
same date. In such case, the Agent shall make such distribution immediately after receiving remittance
from the Borrower, and the Borrower shall bear any Damages, if any, incurred by the Lenders or the
Agent as a result thereof.
Upon request from the Agent, and if such request is based on a reasonable cause, the Lenders receiving
such request shall immediately notify the Agent of the amount (including specifics) of the claims they
hold against the Borrower under this Agreement. In this case, the obligation of the Agent to make a
distribution under Paragraph (1) of this Article shall arise at the time all such notices reach the Agent. In
the case where a Lender delays such notice without reasonable cause, such Lender shall bear all
Damages, if any, incurred by the Lenders or the Agent due to such delay.
The Agent may make a distribution to the Lenders by Temporary Advance. If the Temporary Advance is
not cleared by the Due Time, the Lenders who received the distribution pursuant to this Paragraph shall,
immediately upon the Agent’s request, reimburse to the Agent the amount of such Temporary Advance
that it received. The Lenders shall, immediately upon the Agent’s request, pay to the Agent any
Temporary Advance Costs required in making such Temporary Advance, in proportion to the amount of
Temporary Advance that it received. If a Lender pays such Temporary Advance Costs to the Agent and
if the relevant Temporary Advance is made based on the Borrower’s request, the Borrower shall
compensate such Lender for such Temporary Advance Costs.
(3)
(4)
(5)
(6)
(7)
Article 9-3
(Rights and Obligations of the Agent)
(1)
The Agent shall, on behalf of all Lenders, perform the duties, and exercise the rights, set forth in each
provision of this Agreement entrusted by all Lenders to the Agent (referred to in this Paragraph as the
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
27
(2)
(3)
(4)
(5)
(6)
“Agency Services”), and shall exercise such rights as, in the Agent’s opinion, are ordinarily necessary or
appropriate upon performing the Agency Services. The Agent shall not be liable for any obligation other
than those expressly specified by the provisions of
this Agreement, nor be liable for any
non-performance of obligations by any of the Lenders under this Agreement. The Agent shall be an
agent of the Lenders and, unless otherwise provided, shall not be an agent of the Borrower. The
Borrower shall pay a fee separately agreed with the Agent (the “Agency Fee”) in consideration of the
Agent undertaking the Agency Services under this Agreement.
The Agent may rely upon any communication, instrument and document that has been delivered by an
appropriate person with the signature or the name and seal of such appropriate persons and believed by
the Agent to be true and correct, and may act in reliance upon any written opinion or explanatory letter
of experts reasonably appointed by the Agent within the necessary extent in relation to this Agreement.
The Agent shall perform its duties and exercise its authorities provided for in this Agreement with the
due care of a good manager.
Neither the Agent nor any of its directors, employees or agents shall be liable to the Lenders for any
actions or omissions pursuant to, or in connection with, this Agreement, unless there is a willful
misconduct or gross negligence on its or their part. The Lenders other than the Agent shall jointly and
severally indemnify the Agent for any and all liabilities and Damages incurred by the Agent in the
course of the performance of its duties under this Agreement, to the extent not reimbursed by the
Borrower, and only for the amount outstanding after deducting the portion for which the Agent should
contribute, calculated pursuant to the Participation Ratio of the Lender acting as the Agent (provided,
however, that with respect to any Lender whose Lending Obligation has been cancelled but has
Outstanding Individual Loan Amounts, for purposes of calculating its Participation Ratio for such
indemnity, its Commitment Amount shall be deemed to be equivalent to the principal portion of the
Outstanding Individual Loan Amount for such Lender. In addition, where the Lending Obligation has
been cancelled for all Lenders, prior to the repayment of all amounts due and payable under this
Agreement the Participation Ratio for each Lender for such indemnity shall be equivalent to its pro rata
share of the Total Loan Balance with respect to the principal portion of the Outstanding Individual Loan
Amount with respect to such Lender, and if any of the Lenders cannot perform the indemnity for which
it is liable, the Participation Ratio of the Lender acting as the Agent shall be figured by dividing the
Participation Ratio of the Lender acting as the Agent by the aggregate of the Participation Ratios of the
Lenders excluding such non-indemnifying Lender).
The Agent shall not guarantee the validity of this Agreement, or any matters represented in this
Agreement, and the Lenders shall enter into, and conduct transactions contemplated in, this Agreement
at their sole discretion by conducting investigations as to the creditworthiness of the Borrower and other
necessary matters on the basis of the documents, information and other data as they deem appropriate.
In the case where the Agent is also acting as a Lender, the Agent shall have the same rights and
obligations as other Lenders under this Agreement, irrespective of the Agent’s obligations under this
Agreement. The Agent may engage in commonly accepted banking transactions with the Borrower
outside the scope of this Agreement. The Agent shall not be required to disclose to other Lenders any
information relating to the Borrower obtained through transactions outside the scope of this Agreement,
nor shall the Agent be required to distribute to other Lenders any amount it has received from the
Borrower through transactions with the Borrower outside the scope of this Agreement (any information
that the Agent has received from the Borrower shall be, unless expressly identified as being made
pursuant to this Agreement, deemed obtained in relation to the transactions outside the scope of this
Agreement.)
(7)
In the case where the Agent is also acting as a Lender, in the calculation of amounts to be distributed to
each Lender pursuant to the provisions of this Agreement, the amounts to be distributed to each Lender
other than the Agent shall be determined by discarding any amount less than one Yen (¥1), and the
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
28
amount remaining after deduction of the amounts distributed to other Lenders from the aggregate
distribution amounts shall be the amounts to be distributed to the Lender who is also acting as the Agent.
(8)
(9)
Except for the preceding Paragraph, the handling of fractions less than one Yen (¥1) that are required
under this Agreement shall be made in the manner the Agent deems appropriate.
In the case where the Agent receives any notice from the Borrower which is required to be given to the
Lenders in accordance with this Agreement, the Agent shall immediately inform all Lenders of the details
of such notice, or if the Agent receives any notice from a Lender which is required to be given to the
Borrower or other Lenders in accordance with this Agreement, the Agent shall immediately inform the
Borrower or all Lenders other than the Lender who gave such notice of the details of such notice. The
Agent shall make available for review by the Lenders during the ordinary business hours any documents
obtained from the Borrower and kept by the Agent.
Article 9-4
(Resignation and Dismissal of the Agent)
(1)
The procedures for resignation of the Agent shall be as follows:
(i)
(ii)
(iii)
The Agent may resign from its position by giving a written notice to all Lenders and the
Borrower; provided, however, that such resignation shall not become effective until a successor
Agent is appointed and accepts such appointment.
In the case where the notice is given pursuant to the preceding Item, the Majority Lenders shall
appoint a successor Agent upon obtaining the consent of the Borrower.
In the case where a successor Agent is not appointed by the Majority Lenders within thirty
(30) days from the date the notice under Item (i) above is given, or if the entity appointed by the
Majority Lenders does not agree to assume the position, the Agent in office at that time shall,
upon obtaining consent from the Borrower, appoint a successor Agent in lieu of the Majority
Lenders.
(2)
The procedures for dismissal of the Agent shall be as follows:
(i)
(ii)
The Majority Lenders may dismiss the Agent by giving a written notice thereof to each of the
other Lenders, the Borrower and the Agent; provided, however, that such dismissal shall not
become effective until a successor Agent is appointed and accepts such appointment.
In the case where the notice is given pursuant to the preceding Item, the Majority Lenders shall
appoint a successor Agent upon obtaining the consent from the Borrower.
In the case where the entity appointed as the successor Agent under the preceding two (2) Paragraphs
accepts the appointment, the former Agent shall deliver to the successor Agent all documents and
materials it retained as the Agent under this Agreement, and shall give all the cooperation necessary for
the successor Agent to perform its duties as the Agent set forth under this Agreement.
The successor Agent shall succeed to the rights and obligations of the former Agent under this
Agreement, and the former Agent shall, at the time of assumption of office by the successor Agent, be
released from all of its obligations as the Agent; provided, however, that the provisions of this Agreement
relevant to any actions (including omissions) conducted by the former Agent during the period it was in
office shall remain effective.
In the case where any of the following events occurs, the Agent may resign with the agreement of the
Majority Lenders, notwithstanding the preceding four (4) Paragraphs. In the case where the Agent resigns
under this Paragraph, the resigning Agent shall promptly notify the Borrower and the Lenders, other than
the Lenders who made such agreement, of such resignation and the Borrower shall not make any
objection to such resignation. Further, the Majority Lenders may appoint a successor Agent by mutual
(3)
(4)
(5)
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
29
agreement, and the Borrower shall not make any objection to such appointment (and if the entity
appointed as the successor Agent accepts such appointment,
the provisions of the preceding two
(2) Paragraphs shall apply). Even in the case where the Agent resigns under this Paragraph, the Borrower
shall not be exempted from payment of the accrued Agency Fees.
(i)
(ii)
In the case where there is a petition (including a similar petition filed outside Japan) for
bankruptcy (hasan),
(saiseitetuzuki-kaishi),
commencement of reorganization procedures (koseitetuzuki-kaishi), commencement of special
liquidation (tokubetsu-seisan), or commencement of any other similar legal rearrangement
procedure is filed against the Borrower;
rehabilitation procedures
commencement of
In the case where the Borrower fails to pay the Agency Fee, and if, although the Agent requests
the Borrower to pay the Agency Fee by setting a reasonable period of time, the Borrower fails to
pay the Agency Fee within such period.
(6)
In the case where a successor Agent is not promptly appointed by agreement of the Majority Lenders
when the Agent resigns under the preceding Paragraph, the Majority Lenders and the Agent (provided
that, when the Agent has already resigned, the Majority Lenders) shall, to the extent reasonably required
in order to make it possible for each Lender to act for itself, make necessary or appropriate changes to this
Agreement, including a possible deletion of or amendment to provisions relating to the Agent in this
Agreement.
Article 9-5
(Decisions of Majority Lenders)
(1)
The procedures for seeking decisions of the Majority Lenders shall be as follows:
(i)
(ii)
(iii)
(iv)
When an event requiring the instruction of the Majority Lenders under this Agreement occurs, a
Lender may give a notice to the Agent to request a decision of the Majority Lenders.
The Agent shall, upon receipt of a notice under the preceding Item, immediately give to all
Lenders a notice that it will seek a decision of the Majority Lenders.
Each Lender shall, upon receipt of the notice under the preceding Item, make its decision on the
relevant event and inform the Agent of such decision within a reasonable period designated by the
Agent (in principle, by five (5) Business Days after the receipt of the notice under the preceding
Item).
If a decision of the Majority Lenders is made pursuant to the preceding three Items, the Agent
shall immediately notify the Borrower and all Lenders of such decision as the instruction by the
Majority Lenders.
(2)
In addition to the preceding Paragraph, in the case where the Agent itself decides that an event which
requires a decision of the Majority Lenders has occurred, the Agent may give all Lenders a notice to seek
such decision. The procedures after giving such notice shall follow the provisions of Items (iii) and (iv) of
the preceding Paragraph.
Article 9-6
(Collection from a Third Party)
Without the prior written consent of the Agent and all of the Lenders, no third party other than the
Borrower shall be entitled to repay the obligations of the Borrower under this Agreement.
Article 9-7
(Assignment of Position)
(1)
The Borrower shall not assign to any third party its position, rights or obligations under this Agreement
without the prior written consent of all Lenders and the Agent.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
30
(2)
Prior to the end of the Commitment Period, a Lender may assign to any third party its position under this
Agreement, and all or any part of its rights and obligations associated therewith, only when the Borrower
and the Agent give prior written consent thereto and all requirements described in each Item below are
satisfied (provided, however, that this provision shall not apply to the assignment of loan claims
otherwise provided in this Agreement. Hereafter, the Lender making the relevant assignment shall be
referred to as the “Position Assignor” and the Lender accepting the relevant assignment shall be referred
to as the “Position Assignee”.) Upon the relevant assignment taking effect, the Agent shall provide notice
thereof to all of the Lenders. In the case where the Agent incurs any Damages in relation to the perfection
relating to a consent under Item (i) below, the Position Assignor and the Position Assignee shall bear
them.
(i)
In the case where the Position Assignor owns loan claims, the consent of the Borrower hereunder
shall be deemed to include consent to the assignment of such loan claims, and, promptly following
the date of assignment, certification of the date thereof shall be obtained.
(ii) With respect to a partial assignment of a position under this Agreement and the rights and
obligations associated therewith, following the date of assignment the Position Assignor and the
Position Assignee shall both become Lenders under the Agreement and bound to the terms and
conditions thereof, and the Commitment Amount of the Position Assignor following the
assignment (hereafter for the purposes of this provision,
the “Pre-Assignment Commitment
Amount”) shall only be reduced by such amount as separately agreed between the Position
Assignor and Position Assignee (hereafter for the purposes of this provision, the “Reduction
Amount”), and a Commitment Amount in the same amount as the Reduction Amount (provided,
however,
if the Position Assignee is already an existing Lender prior to the relevant
assignment, the Position Assignee’s Commitment Amount shall be the amount of its Commitment
Amount prior to the assignment plus the Reduction Amount), and the principal, Default Interest
and any other amount for which the Borrower bears a payment obligation relating to the assigned
loan claims prior to the assignment, pro rata to the percentage derived by dividing the Reduction
Amount by the Pre-Assignment Commitment Amount (hereafter for the purposes of this
provision, the “Reduction Ratio”) and the portion of loan claims derived by application of the
Reduction Ratio shall be assigned to the Position Assignee.
that
(iii)
The Position Assignee shall be a qualified institutional investor as set forth in Article 2, Paragraph 3,
Item 1 of the Financial Instruments and Exchange Act and Article 10, Paragraph 1 of the Cabinet
Office Ordinance on Definitions under Article 2 of the Financial Instruments and Exchange Act and
is not a money lending business operator as set forth in the Money Lending Business Act. In the case
of any acceleration with respect to the Borrower, the Position Assignee shall also be a legal entity
resident in Japan.
(iv) With respect to a partial assignment of a position under this Agreement and the rights and
obligations associated therewith, the (i) Reduction Amount and (ii) the amount equivalent to the
Pre-Assignment Commitment Amount minus the Reduction Amount will each be no less than one
hundred million Yen (¥100,000,000).
(v)
No withholding tax or other taxes arise from such assignment, and there is no increase in the
amount of the Borrower interest expense, or any other payment amount, payable to the Position
Assignee.
(3)
All expenses arising from an assignment under the preceding Paragraph (2) shall be borne by the Position
Assignor and/or Position Assignee. The Increased Costs provision of this Agreement shall apply with
respect to any Increased Costs incurred after the assignment. The Position Assignor shall, promptly upon
such assignment, pay to the Agent five hundred thousand Yen (¥500,000) for each Position Assignee and
for each Individual Loan, together with the consumption tax thereon, in consideration of the procedures,
etc., for such assignment.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
31
Article 9-8
(Assignment of Loan Claim)
(1)
After the end of the Commitment Period, unless otherwise provided in this Agreement, a Lender may
assign its loan claims when all requirements described in each Item below are satisfied (with respect to
assignment of loan claims by a Lender during the Commitment Period, the provisions of Article 9-7 shall
apply). The assignor and the assignee shall, promptly after the date of assignment, perfect the assignment
against the third parties and the obligor. In this case, the assignor and assignee, in their joint names, and
the Borrower individually, shall promptly notify the Agent of the fact that such assignment was made,
and in the case where the Agent incurs any Damages in relation to the perfection, the assignor and the
assignee shall bear them. In the case where an assignment of loan claims is made pursuant to this
Paragraph, any and all rights relating to the assigned loan claims among the rights of the assignor under
this Agreement shall transfer to the assignee, and any and all obligations relating to the assigned loan
claims among the obligations of the assignor under this Agreement shall be borne by such assignee. The
Borrower consents in advance to the transfer of the rights to, and bearing of the obligations by, the
assignee. In this case, the assignee shall be treated as a Lender in connection with the application of the
provisions of this Agreement relating to the loan claims so assigned.
(i)
(ii)
(iii)
(iv)
The assignee shall be bound by the provisions in connection with the loan claims under this
Agreement relating to the loan claims so assigned (an assignee under this Paragraph shall not bear
Loan Obligations).
The assignee is a qualified institutional investor as set forth in Article 2, Paragraph 3, Item 1 of the
Financial Instruments and Exchange Act and Article 10, Paragraph 1 of the Cabinet Office
Ordinance on Definitions under Article 2 of the Financial Instruments and Exchange Act, and a
legal entity resident in Japan.
In the case where the assigned loan claim will be divided, the amount after division will not be
less than one hundred million Yen (¥100,000,000).
No withholding tax or other taxes arise from such assignment, and there is no increase in the
amount of the Borrower interest expense, or any other payment amount, payable to the assignee.
(3)
All expenses arising from the assignment under the preceding Paragraph shall be borne by the assignor
and/or assignee. The Increased Costs provision of this Agreement shall apply with respect to any
Increased Costs incurred after the assignment. The assignor shall, promptly upon such assignment, pay to
the Agent five hundred thousand Yen (¥500,000) for each assignee and for each Individual Loan, together
with the consumption tax thereon, in consideration of the procedures, etc., for such assignment.
Article 9-9
(Miscellaneous)
(1)
Disclosure of Information
The Borrower shall not object to the disclosure of the information in each of the following Items. In this
Paragraph, the information with regard to this Agreement shall mean any information regarding the credit
of the Borrower that has been obtained in connection with this Agreement, any information regarding the
contents of this Agreement and other information incidental thereto, and any information regarding the
contents of the loan claims subject to the transaction and other information incidental thereto, and for the
purpose of Item (ii) below, shall not include any information regarding the credit of the Borrower that has
been obtained in connection with any agreement other than this Agreement:
(i)
In the case where a notice of non-lending has been given by a Non-lending Lender, or if any of the
Subordination Events has occurred, or if a decision of the Majority Lenders has been required, the
Agent and the Lenders may disclose with each other any information with regard to the Borrower
and transactions with the Borrower, which either party has obtained through this Agreement or an
agreement other than this Agreement, to the extent reasonably required;
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
32
(ii)
(iii)
Upon the assignment of loan claims, the execution of a guaranty or debt assumption (including
physical guaranty) without delegation from the Borrower for an obligation borne by the Borrower
under this Agreement, or the sale of a loan participation of a loan claim under this Agreement, a
Lender may disclose any information with regard to this Agreement to an assignee (including a
Position Assignee), the guarantor, successor to debt, purchaser of a loan participation, and any
person considering such assignment, guaranty, debt assumption, or purchase of a loan
participation (including an intermediary of such transaction), on the condition that the Lender
imposes the confidentiality obligations on the other party.
A Lender may disclose information with regard to this Agreement, to the extent reasonably
required, upon an order, direction, request, or the like made pursuant to the Laws and Ordinances
or by administrative agencies, judicial agencies or other relevant authorities in Japan and foreign
countries, central banks, or self-regulatory agencies, or to an attorney, judicial scrivener, certified
public accountant, accounting firm, tax accountant, rating agency, or any other expert who needs
to receive the disclosure of the information in relation to his/her works. A Lender may also
disclose the information with regard to this Agreement to its parent company, subsidiary or
affiliate to the extent necessary and appropriate for internal control purposes.
(2)
Default Interest
In the case where the Borrower delays the performance of an obligation under this Agreement to a Lender
or the Agent, the Borrower shall, immediately upon the request of the Agent, for the period from (and
including) the day that the delinquent obligation (referred to in this Paragraph as the “Delinquent
Obligation”) should have been performed (referred to in this Paragraph as the “Due Date”) to (and
including) the day on which the Delinquent Obligation is performed in full, pay default interest on the
amount of the Delinquent Obligation at the rate of fourteen percent (14%) per annum, in accordance with
the provisions of this Agreement. The calculation method for such default interest shall be on a per diem
basis, inclusive of the first day and exclusive of the last day, wherein divisions shall be done at the end of
the calculation, and fractions less than one Yen (¥1) shall be rounded down; provided, however, that the
Borrower shall not be required to pay default interest if (i) the delay of performance is caused by a
clerical or technical error and (ii) the Delinquent Obligation is performed in full within one (1) Business
Day after the Due Date.
(3)
Expenses and Taxes and Public Charges
(i)
(ii)
(iii)
All reasonable expenses (including reasonable attorneys’ fees) arising from the preparation of this
Agreement and documents relating hereto and their amendment and revision, and all reasonable
expenses (including reasonable attorneys fees) of the Lenders and the Agent incurred to ensure
and enforce rights under this Agreement or in performing obligations, shall be borne, within
reasonable limits, by the Borrower, as long as not in violation of Laws and Ordinances, and in the
case where the Lenders or the Agent bear any such on behalf of the Borrower, the Borrower shall,
immediately upon the request of the Agent, pay such amount in accordance with the provisions of
this Agreement.
Revenue stamp tax and other similar Taxes and Public Charges arising in connection with the
preparation, amendment, implementation, etc., of this Agreement and documents relating hereto
shall all be borne by the Borrower, and in the case where the Lenders or the Agent bear any such
on behalf of the Borrower, the Borrower shall, immediately upon the request of the Agent, pay
such amount in accordance with the provisions of this Agreement.
Any Lender that does not have its head office in Japan shall, promptly after the date of execution
of this Agreement, obtain the certificate of exemption from withholding tax for a foreign entity or
non-resident from the competent tax authority, and submit a copy of such certificate to the
Borrower through the Agent. Any Lender for which the expiration date of such certificate of tax
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
33
exemption will fall during the period from the date of execution of this Agreement until its
termination, and to the date of the receipt of repayment in regard to all Outstanding Individual
Loan Amount, shall in the same way submit a valid certificate of exemption promptly after the
expiration of such period. In the event that the Agent incurs any Damages as a result of a certain
Lender not fulfilling the obligations under this Item, such Lender shall bear such Damages.
(iv)
The provisions of the immediately preceding Item shall apply to any Position Assignee and
assignee in the case of an assignment of a position or loan claims under this Agreement.
(4)
Amendments
This Agreement shall not be amended except with the written agreement of the Borrower, all Lenders and
the Agent; provided, however, that the changes set forth in Article 9-4, Paragraph (6) shall be subject to
the procedures set forth in such Paragraph.
(5)
Burden of Risk, Exemptions, and Compensation and Indemnity
(i)
(ii)
If any documents furnished by the Borrower to the Agent or a Lender are lost, destroyed or
damaged by an accident, natural disaster, or other unavoidable cause, the Borrower shall, upon
consultation with the Agent, perform its obligations under this Agreement based on the books,
vouchers, and other records (limited to those of a reasonable nature) of the Agent or the relevant
Lender. The Borrower shall, upon request of the Agent or a Lender through the Agent, forthwith
prepare substitute documents and furnish them to the Agent or the relevant Lender through the
Agent.
If a Lender or the Agent performs a transaction after comparing, with due care, the seal of the
representative and the agent of the Borrower used for the transaction in relation to this Agreement
with the seal reported by the Borrower in advance, and finding no discrepancy, the Borrower shall
bear any Damages, if any, arising as a result of any forgery, alteration, theft, or other accident to
such seal.
(iii)
The Borrower shall bear any Damages arising with respect to a Lender or the Agent as a result of
a breach of this Agreement by the Borrower.
(6)
Severability
Even if any part of the provisions of this Agreement becomes null, illegal, or unenforceable, the validity,
legality and enforceability of all other provisions shall in no way be prejudiced or affected.
(7)
Calculations
Unless otherwise expressly provided, in any calculation under this Agreement, the actual number of days
of a period shall be counted inclusive of the first and the last day of the period, the calculation shall be
made on a per diem basis, the division shall be done at the end of the calculation, and fractions less than
one Yen (¥1) shall be rounded down.
(8)
Preparation of Notarial Deed
The Borrower shall, at any time upon the request of the Agent or Majority Lenders, take the necessary
procedures to entrust a notary public to execute a notarial deed acknowledging the obligations under this
Agreement and agreeing to compulsory execution with regard thereto.
(9)
Continuation of Rights
The fact of non-exercise of all or any rights under this Agreement by the Agent and the Lenders or a
delay in the time of such exercise, shall, in no event, be interpreted as an abandonment of such right by
the Agent and the Lenders or a waiver or reduction of the obligations of the Borrower, and shall not have
any effect on the rights or obligations of the Agent and the Lenders.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
34
(10) Non-applicability of Agreement on Banking Transactions
The agreement on banking transactions (ginko-torihiki-yakujo-sho) or other similar agreement (if any)
separately submitted to a Lender by the Borrower or entered into between the Borrower and a Lender
shall not apply to this Agreement and the transactions contemplated in this Agreement.
(11) Governing Law and Jurisdiction
This Agreement shall be governed by the laws of Japan, and the Tokyo District Court shall have agreed
non-exclusive jurisdiction over any disputes arising in connection with this Agreement.
(12)
Language
This Agreement shall be prepared in the Japanese language and the Japanese language version shall be
the original.
(13) Matters for Discussion
Any matters not provided for in this Agreement, or in the case of any doubt among the parties with
respect to the interpretation of this Agreement, the Borrower and the Lenders shall consult through the
Agent and shall determine the response therefor.
In witness of the above, this Agreement has been prepared in one (1) original, and upon affixing names and seals
of the representatives or agents of the Borrower, the Agent shall keep it for itself, the Lenders and the Borrower.
Each of the Borrower and the Lenders shall receive a copy with certification of custody of the original.
October 26, 2018
[revenue stamp six hundred thousand Yen (¥600,000)]
Borrower: TAKEDA PHARMACEUTICAL COMPANY
LIMITED
_____________________________ [Seal]
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
35
Agent: Sumitomo Mitsui Banking Corporation
[Seal]
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
36
Lender: Sumitomo Mitsui Banking Corporation
[Seal]
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
37
Lender: MUFG Bank, Ltd.
[Seal]
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
38
Lender: Mizuho Bank, Ltd.
[Seal]
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
39
Lender: The Norinchukin Bank
[Seal]
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
40
Lender: Sumitomo Mitsui Trust Bank, Limited
[Seal]
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
41
CONTACT DETAILS OF PARTIES
INITIAL COMMITMENT AMOUNTS OF LENDERS
AND
METHOD OF NOTICES
Attachment 1
1.
Borrower
Borrower and Department
TAKEDA PHARMACEUTICAL
COMPANY LIMITED
Finance/Financial Management/
Financial Planning Dept.
2.
Agent
Address
Tel/Fax
2-2-1, Nihonbashi Honcho, Chuo-ku, Tokyo 103-8668 03-3279-2284
03-3278-2198
Agent and Department
Address
13-6, Nihombashi Kodenma-cho, Chuo-ku,
Tokyo 103-0001
Tel/Fax
03-5640-6688
03-5695-5214
Sumitomo Mitsui Banking
Corporation
Inter-Market Settlement
Department, Syndication Group
3.
Lenders
Lender and
Department
Sumitomo Mitsui Banking
Corporation, Head Office
Department 8
MUFG Bank, Ltd., Corporate
Banking Group No. 2,
Corporate Banking Division
No. 5
Mizuho Bank, Ltd., Corporate
Banking Department No. 3
The Norinchukin Bank
Food & Agriculture Banking
Business, Corporate Business
Div. I
Sumitomo Mitsui Trust Bank,
Limited
Head Office Corporate
Division 3
Initial
Commitment
Amount
Address
Tel/Fax
150,000,000,000 Yen
1-1-2, Marunouchi,
Chiyoda-ku, Tokyo 100-0005
03-4333-3801
03-4333-9667
150,000,000,000 Yen
2-7-1, Marunouchi,
Chiyoda-ku, Tokyo 100-8388
03-3240-8299
03-3240-2360
100,000,000,000 Yen
50,000,000,000 Yen
1-5-5. Otemachi, Chiyoda-ku,
Tokyo 100-8176
1-13-2, Yurakucho,
Chiyoda-ku, Tokyo 100-8420
03-6734-5754
03-3214-0628
050-3853-2163
03-3218-5115
50,000,000,000 Yen
1-4-1, Marunouchi,
Chiyoda-ku, Tokyo 100-8233
03-6256-5705
03-6256-5709
Total
500,000,000,000 Yen
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
42
4.
(1)
(2)
5.
(1)
(2)
Methods of Notice
Notices under this Agreement shall all be in writing, shall each clearly state that it is being made under
this Agreement, and shall be made by one of the methods (i) to (iii) set out below to the address reported
under this Agreement by the intended recipient. Each party to this Agreement shall be able to change its
address by a notice of change of address to the Agent.
(i)
(ii)
(iii)
direct hand delivery
registered mail or courier service
fax transmission (provided that, in the case of the method in Item (iii), for the notices listed below,
the original shall be sent afterwards to the counterparty by either of the methods (i) or (ii))
(a)
(b)
(c)
Receipt
Notice to be given by the Borrower to the Agent in regard to receipt of service of an order
for provisional attachment (kari-sashiosae), preservative attachment (hozen-sashiosae), or
attachment (sashiosae) of a loan claim.
Report of seal or signature on the stipulated form of the Agent and report of change of the
Items reported to the Agent.
(d)
Any other notice for which the recipient requests the original on a reasonable ground
A notice under the preceding Item shall be effective, in the case of fax transmission, upon receipt, and for
other methods, at the time of actual receipt.
Change to Reported Matters
In the case of a change in the trade name, representative, agent, signature, seal, location, or other matter
reported to the Agent, of a Lender and the Borrower, a written notice shall be promptly given to the
Agent.
In the case where a notice under this Agreement is delayed or does not arrive as a result of a failure to
report under the preceding Item, it shall be deemed to have arrived at the time it could be expected to
have arrived.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
43
PRINCIPAL PAYMENT SCHEDULE, INTEREST PAYMENT DATE SCHEDULE
Attachment 2
1. Principal Payment Schedule for Individual Loans
Principal Payment Date
Principal Payment Amount
60th anniversary of the Drawdown Date
(Maturity Date)
Initial loan drawdown amount(*)
(*) The initial loan drawdown amount is the total amount of the Individual Loan disbursed by each of the Lenders
under the Drawdown Notice relating to such loans.
The allocation of payment amounts to each Lender on each Principal Payment Date is as set out below.
Maturity Date
Each Lender excluding Sumitomo
Mitsui Banking Corporation
For each Lender, the entire principal portion of its Outstanding Individual
Loan Amount
Sumitomo Mitsui Banking
Corporation
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
44
To:
Sumitomo Mitsui Banking Corporation
Inter-Market Settlement Department
[ADDRESS]
[NAME]
DRAWDOWN NOTICE
Attachment 3
[DATE]
[Registered Seal]
We refer to the Subordinated Syndicated Loan Agreement dated October 26, 2018 entered into by and between
the Borrower and, inter alia, Sumitomo Mitsui Banking Corporation as the Agent (hereafter the “Agreement”.
Defined terms used herein but not otherwise defined shall have the meanings ascribed to them in the Agreement.)
for the initial Total Commitment Amount of ¥500,000,000,000 as of the execution date of the Agreement, and
subject to the terms and conditions thereof, we wish to borrow loans on the terms set out below. We confirm that
as of the date of the Drawdown Notice and presently on the Requested Drawdown Date set out below, each
condition precedent prescribed in Article 2-2 of the Agreement relating to the Lending Obligations is fulfilled.
Total Amount
Requested
Drawdown Date
Purpose of Funds
Yen
[•] [•] , [•] (Day of the Week)
Repayment of
Requested Drawdown Date
the debt borrowed pursuant
to the SSTL on the
With respect to the Individual Loans that are disbursed in accordance with this Drawdown Notice, the Principal
Payment Date, Interest Payment Date and Principal Payment Amount and the handling of the Principal Payment
Date and the Interest Payment Date in event such days falling on a bank holiday shall be as set out in the relevant
provisions of the Agreement.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
45
EXCLUSION OF ANTI-SOCIAL FORCES
(1)
Members of Organized Crime Groups, etc.
Attachment 4
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Organized Crime Groups (boryokudan) (an organization whose members (including members of
member organizations) are suspected of supporting collective or habitual violent and unlawful
conduct; the same shall apply hereinafter);
Organized Crime Group Members (boryokudan in) (constituent members of Organized Crime
Groups; the same shall apply hereinafter);
Persons who ceased being Organized Crime Group Members less than five (5) years ago;
Quasi-members of Organized Crime Groups (boryokudan jun kosei in) (persons associated with
Organized Crime Groups, other than members of Organized Crime Groups, who are suspected of
engaging in violent and unlawful conduct backed by threats from Organized Crime Groups or who
support or cooperate with or participate in the maintenance or operation of Organized Crime
Groups through the provision of funds, weapons, etc. to Organized Crime Groups or Organized
Crime Group Members; the same shall apply hereinafter);
Corporations associated with Organized Crime Groups (corporations in which Organized Crime
Group Members actively participate, corporations that are managed by Quasi-members of
Organized Crime Groups or former Organized Crime Group Members and actively support or
cooperate with or participate in the maintenance or operation of Organized Crime Groups through
provision of funds, etc. or corporation that actively use Organized Crime Groups in their business
or operations and support or cooperate with the maintenance or operation of Organized Crime
Groups);
Corporate racketeers (sokaiya), etc. (persons suspected of engaging in violent and unlawful
conduct to demand improper gains from corporations and threatening the peaceful lives of the
public, such as corporate racketeers and corporate fraudsters);
Social campaign racketeers (persons who profess or claim to be engaged in social campaigns or
political activities who are suspected of engaging in violent and unlawful conduct to demand
improper gains and threatening the peaceful lives of the public);
Special intelligence criminal organizations (organizations or persons other than those specified in
(a) through (g) above who engage primarily in organized unlawful conduct with using threats
backed by relationships with Organized Crime Groups or capital ties to Organized Crime Groups);
and
(i)
Other persons comparable to those specified in (a) through (h) above.
(The persons specified in (a) through (i) above are collectively referred to as “Organized Crime Group
Members, etc.”)
(2)
Relationships with Organized Crime Group Members, etc.
(a)
(b)
(c)
Relationships recognized as management controlled by Organized Crime Group Members, etc.;
Relationships recognized as Organized Crime Group Members, etc. substantially participating in
management;
Relationships recognized as improperly using Organized Crime Group Members, etc. such as
acting with the intent to gain improper benefit for oneself, one’s company, or a third party or to
harm a third party;
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
46
(d)
(e)
Relationships recognized as ones providing funds, etc. or providing support to Organized Crime
Group Members, etc.; and
Relationships that are socially condemned existing between officers or persons substantially
participating in management and Organized Crime Group Members, etc.
(3)
Unlawful or Improper Conduct
(a)
(b)
(c)
(d)
Making violent demands;
Making improper demands that exceed legal responsibility;
Engaging in threatening speech or conduct or using violent conduct in relation to transactions;
Spreading of rumors, using fraudulent means, or using threats to harm the reputation of the
Lenders or the Agent or to obstruct the business of the Lenders or the Agent; and
(e)
Any other act similar to (a) through (d) above.
Subordinated Syndicated Loan Agreement dated October 26, 2018, for Takeda Pharmaceutical Company Limited
47
Exhibit 10.11
TAKEDA PHARMACEUTICAL COMPANY LIMITED
The Company
MUFG Bank, Ltd.
Fiscal Agent
FISCAL AGENCY AGREEMENT
Dated as of November 21, 2018
€1,250,000,000 0.375% Senior Notes due 2020
€1,000,000,000 Senior Floating Rate Notes due 2020
€1,500,000,000 1.125% Senior Notes due 2022
€750,000,000 Senior Floating Rate Notes due 2022
€1,500,000,000 2.250% Senior Notes due 2026
€1,500,000,000 3.000% Senior Notes due 2030
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Definitions.
SECTION 1.1.
Compliance Certificates and Opinions.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.2.
Form of Documents Delivered to Fiscal Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.3.
Acts of Holders; Record Dates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.4.
Notices, Etc., to Fiscal Agent and the Company. . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.5.
Notice to Holders; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.6.
Effect of Headings and Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.7.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Successors and Assigns.
SECTION 1.8.
SECTION 1.9.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Separability Clause.
SECTION 1.10. Benefits of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.11. Governing Law.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.12. Consent to Jurisdiction; Waiver of Immunities. . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.13. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.14. Payments Due on Non-Business Days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.15. Communications by Holders with Other Holders.
. . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.16. English Language. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.17. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE II THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.1.
SECTION 2.2.
SECTION 2.3.
SECTION 2.4.
SECTION 2.5.
SECTION 2.6.
SECTION 2.7. Mutilated, Destroyed, Lost and Stolen Notes.
SECTION 2.8.
SECTION 2.9.
SECTION 2.10.
SECTION 2.11.
SECTION 2.12.
SECTION 2.13. Book-entry Provisions for Global Notes.
Forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certificate of Authentication.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issue and Delivery of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Registrar, Registration of Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Notes.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer Restrictions.
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese Withholding Taxes.
Japanese Withholding Tax Legend.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance in Euros. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE III SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.1.
SECTION 3.2.
Satisfaction and Discharge of Agreement.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Application of Trust Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IV REMEDIES OF THE FISCAL AGENT AND HOLDERS ON EVENT OF DEFAULT . . .
SECTION 4.1.
SECTION 4.2.
SECTION 4.3.
SECTION 4.4.
SECTION 4.5.
SECTION 4.6.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Event of Default
. . . . . . . . . . . . . . . . . . . . . .
Acceleration of Maturity; Rescission and Annulment
Collection of Indebtedness and Suits for Enforcement by Fiscal Agent
. . . . . . . .
Fiscal Agent May File Proofs of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Fiscal Agent May Enforce Claims Without Possession of Notes.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Application of Money Collected.
- i -
Page
1
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Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.7.
Right of Holders to Receive Principal and Interest. . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.8.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restoration of Rights and Remedies.
SECTION 4.9.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.10. Rights and Remedies Cumulative.
SECTION 4.11. Delay or Omission Not Waiver.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.12. Control by Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.13. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.14. Undertaking for Costs.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.15. Waiver of Stay or Extension Laws.
ARTICLE V THE FISCAL AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Duties and Responsibilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.1.
Certain Rights of Fiscal Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.2.
SECTION 5.3.
. . . . . . . . . . . . . . . . . . . . . . . .
Not Responsible for Recitals or Issuance of Notes.
SECTION 5.4. May Hold Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.5. Money Held in Trust.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation and Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.6.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Agent Required.
SECTION 5.7.
Resignation and Removal; Appointment of Successor.
SECTION 5.8.
. . . . . . . . . . . . . . . . . . . . .
Acceptance of Appointment by Successor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.9.
. . . . . . . . . . . . . .
SECTION 5.10. Merger, Conversion, Consolidation or Succession to Business.
ARTICLE VI HOLDERS’ LISTS AND REPORTS BY FISCAL AGENT AND COMPANY . . . . . . . . . .
SECTION 6.1.
SECTION 6.2.
Company to Furnish Fiscal Agent Names and Addresses of Holders. . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Preservation of Information; Communications to Holders.
ARTICLE VII MERGER, CONSOLIDATION, SALE OR DISPOSITION . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.1.
SECTION 7.2.
Company May Consolidate, Etc., Only on Certain Terms.
. . . . . . . . . . . . . . . . . .
Successor Substituted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VIII AMENDMENTS AND SUPPLEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.1. Without Consent of Holders.
SECTION 8.2. With Consent of Holders.
SECTION 8.3.
SECTION 8.4.
SECTION 8.5.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Execution of Amendments or Supplements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of Amendments or Supplements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Reference in Notes to Amendments or Supplements.
ARTICLE IX COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.1.
SECTION 9.2. Maintenance of Office or Agency.
SECTION 9.3. Money for Notes Payments to Be Held in Trust.
SECTION 9.4.
SECTION 9.5.
SECTION 9.6.
SECTION 9.7.
Payment of Principal, Interest and Additional Amounts. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Statement by Officers as to Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appointment to Fill a Vacancy in Office of Fiscal Agent. . . . . . . . . . . . . . . . . . . .
Indemnification of Judgment Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
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- ii -
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.8.
SECTION 9.9.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.10. Negative Pledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rule 144A Information.
Reporting Requirements.
ARTICLE X REDEMPTION AND PURCHASE OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.1. Optional Redemption of Fixed Rate Notes.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.2. Optional Redemption due to an Additional Amounts Event. . . . . . . . . . . . . . . . . .
SECTION 10.3. Special Mandatory Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.4. Election to Redeem; Notice to Fiscal Agent.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.5. Notice of Redemption.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.6. Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.7. Notes Payable on Redemption Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.8. Repurchase of Notes.
ARTICLE XI CALCULATION AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.1. Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.2. Calculation of Floating Interest.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.3. Commissions; Incidental Acts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.4. Rights and Liabilities of the Calculation Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.5. Resignation and Removal.
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EXHIBITS
EXHIBIT A-1.
EXHIBIT A-2.
EXHIBIT A-3.
EXHIBIT A-4.
EXHIBIT B.
EXHIBIT C.
EXHIBIT D.
Form of Fixed Rate Rule 144A Global Note
Form of Fixed Rate Regulation S Global Note
Form of Floating Rate Rule 144A Global Note
Form of Floating Rate Regulation S Global Note
Form of Transfer Certificate for Transfer from Rule 144A Global Note to
Regulation S Global Note
Form of Transfer Certificate for Transfer from Regulation S Global Note to
Rule 144A Global Note
Form of Officer’s Certificate as to Default
- iii -
FISCAL AGENCY AGREEMENT, dated as of November 21, 2018, between Takeda
Pharmaceutical Company Limited, a joint-stock corporation (kabushiki kaisha) organized under the laws of
Japan (the “Company”), and MUFG Bank, Ltd., incorporated with limited liability in Japan, as fiscal agent (the
“Fiscal Agent”).
W I T N E S S E T H
WHEREAS, the Company has duly authorized the issuance of its €1,000,000,000 Senior
Floating Rate Notes due 2020 (the “2020 Floating Rate Notes”) and €750,000,000 Senior Floating Rate Notes
due 2022 (the “2022 Floating Rate Notes” and, together with the 2020 Floating Rate Notes, the “Floating Rate
Notes”) and its €1,250,000,000 0.375% Senior Notes due 2020 (the “2020 Notes”), €1,500,000,000 1.125%
Senior Notes due 2022 (the “2022 Notes”), €1,500,000,000 2.250% Senior Notes due 2026 (the “2026 Notes”)
and €1,500,000,000 3.000% Senior Notes due 2030 (the “2030 Notes” and, together with the 2020 Notes, the
2022 Notes and the 2026 Notes, the “Fixed Rate Notes”) (the Fixed Rate Notes together with the Floating Rate
the “Notes”) and to provide, among other things, for the execution, authentication, delivery and
Notes,
administration thereof, the Company has duly authorized the execution and delivery of this Agreement; and
WHEREAS, all things necessary to make the Notes, when executed and delivered by the
Company and authenticated and delivered as provided in this Agreement, the valid, binding and legal obligations
of the Company, and to constitute these presents a valid agreement of the Company according to its terms have
been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Notes by the holders thereof, the
Company covenants and agrees for the equal and proportionate benefit of the respective holders of the Notes
from time to time as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Agreement, except as otherwise expressly provided or unless the
context otherwise requires:
(1)
the terms defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular;
(2)
all accounting terms not otherwise defined herein have the meanings assigned to them
in accordance with International Financial Reporting Standards;
(3)
unless the context otherwise requires, any reference to an “Article” or a “Section”
refers to an Article or a Section, as the case may be, of this Agreement;
(4)
the words “herein”, “hereof” and “hereunder” and other words of similar import refer
to this Agreement as a whole and not to any particular Article, Section or other subdivision; and
(5)
the following expressions shall have the following meanings:
“2022 Par Call Date” has the meaning specified in Section 10.1.
1
“2026 Par Call Date” has the meaning specified in Section 10.1.
“2030 Par Call Date” has the meaning specified in Section 10.1.
“Act”, when used with respect to any Holder, has the meaning specified in Section 1.4.
“Act on Special Taxation Measures” has the meaning specified in Section 9.5.
“Additional Amounts” has the meaning specified in Section 9.5.
“Additional Amounts Event” has the meaning specified in Section 10.2.
“Affiliate” of any specified Person means any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified Person. For the purposes of this
definition, “control” when used with respect to any specified Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Agent” means any Notes Registrar, Paying Agent or Calculation Agent.
“Agent Members” has the meaning specified in Section 2.13(g).
“Agreement” means this Fiscal Agency Agreement as originally executed and as it may from
time to time be supplemented or amended pursuant to the applicable provisions hereof.
“Applicable Procedures” has the meaning specified in Section 2.6(e).
“Authorized Officer” means any person (whether designated by name or the person for the
time being holding a designated office) appointed by or pursuant to a Board Resolution or otherwise for the
purpose, or a particular purpose, of this Agreement, provided that written notice of such appointment shall have
been given to the Fiscal Agent.
“Board of Directors” means the board of directors of the Company or any committee or
member thereof duly authorized to act for it in respect hereof.
“Board Resolution” means a copy of a resolution or decision certified by an authorized
Director or any other Authorized Officer of the Company to have been duly adopted or made by the Board of
Directors and to be in full force and effect on the date of such certification, and delivered to the Fiscal Agent.
“Business Day” means both a day on which the TARGET2 System is open, and a day other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banking institutions are
authorized or required by law, regulation or executive order to be closed in London or Tokyo.
“Calculation Agent” means any Person authorized by the Company to calculate the payment
of interest on any Floating Rate Notes on behalf of the Company, which shall initially be MUFG Bank, Ltd.
“Clearstream” means Clearstream Banking S.A.
“Closing Date” means November 21, 2018.
“Company” means the Person named as the “Company” in the first paragraph of this
instrument until a Successor Person shall have become such pursuant to the applicable provisions of this
Agreement, and thereafter “Company” shall mean such Successor Person.
2
“Company Request” or “Company Order” means a written request or order signed in the
name of the Company by any of its Directors and/or Authorized Officers, and delivered to the Fiscal Agent.
“Comparable Government Bond” means, in relation to any Comparable Government Bond
Rate calculation, at the discretion of an Independent Investment Banker, a German government bond whose
maturity is closest to the maturity of the notes to be redeemed, or if such independent investment bank in its
discretion determines that such similar bond is not in issue, such other German government bond as such
Independent Investment Banker may, with the advice of three brokers of, and/or market makers in, German
government bonds selected by the Company, determine to be appropriate for determining the Comparable
Government Bond Rate.
“Comparable Government Bond Rate” means the price, expressed as a percentage (rounded
to three decimal places, with 0.0005 being rounded upwards), at which the gross redemption yield on the notes to
be redeemed, if they were to be purchased at such price on the third business day prior to the date fixed for
redemption, would be equal to the gross redemption yield on such business day of the Comparable Government
Bond on the basis of the middle market price of the Comparable Government Bond prevailing at 11:00 a.m.
(London time) on such Business Day as determined by an Independent Investment Banker.
“Co-operation Agreement” means the Co-operation Agreement, dated May 8, 2018, between
the Company and Shire plc.
“Depositary” has the meaning specified in Section 2.13(a).
“Designated Financial Institution” has the meaning specified in Section 9.5.
“Director” means any member of the Board of Directors.
“EURIBOR Business Day” means any day that is not a Saturday or Sunday, that is neither a
legal holiday nor a day on which commercial banking institutions are authorized or required by law, regulation or
executive order to be closed in London, and is a day on which the TARGET2 System, or any successor thereto,
operates.
“Euroclear” means Euroclear Bank SA/NV.
“Event of Default” has the meaning specified in Section 4.1.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“Expiration Date” has the meaning specified in Section 1.4.
“Fiscal Agent’s Office” means the office of the Fiscal Agent in London at which at any
particular time its business shall be principally administered, which as at the date hereof is located at Ropemaker
Place, 25 Ropemaker Street, London EC2Y 9AN, or such other address as the Fiscal Agent may designate from
time to time by notice to the Holders and the Company, or the principal office of any successor Fiscal Agent (or
such other address as such successor Fiscal Agent may designate from time to time to the Holders and the
Company).
“Fixed Rate Interest Payment Date” means November 21 during the term of this Agreement.
“Floating Rate Interest Payment Date” means each February 21, May 21, August 21 and
November 21, in each case, during the term of this Agreement.
“Global Notes” has the meaning specified in Section 2.1.
3
“Holder” means a Person in whose name a Note is registered in the Notes Register.
“ICMA Procedures” has the meaning specified in Section 2.10.
“Independent Investment Banker” means one of the Reference Government Bond Dealers
appointed by the Company.
“Interest Payment Date” means the Fixed Rate Interest Payment Date and the Floating Rate
Interest Payment Date.
“Interest Recipient Information” has the meaning specified in Section 9.5.
“Judgment Currency” has the meaning specified in Section 9.7.
“Legends” has the meaning specified in Section 2.6(a).
“Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such property or asset, including, without limitation,
the right of a vendor, lessor or similar party under any conditional sales agreement, capital lease or other title
retention agreement relating to such property or asset, and any other right of or arrangement with any creditor to
have its claims satisfied out of any property or assets, or the proceeds therefrom, prior to any general creditor of
the owner thereof.
“Long Stop Date” means May 8, 2019, or such later date as may be agreed upon in accordance
with the Co-Operation Agreement.
“Note” or “Notes” means any Fixed Rate Notes or Floating Rate Notes authenticated and
delivered under this Agreement.
“Notes Register” and “Notes Registrar” have the respective meanings specified in
Section 2.4.
“Officer’s Certificate” means a certificate signed by any Director or Authorized Officer of the
Company and delivered to the Fiscal Agent.
“Opinion of Counsel” means a written opinion of counsel, who may be an employee of or
counsel to the Company, or other counsel acceptable to the Fiscal Agent, in a form satisfactory to the Fiscal
Agent.
“Outside Date” has the meaning specified in Section 10.03.
“Outstanding”, when used with respect to any series of the Notes, means, as of the date of
determination, all Notes of such series theretofore authenticated and delivered under this Agreement, except:
(1)
Notes theretofore cancelled by the Notes Registrar or delivered to the Notes
Registrar for cancellation;
(2)
Notes for whose payment or redemption money in the necessary amount has
been theretofore deposited with the Fiscal Agent or any Paying Agent in trust for the Holders
of such Notes; provided that, if such Notes are to be redeemed, notice of such redemption has
been duly given pursuant to this Agreement or provision therefor satisfactory to the Fiscal
Agent has been made; and
4
(3)
Notes which have been paid pursuant to Section 2.7 or in exchange for or in
lieu of which other Notes have been authenticated and delivered pursuant to this Agreement,
other than any such Notes in respect of which there shall have been presented to the Fiscal
Agent proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands
such Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding
Notes of any series have given, made or taken any request, demand, authorization, direction, notice, consent,
waiver or other action hereunder as of any date, Notes owned by the Company or any other obligor upon the
Notes or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Fiscal Agent or the Paying Agent shall be protected in
relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only
Notes which a Responsible Officer of the Fiscal Agent actually knows to be so owned shall be so disregarded.
Notes so owned or beneficially held which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Fiscal Agent or the Paying Agent the pledgee’s right so to act
with respect to such Notes and that the pledgee is not the Company or any other obligor upon the Notes or any
Affiliate of the Company or of such other obligor.
“Owner Transferee” has the meaning specified in Section 2.6(e).
“Owner Transferor” has the meaning specified in Section 2.6(e).
“Participant” has the meaning specified in Section 9.5.
“Participant Transferee” has the meaning specified in Section 2.6(e).
“Participant Transferor” has the meaning specified in Section 2.6(e).
“Participants” has the meaning specified in Section 2.5.
“Paying Agent” means any Person authorized by the Company to pay the principal of or
interest on any Notes (or Additional Amounts, if any) on behalf of the Company, which shall initially be MUFG
Bank, Ltd.
“Person” means any individual, corporation, partnership, limited liability company, joint
venture, trust, unincorporated organization or government or any branch, agency or political subdivision thereof.
“Principal Subsidiary” means, with respect to any Person, any Subsidiary (i) whose revenue,
as shown by the latest audited financial statements (consolidated in the case of a Subsidiary which itself has
Subsidiaries) of such Subsidiary, constitute at least 10% of the consolidated revenue of such Person and its
consolidated Subsidiaries as shown by the latest audited consolidated financial statements of such Person or
(ii) whose gross assets, as shown by the latest audited financial statements (consolidated in case of a Subsidiary
which itself has Subsidiaries) of such Subsidiary constitute at least 10% of the gross assets of such Person and its
consolidated Subsidiaries as shown by the latest audited consolidated financial statements of such Person.
“Public External Indebtedness” means bonds, debentures, notes or other similar investment
securities of the Company or any other person evidencing indebtedness with a maturity of not less than one year
from the issue date thereof, or any guarantees thereof, which are (a) either (i) by their terms payable, or confer a
right to receive payment, in any currency other than Japanese yen or (ii) denominated in Japanese yen and more
than 50% of the aggregate principal amount thereof is initially distributed outside of Japan by or with the
authorization of the Company thereof; and (b) for the time being, or are intended to be, quoted, listed, ordinarily
dealt in or traded, in each case primarily, on a stock exchange or over-the-counter or other securities market
outside Japan.
5
“Record Date” with respect to any Interest Payment Date shall have the meaning specified in
the form of the Notes.
“Redemption Date” has the meaning specified in Section 10.5.
“Reference Government Bond Dealers” means each of J.P. Morgan Securities plc, Morgan
Stanley MUFG Securities Co., Ltd., Barclays Bank PLC, BNP Paribas or HSBC Bank plc (or their respective
affiliates that are Primary Government Bond Dealers) and their respective successors, and a Primary Government
Bond Dealer selected by SMBC Nikko Capital Markets Limited; provided, however, that if any of the foregoing
shall cease to be a broker or dealer of, and/or market maker in, German government bonds (a “Primary
Government Bond Dealer”), the Company will substitute therefor another Primary Government Bond Dealer.
“Regulation S Global Note” has the meaning specified in Section 2.1.
“Regulation S Global Transferred Amount” has the meaning specified in Section 2.6(f).
“Required Currency” has the meaning specified in Section 9.7.
“Responsible Officer” means, when used with respect to the Fiscal Agent, any officer within
the Fiscal Agent’s debt capital markets department with responsibility for the administration of this Agreement
and also means, with respect to a particular corporate trust matter, any other officer of the Fiscal Agent to whom
such matter is referred because of such officer’s knowledge of and familiarity with the particular subject. When
used with respect to the Calculation Agent, “Responsible Officer” means any vice president, relationship
manager, transaction manager, client service manager or any other officer located at the specified office of the
Calculation Agent who customarily performs functions similar to those persons who at the relevant time shall be
officers, respectively.
“Rule 144A Global Note” has the meaning specified in Section 2.1.
“Rule 144A Global Transferred Amount” has the meaning specified in Section 2.6(e).
“Rule 144A Information” has the meaning specified in Section 9.8.
“Securities Act” means the U.S. Securities Act of 1933, as amended.
“Special Mandatory Redemption Date” means the 20th day (or if such day is not a Business
Day, the first Business Day thereafter) after the earliest to occur of (1) the Long Stop Date, if the Shire
Acquisition has not been consummated on or prior to the Long Stop Date or (2) the date of public announcement
by the Company that the Shire Acquisition will not be consummated.
“Shire Acquisition” means the offer whereby the Company will acquire the entire issued and
to be issued ordinary share capital of Shire plc, pursuant to the Co-operation Agreement.
“specially-related person of the Company” has the meaning specified in Section 9.5.
“Subsidiary” means, with respect to any Person, any entity which is controlled or of which
more than 50% of its ownership interests are owned directly or indirectly by such Person.
“Succession Event” has the meaning specified in Section 7.1.
“Successor Person” has the meaning specified in Section 7.2.
6
“Tax Documentation” means any of certifications, claims for exemption, notifications or other
documentation required under Japanese tax law for interest payments to be made without withholding or
deduction for or on account of Japanese tax.
“Taxes” has the meaning specified in Section 9.5.
“Transfer Restrictions” has the meaning specified in Section 2.6(a).
“Fiscal Agent” means the Person named as the “Fiscal Agent” in the first paragraph of this
instrument until a successor Fiscal Agent shall have become such pursuant to the applicable provisions of this
Agreement, and thereafter “Fiscal Agent” shall mean or include each Person who is then a Fiscal Agent
hereunder.
“United States” means the United States of America.
“Written Application for Tax Exemption” has the meaning specified in Section 9.5.
SECTION 1.2. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Fiscal Agent to take any action under
any provision of this Agreement, the Company shall furnish to the Fiscal Agent an Officer’s Certificate and an
Opinion of Counsel (provided, however, that at the time of issuance of the Notes, the Company shall furnish to
the Fiscal Agent an Officer’s Certificate) stating that all conditions precedent provided for in this Agreement
relating to the proposed action have been complied with. Each such certificate or opinion shall be given in the
form of an Officer’s Certificate, if to be given by an officer of the Company, or an Opinion of Counsel, if to be
given by counsel, and shall comply with the requirements set forth in this Agreement.
Every certificate or opinion with respect to compliance with a condition or covenant provided
for in this Agreement (except for certificates provided for in Section 9.4) shall include:
(1)
a statement that each individual signing such certificate or opinion has read such
condition or covenant and the definitions herein relating thereto;
(2)
a brief statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are based;
(3)
a statement that, in the opinion of each such individual, he has made such examination
or investigation as is necessary to enable him to express an informed opinion as to whether or not such
condition or covenant has been complied with; and
(4)
a statement as to whether, in the opinion of each such individual, such condition or
covenant has been complied with.
SECTION 1.3. Form of Documents Delivered to Fiscal Agent.
In any case where several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only
one such Person, or that they be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based, insofar as it relates to
legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the
7
exercise of reasonable care should know, that the certificate or opinion or representations with respect to the
matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel
may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Company stating that the information with respect to such factual matters is in the
possession of the Company unless such counsel knows, or in the exercise of reasonable care should know, that
the certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests,
consents, certificates, statements, opinions or other instruments under this Agreement, they may, but need not, be
consolidated and form one instrument.
SECTION 1.4. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver or other action provided
or permitted by this Agreement to be given, made or taken by Holders may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed
in writing; and, except as herein otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Fiscal Agent and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the “Act” of the Holders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Fiscal Agent and the Company, if made in the manner provided in this
Section 1.4.
The fact and date of the execution by any Person of any such instrument or writing may be
proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or
writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity
other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Fiscal Agent deems sufficient.
The ownership of Notes shall be proved by the Notes Register.
Any request, demand, authorization, direction, notice, consent, waiver or other Act of the
Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Fiscal Agent or the Company in reliance thereon, whether or not notation of such
action is made upon such Note.
The Company may set any day as a record date for the purpose of determining the Holders of
Outstanding Notes entitled to give, make or take any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Agreement to be given, made or taken by Holders of Notes,
provided that the Company may not set a record date for, and the provisions of this paragraph shall not apply
with respect to, the giving or making of any notice, declaration, request or direction referred to in the next
paragraph. If any record date is set pursuant to this paragraph, the Holders of Outstanding Notes at the close of
business on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not
such Holders remain Holders after such record date; provided that no such action shall be effective hereunder
unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of
Outstanding Notes on such record date. Nothing in this paragraph shall be construed to prevent the Company
from setting a new record date for any action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with no action by any Person be
8
cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action
taken by Holders of the requisite principal amount of Outstanding Notes on the date such action is taken based on
such record date previously set. Promptly after any record date is set pursuant to this paragraph, the Company, at
its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Fiscal Agent in writing and to each Holder of Notes in the manner set forth in
Section 1.6.
The Fiscal Agent may set any day as a record date for the purpose of determining the Holders
of Outstanding Notes entitled to join in the giving or making of (i) any declaration of acceleration referred to in
Section 4.2, (ii) any request to institute proceedings referred to in Section 4.7 or (iii) any direction referred to in
Section 4.12. If any record date is set pursuant to this paragraph, the Holders of Outstanding Notes at the close of
business on such record date, and no other Holders, shall be entitled to join in such declaration, request or
direction, whether or not such Holders remain Holders after such record date; provided that no such action shall
be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite
principal amount of Outstanding Notes on such record date. Nothing in this paragraph shall be construed to
prevent the Fiscal Agent from setting a new record date for any action for which a record date has previously
been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no
action by any Person be cancelled and of no effect), provided, however, that nothing in this paragraph shall be
construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding
Notes on the date such action is taken based on such record date previously set. Promptly after any record date is
set pursuant to this paragraph, the Fiscal Agent, at the Company’s expense, shall cause notice of such record
date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing
and to each Holder of Notes in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section 1.4, the party hereto which sets
such record dates may designate any day as the “Expiration Date” and from time to time may change the
Expiration Date to any earlier or later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other parties hereto in writing, and to each Holder of Notes in the
manner set forth in Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date is not
designated with respect to any record date set pursuant to this Section 1.4, the party hereto which set such record
date shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding
the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with
regard to any particular Note may do so with regard to all or any part of the principal amount of such Note or by
one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or
any part of such principal amount of such Note.
SECTION 1.5. Notices, Etc., to Fiscal Agent and the Company.
Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Agreement to be made upon, given or furnished to, or filed with,
(1)
the Fiscal Agent by any Holder or by the Company shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with the Fiscal Agent at the Fiscal Agent’s
Office, or
(2)
the Company by the Fiscal Agent or by any Holder shall be sufficient for every purpose
hereunder if in writing and mailed, first-class postage prepaid to the Company at its address at 1-1,
Nihonbashi-Honcho 2-Chome, Chuo-ku, Tokyo 103-8668, Japan, Fax: +81-3-3278-2198, Attention:
Global Treasury & Finance Management, Group Finance & Controlling, Global Finance; or at any other
address previously furnished in writing to the Fiscal Agent by the Company.
9
SECTION 1.6. Notice to Holders; Waiver.
Where this Agreement provides for notice to Holders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage
prepaid, or emailed, in PDF format, to each Holder affected by such event, at his address as it appears in the
Notes Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for
the giving of such notice. In any case where notice to Holders is given by mail or email, neither the failure to
mail or email such notice, nor any defect in any notice so mailed or emailed, to any particular Holder shall affect
the sufficiency of such notice with respect to other Holders. Where this Agreement 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 Fiscal Agent, but such filing shall not be a condition precedent to the validity of any action taken in reliance
upon such waiver.
In case by reason of the suspension of regular mail service or by reason of any other cause it
shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of
the Fiscal Agent shall constitute a sufficient notification for every purpose hereunder.
SECTION 1.7. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 1.8. Successors and Assigns.
All covenants and agreements in this Agreement by the Company shall bind its successors and
assigns, whether so expressed or not.
SECTION 1.9. Separability Clause.
In case any provision in this Agreement or in the Notes 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.
SECTION 1.10. Benefits of Agreement.
Nothing in this Agreement or in the Notes, express or implied, shall give to any Person, other
than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right,
remedy or claim under this Agreement.
SECTION 1.11. Governing Law.
This Agreement and the Notes shall be governed by, and construed in accordance with, the
laws of the State of New York.
SECTION 1.12. Consent to Jurisdiction; Waiver of Immunities.
(a)
The Company hereby irrevocably and unconditionally submits to the non-exclusive
jurisdiction of the courts of New York State or the federal courts of the United States located in the Borough of
Manhattan, The City of New York over any suit, action or proceeding arising out of or relating to this Agreement
or any Note. The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding
brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been
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brought in an inconvenient forum. To the extent that the Company has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process with respect to itself or its property, it irrevocably waives
such immunity in respect of its obligations hereunder or under any Note. The Company agrees that final
judgment in any such suit, action or proceeding brought in such a court shall be conclusive and binding upon the
Company and, to the extent permitted by applicable law, may be enforced in any court to the jurisdiction of
which the Company is subject by a suit upon such judgment or in any manner provided by law, provided that
service of process is effected upon the Company in the manner specified in the following paragraph or as
otherwise permitted by law.
(b)
As long as any of the Notes remain Outstanding, the Company will at all times have an
authorized agent in The City of New York upon whom process may be served in any legal action or proceeding
arising out of or relating to this Agreement or any Note. Service of process upon such agent and written notice of
such service mailed or delivered to the Company shall to the fullest extent permitted by law be deemed in every
respect effective service of process upon the Company in any such legal action or proceeding. The Company has
appointed Cogency Global Inc. as its agent for such purpose, and covenants and agrees that service of process in
any suit, action or proceeding may be made upon it at the offices of such agent. Cogency Global Inc. has
accepted such appointment as agent for service of process. Notwithstanding the foregoing, the Company may,
with prior written notice to the Fiscal Agent, terminate the appointment of such agent and appoint another agent
for the above purposes so that the Company shall at all times have an agent for the above purposes in The City of
New York.
(c)
The Company hereby irrevocably waives, to the fullest extent permitted by law, any
requirement or other provision of law, rule, regulation or practice which requires or otherwise establishes as a
condition to the institution, prosecution or completion of any suit, action or proceeding (including appeals)
arising out of or relating to this Agreement or any Note, the posting of any bond or the furnishing, directly or
indirectly, of any other security.
SECTION 1.13. Waiver of Jury Trial.
EACH OF THE COMPANY AND THE FISCAL AGENT 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
AGREEMENT, THE NOTES OR THE TRANSACTION CONTEMPLATED HEREBY.
SECTION 1.14. Payments Due on Non-Business Days.
In any case in which any Fixed Rate Interest Payment Date falls on a day that is not a Business
Day, then payment of principal or interest (or Additional Amounts, if any) need not be made on such date but
may be made on the next succeeding Business Day. Any payment made pursuant to the preceding sentence on
such next succeeding Business Day shall have the same force and effect as if made on the due date, and no
additional interest shall accrue with respect to such payment for the period after such date.
If any Floating Rate Interest Payment Date would otherwise be a day that is not a EURIBOR
Business Day, such Floating Rate Interest Payment Date shall be the next succeeding EURIBOR Business Day,
unless the next succeeding EURIBOR Business Day is in the next succeeding calendar month, in which case such
Floating Rate Interest Payment Date shall be the immediately preceding EURIBOR Business Day.
SECTION 1.15. Communications by Holders with Other Holders.
Within five Business Days of receipt of a written application by a Holder stating that such
Holder desires to communicate with other Holders of Notes, the Fiscal Agent, provided it has received a copy of
the form of proxy or other communication which such applying Holder proposes to transmit and proof
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reasonably satisfactory to the Fiscal Agent that such Holder has owned Notes for a period of at least six months
prior to such request, shall either (i) afford the applying Holder access to the requested information or
(ii) transmit copies of the communication prepared by the applying Holder to the registered Holders at the
expense of such applying Holder.
SECTION 1.16. English Language.
All certificates, opinions, notices, consents, requests or other documents or instruments
delivered pursuant hereto shall be in the English language.
SECTION 1.17. Counterparts
This Agreement may be executed in two or more counterparts, each of which shall be deemed
to be an original and all of which together shall constitute one and the same agreement. The exchange of copies
of this Agreement and of signature pages by facsimile or PDF transmission shall constitute effective execution
and delivery of this Agreement as to the parties hereto and may be used in lieu of the original Agreement and
signature pages for all purposes.
ARTICLE II
THE SECURITIES
SECTION 2.1. Forms.
Upon the execution and delivery of this Agreement, the:
•
•
•
•
•
•
0.375% Senior Notes due 2020 in an aggregate principal amount of €1,250,000,000,
Senior Floating Rate Notes due 2020 in an aggregate principal amount of €1,000,000,000,
1.125% Senior Notes due 2022 in an aggregate principal amount of €1,500,000,000,
Senior Floating Rate Notes due 2022 in an aggregate principal amount of €750,000,000,
2.250% Senior Notes due 2026 in an aggregate principal amount of €1,500,000,000, and
3.000% Senior Notes due 2030 in an aggregate principal amount of €1,500,000,000
may be executed and delivered by the Company to the Fiscal Agent for authentication,
accompanied by a Company Order directing such authentication, and the Fiscal Agent shall
thereupon
authenticate and deliver said Notes to or upon the written order of the Company (as set forth in such Company
Order) signed by an Authorized Officer of the Company. Notwithstanding the foregoing, the Company, pursuant
to a Board Resolution, may from time to time, without the consent of Holders of Notes, create and issue further
notes having the same terms and conditions as the Notes of a series in all respects, except for the issue date, issue
price and first Interest Payment Date thereon. Additional notes issued in this manner may be consolidated with
and form a single series with the previously outstanding Notes of the relevant series; provided that if any
additional notes are not fungible with the Notes of the relevant series for U.S. federal income tax purposes, such
additional notes will be issued as a separate series under this Agreement and will have a separate “ISIN” or
similar identifying number from the Notes of the relevant series.
The Notes shall be issuable only in fully registered form without
interest coupons in
denominations of €100,000 and integral multiples of €1,000 in excess thereof. Notes issued in accordance with
Rule 144A of the Securities Act shall initially be issued in the form of one or more global notes in the form of
Exhibit A-1 or A-3 hereto (each, a “Rule 144A Global Note”) and Notes issued in accordance with Regulation S
of the Securities Act shall initially be issued in the form of one or more global notes in the form of Exhibit A-2 or
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A-4 hereto (each, a “Regulation S Global Note” and, collectively with the Rule 144A Global Notes, the “Global
Notes”). Interests in any Global Note will be exchangeable for definitive Notes in registered form only under the
circumstances set forth herein.
The Notes may have such additional provisions, omissions, variations or substitutions as are
not inconsistent with the provisions of this Agreement and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be required to comply with any law or
with any rules made pursuant thereto or with the rules of any securities exchange, any governmental agency or
the Depositary or as may, consistently herewith, be determined by the officers of the Company executing such
Notes, as evidenced by their execution thereof. All Notes shall be substantially identical except as to
denomination and as provided herein.
The Notes shall be executed on behalf of the Company by any Representative Director of the
Company. The signature of any Representative Director of the Company on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signatures of individuals who were at the time of
issuance of such Notes the proper Representative Director of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such offices thereafter.
The definitive Notes shall be printed, lithographed or engraved on steel engraved borders or
may be produced in any other manner, all as determined by the Representative Director of the Company
executing such Notes, as evidenced by their execution thereof. Until definitive Notes shall have been prepared,
the Company may execute, and upon the written order of the Company, the Fiscal Agent shall authenticate and
deliver, in accordance with the provisions of this Agreement (in lieu of definitive Notes), temporary Notes which
are printed, lithographed, typewritten, mimeographed or otherwise produced, substantially of the tenor referred to
above. Such temporary Notes shall be subject to the same limitations and conditions and entitled to the same
rights and benefits as definitive Notes, except as provided herein or therein. If temporary Notes are issued, the
Company shall promptly cause definitive Notes to be prepared. Temporary Notes shall be exchangeable at the
principal office of the Fiscal Agent in London (or at such other office in London as shall be specified in the text
of such temporary Notes) for definitive Notes when the latter shall be ready for delivery; and upon the surrender
for exchange at said office of such temporary Notes, the Company, at its own expense, shall execute, and the
Fiscal Agent is authorized to authenticate and deliver, in accordance with the provisions of Section 2.2 of this
Agreement, in exchange for such temporary Notes a like aggregate principal amount of definitive Notes of the
appropriate form and denomination. Temporary Notes shall be appropriately legended.
SECTION 2.2. Certificate of Authentication.
Only such Notes as shall bear thereon a certificate of authentication substantially as set forth in
the Form of Note in Exhibit A-1, A-2, A-3 or A-4 hereto, as applicable, executed by the Fiscal Agent by manual
signature of one of its Responsible Officers, shall be entitled to the benefits of this Agreement or be valid or
obligatory for any purpose. Such certification by the Fiscal Agent upon any Note executed by or on behalf of the
Company shall be conclusive evidence that the Note so authenticated has been duly authenticated and delivered
hereunder and that the Holder thereof is entitled to the benefits of this Agreement.
SECTION 2.3.
Issue and Delivery of Notes.
The Company has, by a purchase agreement dated November 15, 2018 among the Company
and J.P. Morgan Securities plc, SMBC Nikko Capital Markets Limited, Morgan Stanley MUFG Securities Co.,
Ltd., Barclays Bank PLC, BNP Paribas and HSBC Bank plc as representatives (the “Representatives”) of the
initial purchasers named therein (the “Initial Purchasers”), agreed to issue
•
€1,250,000,000 aggregate principal amount of 0.375% Senior Notes due 2020,
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•
•
•
•
•
€1,000,000,000 aggregate principal amount of the Senior Floating Rate Notes due 2020,
€1,500,000,000 aggregate principal amount of 1.125% Senior Notes due 2022,
€750,000,000 aggregate principal amount of the Senior Floating Rate Notes due 2022,
€1,500,000,000 aggregate principal amount of 2.250% Senior Notes due 2026, and
€1,500,000,000 aggregate principal amount of 3.000% Senior Notes due 2030.
The aggregate principal amount of the Rule 144A Global Notes and the Regulation S Global Notes issued on the
Closing Date shall be €7,500,000,000. The principal amount of any Rule 144A Global Note and any Regulation
S Global Note may from time to time be increased or decreased by adjustments made on the records of the Fiscal
Agent, as provided in Section 2.6. The Global Notes will be dated November 21, 2018.
SECTION 2.4. Registrar, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Fiscal Agent’s Office a register (the register
maintained in such office and in any other office or agency of the Company herein sometimes collectively
referred to as the “Notes Register”) in which, subject to such reasonable regulations as it may prescribe, the
Company shall provide for the registration of Notes and of transfers of Notes. The Fiscal Agent is hereby
appointed “Notes Registrar” for the purpose of registering Notes and transfers of such Notes as herein provided.
The Company may at any time designate additional transfer agents or rescind the designation of any transfer
agent or approve a change in the office through which any transfer agent acts; provided, however, that there shall
at all times be a transfer agent in London. There shall be only one Notes Registrar. The Notes Register will show
the amount of the Notes, the date of issue, all subsequent transfers and changes of ownership in respect thereof
and the names, tax identifying numbers (if relevant to a specific holder), addresses of the holders of the Notes
and any payment instructions with respect thereto (if different from a holder’s registered address). The Fiscal
Agent will also maintain a record which will include notations as to whether the Notes have been paid or
cancelled, and, in the case of mutilated, destroyed, stolen or lost Notes, whether such Notes have been replaced.
In the case of the replacement of any of the Notes, such records will include notations of each Note so replaced,
and the Note issued in replacement thereof. In the case of the cancellation of any of the Notes, such records will
include notations of each Note so cancelled and the date on which such Note was cancelled. The Fiscal Agent
shall upon written request make the Notes Register and such records available, during normal office hours and on
reasonable written notice, to the Company, or any Person authorized by the Company in writing, for inspection
and for the taking of copies thereof or extracts therefrom, and, at the expense of the Company, the Fiscal Agent
shall deliver to such Persons all lists of Holders of Notes, their addresses and amounts of such holdings as they
may request.
Except as otherwise specifically provided herein, (i) all references in this Agreement to the
Fiscal Agent shall be deemed to refer to the Fiscal Agent in its capacity as Fiscal Agent, Notes Registrar and
Calculation Agent and (ii) every provision of this Agreement relating to the conduct, rights or privileges of the
Fiscal Agent or affecting the liability or offering protection, immunity or indemnity to the Fiscal Agent shall be
deemed to apply with the same force and effect to the Fiscal Agent acting in its capacities as Notes Registrar,
Calculation Agent and Paying Agent and to each agent of the Fiscal Agent employed to act hereunder.
Subject to this Section 2.4, Section 2.5 and Section 2.6, at the option of the Holder, Notes may
be presented for exchange for other Notes, of any authorized denominations and of like tenor and aggregate
principal amount or for registration of transfer by the Holder thereof or his attorney duly authorized in writing
and with the form of transfer thereon duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Fiscal Agent duly executed, at the office of the Fiscal Agent or at the office of any transfer
agent designated by the Company for such purpose. Whenever any Notes are so surrendered for exchange, the
Company shall execute and the Fiscal Agent shall authenticate and deliver the Notes which the Holder making
the exchange is entitled to receive.
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Upon surrender for registration of transfer of any Note at the office or agency of the Company,
the Company shall execute and the Fiscal Agent shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Notes, of any authorized denominations and of like tenor and
aggregate principal amount.
All Notes issued upon any registration of transfer or exchange of Notes shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Agreement, as
the Notes surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or for exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company duly
executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange of Notes, but the
Company may require payment by the Holder of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any registration of transfer or exchange of Notes.
The Fiscal Agent shall have no obligation or duty to monitor, determine or inquire as to
compliance with any restrictions on transfer imposed under this Agreement or under applicable law with respect
to any transfer of any interest in any Note (including any transfers between or among Participants or beneficial
owners of interests in any Global Note) 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 Agreement, and to examine the same to determine substantial compliance as to form with the express
requirements hereof.
SECTION 2.5. Global Notes.
Each Global Note authenticated under this Agreement shall be registered in the name of the
Depositary designated for such Global Note or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Note shall constitute a single Note for all purposes of this
Agreement.
Ownership of beneficial interests in a Global Note will be limited to persons who have
accounts with Euroclear and Clearstream (“Participants”) or persons who hold interests through such
Participants. Upon the issuance of a Global Note, Euroclear or Clearstream shall credit, on its internal system, the
respective principal amount of the individual beneficial interests represented by such Global Note to the accounts
of its Participants. Ownership of beneficial interests in a Global Note shall be shown only on, and the transfer of
such ownership interests shall be effected only through, records maintained by Euroclear and Clearstream (with
respect to interests of Participants) or by any such Participant (with respect to interests of persons held by such
Participants on their behalf). Payments, transfers, exchanges and other matters relating to beneficial interests in a
Global Note may be subject to various policies and procedures adopted by Euroclear and Clearstream from time
to time. None of the Company, the Fiscal Agent or any of their respective agents shall have any responsibility or
liability for any aspect of Euroclear’s, Clearstream’s or any Participant’s records, policies or procedures relating
to, or for payments made on account of, beneficial interests in a Global Note or for any other aspect of the
relationship between Euroclear or Clearstream and its Participants, or for maintaining, supervising or reviewing
any records relating to such beneficial interests.
Notwithstanding any provision of this Agreement or any Note to the contrary, no Global Note
may be exchanged in whole or in part for Notes registered, and no transfer of a Global Note in whole or in part
may be registered, in the name of any Person other than the Depositary or its nominee unless (i) Euroclear and
Clearstream is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory
or otherwise) or announces an intention permanently to cease business or does in fact do so or (ii) there shall
15
have occurred and be continuing an Event of Default with respect to the Notes. All definitive Notes issued in
exchange for a Global Note or any portion thereof shall be registered in such names as the Depositary shall
direct. In the event and for so long as definitive Notes are not issued to any owner of a beneficial interest in a
Global Note after the occurrence of one of the events set forth above, the Company expressly acknowledges, with
respect to the right of a Holder to pursue a remedy pursuant to Section 4.7 or Section 4.8, the right of such owner
to pursue such remedy with respect to the portion of the Global Note that represents such owner’s Notes as if
such definitive Notes had been issued.
Except in the circumstances referred to in the preceding paragraph, as long as the Depositary,
or its nominee, is the registered Holder of a Global Note, the Depositary or such nominee, as the case may be,
shall be considered the sole owner and Holder of such Global Note (and of the Notes represented thereby) for all
purposes under this Agreement and the Notes. Except in the circumstances referred to in the preceding
paragraph, owners of beneficial interests in a Global Note shall not be entitled to have such Global Note or any
Notes represented thereby registered in their names, shall not receive or be entitled to receive physical delivery of
definitive Notes in exchange therefor and shall not be considered the owners or Holders of such Global Note (or
any Notes represented thereby) for any purpose under this Agreement or the Notes. In addition, no beneficial
owner of an interest in a Global Note shall be able to transfer that interest except in accordance with the
Depositary’s applicable procedures (in addition to those under this Agreement referred to herein and, if
applicable, those of Euroclear and Clearstream). All payments of interest on, principal of, or Additional Amounts
on, a Global Note shall be made to or to the order of the Depositary or its nominee, as the case may be, as the
Holder thereof.
Every Note authenticated and delivered upon registration of transfer of, or in exchange for or in
lieu of, a Global Note or any portion thereof, whether pursuant to this Section 2.5, Section 2.6, Section 2.7 or
otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Note, unless such Note is
registered in the name of a Person other than the Depositary for such Global Note or a nominee thereof.
Neither the Fiscal Agent nor any Agent shall have any responsibility or liability for any actions
taken or not taken by the Depositary.
SECTION 2.6. Transfer Restrictions.
(a)
The Global Notes shall be subject to the restrictions on transfers (the “Transfer
Restrictions”) provided in the applicable legends (the “Legends”) required to be set forth on the face of each
Global Note as provided in Exhibits A-1, A-2, A-3 and A-4 hereto, and each Holder of a Global Note and each
owner of a beneficial interest in a Global Note, by its acceptance thereof, agrees to be bound by and comply with
the Transfer Restrictions, in each case unless compliance with the Transfer Restrictions shall be waived by the
Company in writing delivered to the Fiscal Agent.
(b)
The Transfer Restrictions shall cease and terminate with respect to any particular
Global Note upon receipt by the Company of evidence satisfactory to it (which may include an opinion of
independent counsel experienced in matters of United States federal securities law) that, as of the date of
determination, such Global Note (a) has been sold pursuant to an effective registration statement under the
Securities Act or (b) has been transferred (i) in a transaction satisfying all the requirements of Rule 903 or 904
(as applicable) of Regulation S under the Securities Act or (ii) pursuant to Rule 144 under the Securities Act. All
references in the preceding sentence to any regulation, rule or provision thereof shall be deemed also to refer to
any successor provisions thereof.
(c)
At the request of the Holder and upon the surrender of such Global Note to the Fiscal
Agent for exchange in accordance with the provisions of this Section 2.6, any Global Note as to which the
Transfer Restrictions shall have terminated in accordance with the preceding paragraph shall be exchanged for a
new Note, of like tenor and aggregate principal amount, but without the Legends.
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(d)
As used in this Section 2.6, the term “transfer” encompasses any sale, pledge, transfer
or other disposition of any Notes referred to herein.
(e)
Rule 144A Global Note to Regulation S Global Note. If the owner of a beneficial
interest (an “Owner Transferor”) in a Rule 144A Global Note wishes at any time to transfer such beneficial
interest to a Person (an “Owner Transferee”) who wishes to take delivery thereof in the form of a beneficial
interest in a Regulation S Global Note, such transfer may be effected, subject to the Applicable Procedures, only
in accordance with the provisions of this paragraph (e). “Applicable Procedures” means, with respect to any
transfer of a beneficial interest in a Global Note, the rules and procedures of Euroclear and Clearstream to the
extent the same are applicable to such transfer and shall be complied with by any Holder or any party which has a
beneficial interest in a Global Note; provided, however, the Fiscal Agent shall not be responsible for determining
any compliance with such rules and procedures. Upon receipt by the Fiscal Agent of (1) written instructions
given in accordance with the Applicable Procedures from a Participant whose account is to be debited (a
“Participant Transferor”) with respect to the Rule 144A Global Note directing the Fiscal Agent to credit or
cause to be credited to a specified account of another Participant (a “Participant Transferee”) a beneficial
interest in a Regulation S Global Note in a principal amount equal to that of the beneficial interest in the Rule
144A Global Note to be so transferred (the “Rule 144A Global Transferred Amount”), (2) a written order
given in accordance with the Applicable Procedures containing information regarding the account of the
Participant Transferee to be credited with, and the account of the Participant Transferor to be debited for, the
Rule 144A Global Transferred Amount and (3) a certificate in substantially the form set forth in Exhibit B hereto
given by the Owner Transferor stating that the transfer has been made pursuant to and in accordance with Rule
903 or Rule 904 of Regulation S under the Securities Act, the Fiscal Agent shall instruct Euroclear or
Clearstream, as applicable, to reduce the principal amount of the Rule 144A Global Note, and to increase the
principal amount of the Regulation S Global Note, by the Rule 144A Global Transferred Amount, and to credit
or cause to be credited to the account of the Participant Transferee a beneficial interest in the Regulation S
Global Note, and to debit or cause to be debited to the account of the Participant Transferor a beneficial interest
in the Rule 144A Global Note, in each case having a principal amount equal to the Rule 144A Global Transferred
Amount.
(f)
Regulation S Global Note to Rule 144A Global Note. If an Owner Transferor wishes at
any time to transfer a beneficial interest in a Regulation S Global Note to an Owner Transferee who wishes to
take delivery thereof in the form of a beneficial interest in a Rule 144A Global Note, such transfer may be
effected, subject to the Applicable Procedures, only in accordance with this Section 2.6(f). Upon receipt by the
Fiscal Agent of (1) written instructions given in accordance with the Applicable Procedures from the Participant
Transferor, directing the Fiscal Agent to credit or cause to be credited to a specified account of a Participant
Transferee a beneficial interest in a Rule 144A Global Note in a principal amount equal to that of the beneficial
interest in the Regulation S Global Note to be so transferred (the “Regulation S Global Transferred Amount”),
(2) a written order given in accordance with the Applicable Procedures containing information regarding the
account of the Participant Transferee to be credited with, and the account of the Participant Transferor to be
debited for, the Regulation S Global Amount, and (3) if the transfer is prior to or on the 40th day after the later of
the commencement of the offering of the Notes and the issue date of the Notes, a certificate in substantially the
form set forth in Exhibit C hereto given by the Owner Transferor stating (A) that the Person transferring such
interest in a Regulation S Global Note (i) reasonably believes that the Person acquiring such interest in a Rule
144A Global Note is a Qualified Institutional Buyer purchasing for its own account (or for the account of one or
more Qualified Institutional Buyers over which account it exercises sole investment discretion), (ii) has notified
such Person of the transfer restrictions applicable to the Global Notes, and (B) the transfer is in accordance with
any applicable securities laws of any state of the United States or any other applicable jurisdiction, the Fiscal
Agent shall instruct Euroclear or Clearstream, as applicable, to reduce the principal amount of the Regulation S
Global Note, and to increase the principal amount of the Rule 144A Global Note, by the Regulation S Global
Transferred Amount, and to credit or cause to be credited to the account of the Participant Transferee a beneficial
interest in the Rule 144A Global Note, and to debit or cause to be debited to the account of the Participant
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Transferor a beneficial interest in the Regulation S Global Note, in each case having a principal amount equal to
the Regulation S Global Transferred Amount.
SECTION 2.7. Mutilated, Destroyed, Lost and Stolen Notes.
If any mutilated Note is surrendered to the Fiscal Agent, the Company shall execute, and the
Fiscal Agent shall authenticate and deliver in exchange therefor, a new Note of like tenor and principal amount
and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Fiscal Agent (i) evidence to their satisfaction
of the destruction, loss or theft of any Note and (ii) indemnity satisfactory to them to save each of them and any
of their agents harmless, from any losses or claims incurred in connection with the issuance of a new Note, then,
in the absence of notice to the Company or the Fiscal Agent that such Note has been acquired by a bona fide
purchaser, the Company shall execute and the Fiscal Agent shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Note, a new Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become or is about to become
due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section 2.7, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Fiscal Agent) connected therewith.
Every new Note issued pursuant to this Section 2.7 in exchange for any mutilated Note or in
lieu of any destroyed, lost or stolen Note shall constitute an original contractual obligation of the Company,
whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Agreement equally and proportionately with any and all other Notes duly
issued hereunder.
The provisions of this Section 2.7 are exclusive and shall preclude (to the extent lawful) all
other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen
Notes.
SECTION 2.8. Persons Deemed Owners.
Prior to due presentment of a Note for registration of transfer, the Company, the Fiscal Agent
and any agent of the Company or the Fiscal Agent may treat the Person in whose name such Note is registered as
the owner of such Note for the purpose of receiving payment of principal of and any interest on such Note and
for all other purposes whatsoever, whether or not such Note be overdue, and neither the Company, the Fiscal
Agent nor any agent of the Company or the Fiscal Agent shall be affected by notice to the contrary. In
considering the interests of the Holders of Notes while title to the Notes is registered in the name of a nominee of
the Depositary, the Fiscal Agent may refer to any information made available to it by the Depositary as to the
identity (either individually or by category) of its Participants or persons who hold interests through such
Participants with entitlements to Notes and may consider such interests as if such accountholders were the
Holders of the Notes. For the purposes of enforcement of the provisions of this Agreement against the Fiscal
Agent, the persons named in a certificate of the Holder of any Global Note in respect of which a global certificate
is issued shall be recognized as the beneficiaries of this Agreement, to the extent of the principal amounts of their
interests in the Notes set out in the certificate of the Holder, as if they were themselves the Holders of the Notes
in such principal amounts.
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SECTION 2.9. Cancellation.
All Notes surrendered for payment, redemption, registration of transfer or exchange shall, if
surrendered to any Person other than the Fiscal Agent, be delivered to the Fiscal Agent and shall be promptly
canceled by it. The Company may at any time deliver to the Fiscal Agent for cancellation any Notes previously
authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and
may deliver to the Fiscal Agent (or to any other Person for delivery to the Fiscal Agent) for cancellation any
Notes previously authenticated hereunder which the Company has not issued and sold, and all Notes so delivered
shall be promptly canceled by the Fiscal Agent. No Notes shall be authenticated in lieu of or in exchange for any
Notes canceled as provided in this Section 2.9, except as expressly permitted by this Agreement. All canceled
Notes (and all Notes paid in full at final maturity thereof) held by the Fiscal Agent shall be disposed of in
accordance with the Fiscal Agent’s customary practices.
SECTION 2.10.
Japanese Withholding Taxes.
(a)
In compliance with Japanese tax laws and the practices of tax authorities in Japan, in
respect of any interest payment on the Notes issued in global or book-entry form pursuant to this Agreement or
any amendments or supplements hereto, any Paying Agent shall act in accordance with the procedures and forms
set out
in the applicable and most recent memorandum prepared by the International Capital Markets
Association, or any other organization or organizations that succeed the International Capital Markets
Association (as may be amended or supplemented from time to time by notice from such association) entitled
“Compliance Procedures for International Securities Offerings by Japanese Issuers”, intended to provide for the
administration of the Act on Special Taxation Measures (the “ICMA Procedures”). Except as otherwise
provided in this Agreement, any such Paying Agent shall be responsible only for performing such services as are
specifically provided for in the ICMA Procedures or such other procedures actually known by the Paying Agent,
as applicable and as may be amended or modified and communicated to the Paying Agent from time to time. Any
such Paying Agent and the Company may rely on the information provided in the claim for exemption from
Japanese withholding taxes and other documentation in the absence of actual knowledge to the contrary. If any
interest payment on a Note is due to be made hereunder, and if and so long as payments of interest (if any) by the
Company to any Paying Agent may be made without withholding or deduction for or on account of Japanese tax
only upon receipt of Tax Documentation, the relevant Paying Agent at the direction of the Company, shall
(i) accept delivery of the required Tax Documentation from the clearing organization (or Holders of the Notes, if
definitive Notes have been issued); (ii) provide to the Company any required confirmations of information
available to it; and (iii) deliver such Tax Documentation to, or on the written order of, the Company via facsimile
no later than two Business Days after the Paying Agent has received such Tax Documentation, followed by first
class mail or express courier at the address stipulated in Section 1.5, for filing with the relevant Japanese district
tax office. Any such Paying Agent may rely on the information provided in Tax Documentation (including,
where relevant, supporting documentation) in the absence of actual knowledge that such information is incorrect.
(b)
If a Holder of the Notes or the holder of a depositary interest representing the Notes
satisfies the requirements for claiming an exemption from Japanese withholding tax after the date on which an
amount in respect of such tax is withheld and before the date on which the tax is actually paid to the Japanese tax
authorities, then the Company or the Paying Agent acting at the direction of the Company may, to the extent
reasonably practicable, repay the amount withheld (after deduction of reasonable costs, including amounts in
respect of changes in foreign exchange rates) to the Holder.
SECTION 2.11.
Japanese Withholding Tax Legend.
Each Global Note and each definitive Note issued for exchange for a beneficial interest in the
Global Note shall bear the following legend relating to Japanese withholding tax:
“INTEREST PAYMENTS ON THIS NOTE GENERALLY WILL BE SUBJECT TO
JAPANESE WITHHOLDING TAX UNLESS IT IS ESTABLISHED THAT THIS NOTE IS HELD BY OR
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FOR THE ACCOUNT OF A BENEFICIAL OWNER THAT IS (I) FOR JAPANESE TAX PURPOSES,
NEITHER AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION, NOR AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A PERSON HAVING A SPECIAL RELATIONSHIP WITH THE COMPANY AS DESCRIBED IN
ARTICLE 6, PARAGRAPH (4) OF THE ACT ON SPECIAL MEASURES CONCERNING TAXATION OF
JAPAN (ACT NO. 26 OF 1957, AS AMENDED) (THE “ACT ON SPECIAL TAXATION MEASURES”) (A
“SPECIALLY-RELATED PERSON OF THE COMPANY”),
(II) A JAPANESE FINANCIAL
INSTITUTION OR A JAPANESE FINANCIAL INSTRUMENTS BUSINESS OPERATOR DESIGNATED IN
ARTICLE 3-2-2, PARAGRAPH (28) OF THE CABINET ORDER (CABINET ORDER NO. 43 OF 1957, AS
AMENDED) RELATING TO THE ACT ON SPECIAL TAXATION MEASURES WHICH COMPLIES WITH
THE REQUIREMENT FOR TAX EXEMPTION UNDER ARTICLE 6, PARAGRAPH (9) OF THE ACT ON
SPECIAL TAXATION MEASURES OR (III) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION
OR A FINANCIAL INSTRUMENTS BUSINESS OPERATOR, ETC. DESCRIBED IN ARTICLE 3-3,
PARAGRAPH (6) OF THE ACT ON SPECIAL TAXATION MEASURES WHICH HAS RECEIVED SUCH
PAYMENTS THROUGH A PAYMENT HANDLING AGENT IN JAPAN AS DESCRIBED IN PARAGRAPH
(1) OF SAID ARTICLE AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER
THAT PARAGRAPH.
INTEREST PAYMENTS ON THIS NOTE TO AN INDIVIDUAL RESIDENT OF JAPAN,
TO A JAPANESE CORPORATION NOT DESCRIBED IN THE PRECEDING PARAGRAPH, OR TO AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A SPECIALLY-RELATED PERSON OF THE COMPANY WILL BE SUBJECT TO JAPANESE
INCOME TAX AT THE TIME OF SUCH INTEREST PAYMENTS.”
SECTION 2.12.
Issuance in Euros.
Principal, premium, if any, and interest payments and additional amounts, if any, in respect of
the Notes will be payable in euros. If the euro is unavailable to the Company due to the imposition of exchange
controls or other circumstances beyond its control or the euro is no longer used by the then member states of the
European Monetary Union that have adopted the euro as their currency or for the settlement of transactions by
public institutions within the international banking community, then all payments in respect of the Notes will be
made in U.S. dollars until the euro is again available to the Company or so used. In such circumstances, the
amount payable on any date in euros will be converted to U.S. dollars on the basis of the most recently available
market exchange rate for euros, as determined by the Company in its sole discretion. Any payment in respect of
the Notes so made in U.S. dollars will not constitute an Event of Default. Neither the Fiscal Agent nor the Paying
Agent will be responsible for obtaining exchange rates, effecting conversions or otherwise handling
redenominations.
SECTION 2.13. Book-entry Provisions for Global Notes.
(a)
The Global Notes representing the Notes shall be deposited with, or on behalf of, a
common depositary for Euroclear and Clearstream (the “Depositary”), and registered in the name of such
common depository or its nominee for the accounts of Euroclear and Clearstream, duly executed by the Company
and authenticated by the Fiscal Agent pursuant to the terms of this Agreement. Each such Global Note shall
constitute a single security for all purposes of this Agreement.
(b)
Notwithstanding any other provision in this Agreement, no Global Note may be
exchanged in whole or in part for Notes registered, and no transfer of a Global Note in whole or in part may be
registered, in the name of any Person other than the Depositary for such Global Note or a nominee thereof unless
(A) Euroclear or Clearstream is closed for business for a continuous period of 14 days (other than by reason of
holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so,
(B) the Company determines at any time that the Notes shall no longer be represented by Global Notes and shall
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inform Euroclear or Clearstream of such determination and participants in Euroclear or Clearstream elect to
withdraw their beneficial interests in the Notes from such Depositary, following notification by the Depositary of
their right to do so, or (C) such exchange is made upon request by or on behalf of the Depositary in accordance
with customary procedures, following the request of a Holder seeking to exercise or enforce its rights under the
Notes during the continuance of an Event of Default.
(c)
Subject to clause (b) above, any exchange of a Global Note for other Notes may be
made in whole or in part, and all Notes issued in exchange for a Global Note or any portion thereof shall be
registered in such names as the Depositary for such Global Note shall direct in writing to the Fiscal Agent.
(d)
Every Note authenticated and delivered upon registration of transfer of, or in exchange
for or in lieu of, a Global Note or any portion thereof shall be authenticated and delivered in the form of, and
shall be, a Global Note, unless such Note is registered in the name of a Person other than the Depositary for such
Global Note or a nominee thereof.
(e)
Subject to the provisions of clause (g) below, the registered Holder may grant proxies
and otherwise authorize any Person, including Agent Members (as defined below in clause (g)) and Persons that
may hold interests through Agent Members, to take any action which a Holder is entitled to take under this
Agreement or the Notes.
(f)
In the event of the occurrence of any of the events specified in clause (b) above, the
Company will promptly make available to the Fiscal Agent a reasonable supply of certificated Notes in
definitive, fully registered form, without interest coupons.
(g)
Neither any members of, or participants in, Euroclear or Clearstream (collectively, the
“Agent Members”) nor any other Persons on whose behalf Agent Members may act shall have any rights under
this Agreement with respect to any Global Note registered in the name of the Depositary or any nominee thereof,
or under any such Global Note, and the Depositary or such nominee, as the case may be, may be treated by the
Company, the Fiscal Agent and any agent of the Company or the Fiscal Agent as the absolute owner and Holder
of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company or the Fiscal Agent or any agent of the Company or the Fiscal Agent from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or
impair, as between the Depositary, its Agent Members and any other Person on whose behalf an Agent Member
may act, the operation of customary practices of such Persons governing the exercise of the rights of a Holder of
any Note.
ARTICLE III
SATISFACTION AND DISCHARGE
SECTION 3.1.
Satisfaction and Discharge of Agreement.
The Company may terminate all of its obligations under this Agreement (except as to any
surviving rights of registration of transfer or exchange of Notes herein expressly provided for), and the Fiscal
Agent, at the expense of the Company, shall execute instruments in form and substance satisfactory to the Fiscal
Agent and the Company acknowledging satisfaction and discharge of this Agreement, when
(1)
either
(A)
all Notes theretofore authenticated and delivered (other than Notes which have been
mutilated, destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.7)
have been delivered to the Fiscal Agent for cancellation; or
(B)
all such Notes not theretofore delivered to the Fiscal Agent for cancellation
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(i)
have become due and payable,
(ii)
will become due and payable at their maturity date within one year, or
(iii)
are to be called for redemption pursuant to Section 10.1, Section 10.2, Section 10.3,
Section 10.04 or Section 10.5 within one year under arrangements satisfactory to the Fiscal Agent for
the giving of notice of redemption by the Fiscal Agent in the name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the
Fiscal Agent as trust funds in trust for such purpose money in an amount sufficient to pay and discharge
the entire indebtedness on such Notes not theretofore delivered to the Fiscal Agent for cancellation, for
principal and interest to the date of such deposit (in the case of Notes which have become due and
payable) or to the Redemption Date, as the case may be;
(2)
the Company has paid or caused to be paid or made provision satisfactory to the Fiscal
Agent for the payment of all other sums payable hereunder by the Company; and
(3)
the Company has delivered to the Fiscal Agent an Officer’s Certificate and an Opinion
of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and
discharge of this Agreement have been complied with.
Notwithstanding the satisfaction and discharge of this Agreement, the obligations of the
Company to the Fiscal Agent under Section 4.6, Section 5.6 and Section 9.3, any obligations of the Fiscal Agent
under Section 3.2 and any rights of registration of transfer, exchange or replacement of Notes provided in
Section 2.4, Section 2.5, Section 2.6, Section 2.7, or Section 9.2 and any rights to Additional Amounts pursuant
to Section 9.5 shall survive such satisfaction and discharge.
SECTION 3.2. Application of Trust Money.
All money deposited with the Fiscal Agent pursuant to Section 3.1 shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this Agreement, to the payment, either directly
or through any Paying Agent as the Fiscal Agent may determine, to the Persons entitled thereto, of the principal
and any interest (or Additional Amounts, if any) for whose payment such money has been deposited with the
Fiscal Agent.
ARTICLE IV
REMEDIES OF THE FISCAL AGENT AND HOLDERS ON EVENT OF DEFAULT
SECTION 4.1. Event of Default. Unless otherwise established hereunder or by
any applicable amendment or supplement hereto, an “Event of Default” with respect to the Notes shall mean any
one of the following events which shall have occurred and be continuing (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental
body):
1.
2.
default shall be made for more than seven days in the payment of principal or for more
than 30 days in the payment of interest in respect of any of the Notes; or
the Company defaults in the performance or observance of any covenant, condition or
provision contained in the Notes or in this Agreement for a period of 60 days after
written notification requesting such default to be remedied by the Company shall first
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have been given to the Company (and to the Fiscal Agent in the case of notice by the
Holders referred to below) by the Fiscal Agent or Holders of at least 25% in principal
amount of the then Outstanding Notes (such notification must specify the Event of
Default, demand that it be remedied and state that the notification is a “Notice of
Default” hereunder); or
the Company shall have become bound as a consequence of a default by it in its
obligations in respect of any indebtedness for borrowed moneys having a total
principal amount then outstanding of at least $50,000,000 (or its equivalent in any
other currency or currencies) contracted or incurred by it prematurely to repay the
same, or the Company shall have defaulted in the repayment of any such indebtedness
contracted or incurred by it at the later of the maturity thereof or the expiration of any
applicable grace period therefor, or the Company shall have failed to pay when
properly called upon to do so, and after the expiration of any applicable grace period,
any guarantee contracted or incurred by it of any such indebtedness in accordance
with the terms of any such guarantee; provided, however, that, prior to any judgment,
if any such default under such indebtedness shall be cured by the Company, or be
waived by the holders of such indebtedness, in each case as may be permitted under
the terms of such indebtedness, then the Event of Default hereunder by reason of such
default shall be deemed likewise to have been thereupon cured or waived; or
a final and non-appealable order of a court of competent jurisdiction shall be made or
an effective resolution of the Company shall be passed for the winding-up or
dissolution of the Company except for the purposes of or pursuant to a consolidation,
amalgamation, merger or reconstruction under which the continuing corporation or the
corporation formed as a result thereof effectively assumes the entire obligations of the
Company under this Agreement in relation to the Notes; or
an encumbrancer shall have taken possession, or a trustee or receiver shall have been
appointed, in bankruptcy, civil rehabilitation, reorganization or insolvency of the
Company, of all or substantially all of its assets and undertakings and such possession
or appointment shall have continued undischarged and unstayed for a period of
60 days; or
the Company shall stop payment (within the meaning of the bankruptcy law of Japan)
or (otherwise than for the purposes of such a consolidation, amalgamation, merger or
reconstruction as is referred to in paragraph 4 above) shall cease to carry on business
or shall be unable to pay its debts generally as and when they fall due; or
a decree or order by any court having jurisdiction shall have been issued adjudging the
Company bankrupt or insolvent, or approving a petition seeking with respect to the
Company reorganization or
rehabilitation,
reorganization or insolvency law of Japan, and such decree or order shall have
continued undischarged and unstayed for a period of 60 days; or
liquidation under bankruptcy, civil
initiate or consent
the Company shall
to proceedings relating to itself under
bankruptcy, civil rehabilitation, reorganization or insolvency law of Japan or shall
make a conveyance or assignment for the benefit of, or shall enter into any
composition with, its creditors generally.
3.
4.
5.
6.
7.
8.
SECTION 4.2. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default with respect to the Notes occurs and is continuing, then in every such case (other than an Event
23
of Default specified in Section 4.1(7) or Section 4.1(8)) the Fiscal Agent or the Holders of not less than 25% in
principal amount of the Outstanding Notes of each affected series may declare the principal amount of all the
Notes of such affected series to be due and payable immediately, by a notice in writing to the Company (and to
the Fiscal Agent if given by Holders), and upon any such declaration such principal amount together with all
accrued and unpaid interest shall become immediately due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising under Section 4.1(7)
or Section 4.1(8) with respect to us, the principal of and interest on all outstanding Notes will become
immediately due and payable without further action or notice. In addition, the fiscal agent shall have no
obligation to accelerate the Notes if, in the reasonable judgment of the fiscal agent, acceleration is not in the best
interest of the holders.
At any time after such a declaration of acceleration with respect to the Notes has been made
and before a judgment or decree for payment of the money due has been obtained by the Fiscal Agent as
hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Notes, by
written notice to the Company and the Fiscal Agent, may rescind and annul such declaration and its
consequences if
(1)
the Company has paid or deposited with the Fiscal Agent a sum sufficient to pay
(A)
all overdue interest on all Notes,
(B)
the principal of (and premium, if any, on) any Notes which have become due otherwise
than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor
in such Notes,
(C)
to the extent that payment of such interest is lawful, interest upon overdue interest at
the rate or rates prescribed therefor in such Notes, and
(D)
all sums paid or advanced by the Fiscal Agent hereunder and the compensation and the
reasonable expenses, disbursements and advances of the Fiscal Agent, its agents and counsel; and
(2)
all Events of Default with respect to Notes, other than the non-payment of the principal
of Notes which have become due solely by such declaration of acceleration, have been cured or waived
as provided in Section 4.13.
No such rescission shall affect any subsequent default or impair any right consequent thereon.
SECTION 4.3. Collection of Indebtedness and Suits for Enforcement by
Fiscal Agent. The Company covenants that if
(1)
default is made in the payment of any interest on any Note when such interest becomes
due and payable and such default continues for a period of 30 days, or
(2)
default is made in the payment of the principal of (or premium, if any, on) any Note at
the maturity thereof and such default continues for a period of seven days,
the Company will, upon demand of the Fiscal Agent, pay to it, for the benefit of the Holders of
such Notes, the whole amount then due and payable on such Notes for principal and any premium and interest
and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and
premium and on any overdue interest, at the rate or rates prescribed therefor in such Notes, if any, and, in
24
addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection,
including the compensation and the reasonable expenses, disbursements and advances of the Fiscal Agent, its
agents and counsel.
If an Event of Default with respect to the Notes occurs and is continuing, the Fiscal Agent may
in its discretion proceed to protect and enforce its rights and the rights of the Holders of Notes by such
appropriate judicial proceedings as the Fiscal Agent shall deem most effectual to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in this Agreement or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 4.4. Fiscal Agent May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any other obligor upon the
Notes), its property or its creditors, the Fiscal Agent shall be entitled and empowered to institute any action or
proceedings at law or in equity for the collection of the sums due and unpaid, and may prosecute any such action
or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the
Company upon the Notes and collect in the manner provided by law out of the property of the Company,
wherever situated, the monies adjudged or decreed to be payable. In particular, the Fiscal Agent shall be
authorized to collect and receive any moneys or other property payable or deliverable on 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 Fiscal Agent
and, in the event that the Fiscal Agent shall consent to the making of such payments directly to the Holders, to
pay to the Fiscal Agent any amount due it for the compensation and the reasonable expenses, disbursements and
advances of the Fiscal Agent, its agents and counsel, and any other amounts due the Fiscal Agent under
Section 5.6.
No provision of this Agreement shall be deemed to authorize the Fiscal Agent to authorize or
consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to authorize the Fiscal Agent to vote in
respect of the claim of any Holder in any such proceeding; provided, however, that the Fiscal Agent may, on
behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a
creditors’ or other similar committee.
SECTION 4.5. Fiscal Agent May Enforce Claims Without Possession of
Notes.
All rights of action and claims under this Agreement or the Notes may be prosecuted and
enforced by the Fiscal Agent without the possession of any of the Notes or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Fiscal Agent shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Fiscal Agent, its agents and counsel, be
for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered.
SECTION 4.6. Application of Money Collected.
Any money collected by the Fiscal Agent pursuant to this Article shall be applied in the
following order, at the date or dates fixed by the Fiscal Agent and, in case of the distribution of such money on
account of principal or any premium or interest, upon presentation of the Notes and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Fiscal Agent and any predecessor Fiscal Agent
under Section 5.6; and
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SECOND: To the payment of the amounts then due and unpaid for principal of and interest on
the Notes (including Additional Amounts, if any) in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on
such Notes for principal and interest, respectively.
SECTION 4.7. Limitation on Suits.
Other than the right to institute a suit for the enforcement of the payment of principal of, or
interest on (including, in each case, any Additional Amounts, if applicable), any Notes after the applicable due
date specified in the Notes, no Holder of any Note shall have any right to institute any proceeding with respect to
this Agreement, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Fiscal Agent of a continuing Event of Default; (b) the
Holders of not less than 25% in aggregate principal amount of the Notes of each affected series shall have made
written request to the Fiscal Agent to institute proceedings in respect of such Event of Default in its own name as
Fiscal Agent; (c) such Holder or Holders have offered to the Fiscal Agent indemnity reasonably satisfactory to it
against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Fiscal Agent for
60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding;
and (e) no direction inconsistent with such written request has been given to the Fiscal Agent during such 60-day
period by the Holders of a majority in aggregate principal amount of the Notes of each affected series.
No one or more of such Holders shall have any right in any manner whatsoever by virtue of, or
by availing of, any provision of this Agreement to affect, disturb or prejudice the rights of any other of such
Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any
right under this Agreement, except in the manner herein provided and for the equal and ratable benefit of all of
such Holders.
SECTION 4.8. Right of Holders to Receive Principal and Interest.
Notwithstanding any other provision of this Agreement and any provision of any Note, the
right of any Holder to receive payment of the principal of, and interest on, such Note on or after the respective
due dates expressed in such Note (or, in the case of redemption, on the Redemption Date), or to institute suit for
the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.
SECTION 4.9. Restoration of Rights and Remedies.
If the Fiscal Agent or any Holder has instituted any proceeding to enforce any right or remedy
under this Agreement and such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Fiscal Agent or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Fiscal Agent and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and remedies of the Fiscal Agent and the
Holders shall continue as though no such proceeding had been instituted.
SECTION 4.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect
to the replacement or payment of mutilated,
destroyed, lost or stolen Notes in Section 2.7 and as provided in Section 4.7, no right or remedy herein conferred
upon or reserved to the Fiscal Agent 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.
26
SECTION 4.11. Delay or Omission Not Waiver.
No delay or omission of the Fiscal Agent or of any Holder of any Notes to exercise any right or
remedy accruing upon any Event of Default or otherwise 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 or
by law to the Fiscal Agent or to the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Fiscal Agent or by the Holders, as the case may be.
SECTION 4.12. Control by Holders.
The Holders of a majority in principal amount of the Outstanding Notes shall have the right to
direct the time, method and place of conducting any proceeding for any remedy available to the Fiscal Agent, or
exercising any trust or power conferred on the Fiscal Agent, provided that
(1)
(2)
such direction shall not be in conflict with any rule of law or with this Agreement,
the action so directed would not be unjustly prejudicial to the Holders not taking part in
such direction or would involve the Fiscal Agent in personal liability,
(3)
the Fiscal Agent may take any other action deemed proper by the Fiscal Agent which is
not inconsistent with such direction, and
(4)
the Fiscal Agent shall not be advised by counsel that the action or proceeding so
directed may not lawfully be taken, and
provided further that the Fiscal Agent shall be under no obligation to determine whether any
such direction shall be in such conflict or so unjustly prejudicial to the Holders not taking part in such direction.
Nothing in this Agreement shall impair the right of the Fiscal Agent in its discretion to take any
action deemed proper by the Fiscal Agent and which is not inconsistent with such direction by Holders of Notes.
SECTION 4.13. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount of the Outstanding Notes
of the relevant series may, on behalf of the Holders of all the Notes of such series, waive any past default
hereunder, except a default
(1)
in the payment of the principal of or interest on any Note or any Additional Amounts
payable in respect thereof, or
(2)
in respect of a covenant or provision hereof which under Article VIII cannot be
modified or amended without the consent of the Holder of each Outstanding Note affected thereby.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose under this Agreement, but no such waiver shall
extend to any subsequent or other default or impair any right consequent thereon.
SECTION 4.14. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Agreement, or in any suit
against the Fiscal Agent for any action taken, suffered or omitted by it as Fiscal Agent, a court may require any
party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess reasonable costs,
27
including reasonable attorneys’ fees and expenses, against any such party litigant; provided that no court shall
require such an undertaking or to make such an assessment in any suit instituted by the Company, the Fiscal
Agent or any Holder or group of Holders holding in aggregate more than 10% in aggregate principal amount of
the Outstanding Notes of a series, or to any suit instituted by any Holder for the enforcement of the payment of
the principal of or interest on any Outstanding Note on or after the due date expressed in such Note.
SECTION 4.15. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it will not at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the
performance of this Agreement; and the Company (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Fiscal Agent, but will suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE V
THE FISCAL AGENT
SECTION 5.1. Certain Duties and Responsibilities.
The Fiscal Agent accepts its obligations herein set forth upon the terms and conditions hereof,
including the following, to all of which the Company agrees and to all of which the rights of Holders of Notes are
subject:
(1)
In acting under this Agreement and in connection with the Notes, the Fiscal Agent is
acting solely as an agent of the Company and does not assume any responsibility for the correctness of
the recitals in the Notes (except for the correctness of the statement of the Fiscal Agent in its certificate
of authentication thereon) or any obligation or relationship of agency, for or with any of the owners or
Holders of the Notes.
(2) The Fiscal Agent may consult with its counsel at the Company’s expense, and the opinion
of such counsel shall be full and complete authorization and protection in respect of any action taken or
suffered by them hereunder in good faith and without negligence and in accordance with such opinion.
(3) The Fiscal Agent shall (except as ordered by a court of competent jurisdiction or as
required by any applicable law), notwithstanding any notice to the contrary, be entitled to treat the
Holder of any Security as the owner thereof, shall not be liable for so doing and shall be indemnified
and held harmless by the Company against any loss, liability, claim, demand or expense arising from or
based upon it so doing.
(4) Except as may otherwise be agreed, the Fiscal Agent shall not be under any liability for
interest on monies at any time received by it pursuant to any of the provisions of this Agreement or of
the Notes.
(5) The duties and obligations of the Fiscal Agent shall be determined solely by the express
provisions of this Agreement and the Notes and the Fiscal Agent shall not be liable except for the
performance of such duties and obligations as are specifically set forth in this Agreement and the Notes,
and no implied covenants or obligations shall be read into this Agreement or the Notes against the Fiscal
Agent.
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SECTION 5.2. Certain Rights of Fiscal Agent.
Subject to the provisions of Section 5.1:
(1)
the Fiscal Agent may rely and shall be protected in acting or refraining from acting
upon any 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 party or parties;
(2)
any request or direction of the Company mentioned herein shall be sufficiently
evidenced by a Company Request or Company Order, and any resolution of the Board of Directors shall
be sufficiently evidenced by a Board Resolution;
(3)
whenever in the administration of this Agreement the Fiscal Agent shall deem it
desirable that a matter be proved or established prior to taking, suffering or omitting any action
hereunder, the Fiscal Agent (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officer’s Certificate;
(4)
the Fiscal Agent 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 by it hereunder in good faith and in reliance thereon;
(5)
the Fiscal Agent shall be under no obligation to exercise any of the rights or powers
vested in it by this Agreement at the request or direction of any of the Holders pursuant to this
Agreement, unless such Holders shall have offered to the Fiscal Agent security or indemnity reasonably
satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(6)
the Fiscal Agent shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but
the Fiscal Agent, in its discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Fiscal Agent shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises of the Company, personally
or by agent or attorney, it being understood that all reasonable expenses incurred in connection with
such inquiry or investigation shall be borne by the Company and the Fiscal Agent shall incur no liability
or additional liability of any kind by reason of such inquiry or investigation;
(7)
the Fiscal Agent may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through agents or attorneys and the Fiscal Agent shall not be
responsible for any misconduct or negligence on the part of any agent or attorney appointed with due
care by it hereunder;
(8)
the Fiscal Agent shall not be deemed to have or charged with knowledge of any default
or Event of Default unless (a) a Responsible Officer of the Fiscal Agent shall have actual knowledge of
such default or Event of Default or (b) written notice of such default or Event of Default shall have been
given to a Responsible Officer of the Fiscal Agent by the Company or by any Holder of such Notes, and
such notice references this Agreement and the Notes;
(9)
the Fiscal Agent shall not be liable for any action taken, suffered, or omitted to be taken
by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement;
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(10)
the Fiscal Agent shall not be required to give any bond or surety in respect of the
performance of its powers and duties hereunder;
(11)
the rights, privileges, protections, immunities and benefits given to the Fiscal Agent,
including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by,
the Fiscal Agent in each of its capacities hereunder, and each agent, custodian and other Person
employed to act hereunder; and
(12)
the Fiscal Agent may request that the Company deliver a certificate setting forth the
names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to
this Agreement.
SECTION 5.3. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except the Fiscal Agent’s certificates of
authentication, shall be taken as the statements of the Company, and the Fiscal Agent does not assume any
responsibility for their correctness. The Fiscal Agent makes no representations as to the validity or sufficiency of
this Agreement or of the Notes. The Fiscal Agent shall not be accountable for the use or application by the
Company of the Notes or the proceeds thereof.
SECTION 5.4. May Hold Notes.
The Fiscal Agent, any Paying Agent, any Calculation Agent, the Notes Registrar or any other
agent of the Fiscal Agent or the Company, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company with the same rights it would have if it were not
Fiscal Agent, Paying Agent, Calculation Agent, Notes Registrar or such other agent.
SECTION 5.5. Money Held in Trust.
Money held by the Fiscal Agent in trust hereunder need not be segregated from other funds
except to the extent required by law. The Fiscal Agent shall be under no liability for interest on or investment of
any money received by it hereunder except as otherwise agreed in writing with the Company.
SECTION 5.6. Compensation and Reimbursement.
The Company agrees
(1)
to pay to the Fiscal Agent from time to time such compensation for all services
rendered by it hereunder in such amounts as shall have been agreed upon in writing by the Company and
the Fiscal Agent from time to time (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(2)
except as otherwise expressly provided herein, to reimburse the Fiscal Agent upon its
request for all reasonable expenses, disbursements and advances incurred or made by the Fiscal Agent
in accordance with any provision of this Agreement (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense, disbursement or
advance as may be attributable to its negligence, bad faith or willful misconduct; and
(3)
to indemnify the Fiscal Agent for, and to defend and hold it harmless against, any loss,
liability or expense arising out of or in connection with the acceptance or administration of this trust or
trusts hereunder, including taxes (other than taxes based upon or determined by the income of the Fiscal
Agent) and the costs and expenses of defending itself against any claim (whether asserted by the
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Company, a Holder or any other Person) or liability in connection with the exercise or performance of
any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence, bad faith or willful misconduct.
Notwithstanding anything to the contrary herein, under no circumstances will the Fiscal Agent
or any Agent be liable to the Company or any other party to this Agreement for any special, indirect, punitive or
consequential loss or damage of any kind whatsoever (inter alia, being loss of business, goodwill, opportunity or
profit); in each case however caused or arising and whether or not foreseeable, even if the Fiscal Agent or the
Agent has been advised of the possibility of such loss or damage and regardless of whether the claim for loss or
damage is made in negligence, for breach of contract or otherwise.
The obligations of the Company to the Fiscal Agent under the provisions of this Section 5.6
shall survive the resignation or removal of the Fiscal Agent, the termination of this Agreement and the payment
in full of the Notes issued hereunder.
SECTION 5.7. Fiscal Agent Required.
There shall at all times be one (and only one) Fiscal Agent hereunder.
SECTION 5.8. Resignation and Removal; Appointment of Successor.
No resignation or removal of the Fiscal Agent and no appointment of a successor Fiscal Agent
pursuant to this Article shall become effective until the acceptance of appointment by the successor Fiscal Agent
in accordance with the applicable requirements of Section 5.9.
The Fiscal Agent may resign at any time by giving written notice thereof to the Company. If
the instrument of acceptance by a successor Fiscal Agent required by Section 5.9 shall not have been delivered to
the Fiscal Agent within 30 days after the giving of such notice of resignation (or within 30 days of the Fiscal
Agent receiving a notice of removal pursuant to the provisions below), the resigning (or removed) Fiscal Agent
may petition any court of competent jurisdiction for the appointment of a successor Fiscal Agent with respect to
the Notes.
The Fiscal Agent may be removed at any time by Act of the Holders of a majority in principal
amount of the Outstanding Notes, delivered to the Fiscal Agent and to the Company.
If at any time:
(1)
the Fiscal Agent shall cease to be eligible under Section 5.7 and shall fail to resign after
written request therefor by the Company or any Holder, or
(2)
the Fiscal Agent shall become incapable of acting or shall be adjudged bankrupt or
insolvent or a receiver of the Fiscal Agent or of its property shall be appointed or any public officer shall
take charge or control of the Fiscal Agent or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (A) the Company may remove the Fiscal Agent or (B) any Holder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Fiscal Agent with respect to all Notes and the
appointment of a successor Fiscal Agent.
If the Fiscal Agent shall resign, be removed or become incapable of acting, or if a vacancy
shall occur in the office of Fiscal Agent for any cause, the Company, by a Board Resolution, shall promptly
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appoint a successor Fiscal Agent with respect to the Notes and shall comply with the applicable requirements of
Section 5.7. If a successor Fiscal Agent with respect to the Notes shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Notes delivered to the Company and the retiring Fiscal Agent,
the successor Fiscal Agent so appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 5.9, become the successor Fiscal Agent with respect to the Notes and
supersede the successor Fiscal Agent appointed by the Company. If no successor Fiscal Agent with respect to the
Notes shall have been so appointed by the Company or the Holders and accepted appointment in the manner
required by Section 5.9 within one year after such resignation, removal or incapability, or the occurrence of such
vacancy, any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor
Fiscal Agent.
The Company shall give notice, or shall cause the Notes Registrar to give notice, of each
resignation and each removal of the Fiscal Agent and each appointment of a successor Fiscal Agent to all
Holders of Notes in the manner provided in Section 1.6. Each notice shall include the name of the successor
Fiscal Agent and the address of the Fiscal Agent’s Office.
SECTION 5.9. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Fiscal Agent, every such successor Fiscal
Agent so appointed shall execute, acknowledge and deliver to the Company and to the retiring Fiscal Agent an
instrument accepting such appointment, and thereupon the resignation or removal of the retiring Fiscal Agent
shall become effective and such successor Fiscal Agent, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring Fiscal Agent; but, on the request of the
Company or the successor Fiscal Agent, such retiring Fiscal Agent shall, upon payment of its charges, execute
and deliver an instrument transferring to such successor Fiscal Agent all the rights, powers and trusts of the
retiring Fiscal Agent and shall duly assign, transfer and deliver to such successor Fiscal Agent all property and
money held by such retiring Fiscal Agent hereunder.
Upon request of any such successor Fiscal Agent, the Company shall execute any and all
instruments for more fully and certainly vesting in and confirming to such successor Fiscal Agent all such rights,
powers and trusts referred to in the first or second preceding paragraph, as the case may be.
No successor Fiscal Agent shall accept its appointment unless at the time of such acceptance
such successor Fiscal Agent shall be qualified and eligible under this Article.
SECTION 5.10. Merger, Conversion, Consolidation or Succession to
Business.
Any bank or trust company into which the Fiscal Agent may be merged or converted or with
which it may be consolidated, or any bank or trust company resulting from any merger, conversion or
consolidation to which the Fiscal Agent shall be a party, or any bank or trust company succeeding to all or
substantially all the corporate trust business of the Fiscal Agent, shall be the successor of the Fiscal Agent
hereunder, provided such bank or trust company shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any
Notes shall have been authenticated, but not delivered, by the Fiscal Agent then in office, any successor by
merger, conversion, consolidation or sale to such authenticating Fiscal Agent may adopt such authentication and
deliver the Notes so authenticated with the same effect as if such successor Fiscal Agent had itself authenticated
such Notes.
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ARTICLE VI
HOLDERS’ LISTS AND REPORTS BY FISCAL AGENT AND COMPANY
SECTION 6.1. Company to Furnish Fiscal Agent Names and Addresses of
Holders.
The Company will furnish or cause the Notes Registrar to furnish to the Fiscal Agent
(1)
not later than 15 days after each Record Date, a list, in such form as the Fiscal Agent
may reasonably require, of the names and addresses of the Holders of Outstanding Notes as of such
Record Date, and
(2)
at such other times as the Fiscal Agent may reasonably request in writing, within 30
days after the receipt by the Company of any such request, a list of similar form and content as of a date
not more than 15 days prior to the time such list is furnished;
provided, however, that if and so long as the Fiscal Agent shall be Notes Registrar, no such list need be
furnished.
SECTION 6.2. Preservation of Information; Communications to Holders.
The Fiscal Agent shall preserve, in as current a form as is reasonably practicable, the names
and addresses of Holders contained in the most recent list furnished to the Fiscal Agent as provided in
Section 6.1 and the names and addresses of Holders received by the Fiscal Agent in its capacity as Notes
Registrar. The Fiscal Agent may destroy any list furnished to it as provided in Section 6.1 upon receipt of a new
list so furnished.
Every Holder of Notes, by receiving and holding the same, agrees with the Company and the
Fiscal Agent that neither the Company nor the Fiscal Agent nor any agent of either of them shall be held
accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to
applicable law.
ARTICLE VII
MERGER, CONSOLIDATION, SALE OR DISPOSITION
SECTION 7.1. Company May Consolidate, Etc., Only on Certain Terms.
The Company may not merge or consolidate into any other Person (the Company not being the
continuing entity) or sell, lease or dispose of its properties and assets substantially as an entirety (including by
way of a corporate split (kaisha bunkatsu)), whether as a single transaction or a number of transactions, related or
not, to any Person unless (a) such Person assumes or succeeds the obligations of the Company under the all series
of Notes and this Agreement (and, if such Person is organized in a jurisdiction other than Japan, agrees to pay
additional amounts in respect of any taxes, duties, assessments or governmental charges of whatever nature
imposed or levied by or on behalf of the jurisdiction of such Person, or any authority therein or thereof having
power to tax, corresponding to the obligation to pay Additional Amounts pursuant to Section 9.5, substituting
such jurisdiction for references to “Japan”) and (b) after giving effect thereto, no Event of Default shall have
occurred and be continuing (such permitted transaction, a “Succession Event”).
In connection with any such Succession Event, the Company shall deliver to the Fiscal Agent
an Officer’s Certificate and an Opinion of Counsel, each stating that such Succession Event and,
if an
amendment or supplement is required in connection with such transaction, such amendment or supplement,
comply with this Section 7.1 and that all conditions precedent in this Agreement provided for or relating to such
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transaction have been complied with, and that this Agreement and the Notes are the legal, valid and binding
obligation of such succeeding Person, enforceable against such Person in accordance with their terms (subject to
customary exceptions).
SECTION 7.2.
Successor Substituted.
Upon any Succession Event in accordance with Section 7.1, such succeeding entity (the
“Successor Person”) formed by such Succession Event shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Agreement with the same effect as if such Successor Person
had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall
be relieved of all obligations and covenants under this Agreement and the Notes.
ARTICLE VIII
AMENDMENTS AND SUPPLEMENTS
SECTION 8.1. Without Consent of Holders.
Without the consent of any Holders, the Company and the Fiscal Agent, at any time and from
time to time, may enter into one or more amendments or supplements to this Agreement, in form satisfactory to
the Fiscal Agent, for any of the following purposes:
(1)
to evidence the succession of another Person to the Company and the assumption by
any such successor of the covenants of the Company herein and in the Notes; or
(2)
to add to the covenants of the Company or to surrender any right or power herein
conferred upon the Company for the benefit of the Holders; or
(3)
to evidence and provide for the acceptance of appointment hereunder by a successor
Fiscal Agent; or
(4)
to cure any ambiguity, to correct or supplement any provision herein which may be
defective or inconsistent with any other provision herein, or to make any other provisions with respect to
matters or questions arising under this Agreement, provided that such action pursuant to this Clause
(4) shall not adversely affect the interests of the Holders of Notes in any material respect; or
(5)
to make any other change that does not adversely affect the interests of the Holders of
the Notes in any material respect.
SECTION 8.2. With Consent of Holders.
Modification and amendment of this Agreement and the Notes of any series may be made by
the Company and the Fiscal Agent with the written consent of the Holders of at least 66% in aggregate principal
amount of the Outstanding Notes of each affected series; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Note affected thereby:
(i)
change the maturity date of the principal or payment date of any interest or change any
obligation of the Company to pay any Additional Amounts,
(ii)
reduce the principal amount of, or rate of interest on, any Note,
(iii)
change the redemption date or price at which Notes are redeemed, including the
special mandatory redemption,
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(iv)
affect the rights of Holders of less than all the Outstanding Notes,
(v)
change the place of payment where, or the coin or currency in which, any Note or
interest thereon is payable, or
(vi)
impair the right of a Holder to institute suit for the enforcement of any payment on or
with respect to any Note on or after the date when due;
provided, further, that no such modification may, without the consent of the Holders of all Notes of the affected
series Outstanding at the time, alter the respective percentages of Outstanding Notes necessary, pursuant to this
Agreement, to modify the terms of the Notes, waive past defaults or accelerate the payment of the principal
amount of the Notes.
It shall not be necessary for any Act of Holders under this Section 8.2 to approve the particular
form of any proposed amendment or supplement hereto, but it shall be sufficient if such Act shall approve the
substance thereof.
SECTION 8.3. Execution of Amendments or Supplements.
In executing, or accepting the additional trusts created by, any amendment or supplement
permitted by this Article or the modifications thereby of the trusts created by this Agreement, the Fiscal Agent
shall receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of
such amendment or supplement is authorized or permitted by this Agreement. The Fiscal Agent may, but shall
not be obligated to, enter into any such amendment or supplement which affects the Fiscal Agent’s own rights,
duties or immunities under this Agreement or otherwise.
SECTION 8.4. Effect of Amendments or Supplements.
Upon the execution of any amendment or supplement under this Article, this Agreement shall
be modified in accordance therewith, and such amendment or supplement shall form a part of this Agreement for
all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be
bound thereby.
SECTION 8.5. Reference in Notes to Amendments or Supplements.
Notes authenticated and delivered after the execution of any amendment or supplement
pursuant to this Article may, and shall if required by the Fiscal Agent, bear a notation in form approved by the
Fiscal Agent as to any matter provided for in such amendment or supplement. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Fiscal Agent and the Company, to any such
amendment or supplement may be prepared and executed by the Company and such Notes may be authenticated
and delivered by the Fiscal Agent in exchange for Outstanding Notes.
ARTICLE IX
COVENANTS
SECTION 9.1. Payment of Principal, Interest and Additional Amounts.
The Company covenants and agrees that it will duly and punctually pay the principal of and
interest on the Notes (and Additional Amounts, if any) in accordance with the terms of the Notes and this
Agreement.
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SECTION 9.2. Maintenance of Office or Agency.
So long as any of the Notes remain Outstanding, the Company will maintain in London an
office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon the Company in respect of the
Notes and this Agreement may be served. The Company will give prompt written notice to the Fiscal Agent of
the location, and any change in the location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Fiscal Agent with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the Fiscal Agent’s Office. The
Company hereby initially designates the office of the Paying Agent as specified in the Reverse of Note as the
office or agency for each such purpose.
The Company may also from time to time designate one or more other offices or agencies
where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in London for such purposes. The Company will give
prompt written notice to the Fiscal Agent of any such designation or rescission and of any change in the location
of any such other office or agency.
With respect to any Global Note, and except as otherwise may be specified for such Global
Note as contemplated by Section 2.5, the Fiscal Agent’s Office shall be the place of payment where such Global
Note may be presented or surrendered for payment or for registration of transfer or exchange, or where successor
Notes may be delivered in exchange therefor, provided, however, that any such payment, presentation, surrender
or delivery effected pursuant to the Applicable Procedures of the Depositary for such Global Note shall be
deemed to have been effected at the place of payment for such Global Note in accordance with the provisions of
this Agreement.
SECTION 9.3. Money for Notes Payments to Be Held in Trust.
Whenever the Company shall have one or more Paying Agents, it shall deposit or cause to be
deposited with a Paying Agent, a sum for value each due date sufficient to pay the principal of or interest (or
Additional Amounts, if any) on the Notes, such sum to be held in trust for the benefit of the Persons entitled to
such principal or interest, and (unless such Paying Agent is the Fiscal Agent) the Company will promptly notify
the Fiscal Agent in writing of its action or failure so to act.
The Company will cause each Paying Agent other than the Fiscal Agent to execute and deliver
to the Fiscal Agent an instrument in which such Paying Agent shall agree with the Fiscal Agent, subject to the
provisions of this Section 9.3, that such Paying Agent will (1) hold all sums held by it for the payment of the
principal of or interest on Notes in trust for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided, (2) give the Fiscal Agent prompt written notice
of any default by the Company (or any other obligor upon the Notes) in the making of any payment of principal
or interest on the Notes and (3) during the continuance of any default by the Company (or any other obligor upon
the Notes) in the making of any payment in respect of the Notes, upon the written request of the Fiscal Agent,
forthwith pay to the Fiscal Agent all sums held in trust by such Paying Agent for payment in respect of the Notes.
The Company may at any time, for the purpose of obtaining the satisfaction and discharge of
this Agreement or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Fiscal
Agent all sums held in trust by such Paying Agent, such sums to be held by the Fiscal Agent upon the same trusts
as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent
to the Fiscal Agent, such Paying Agent shall be released from all further liability with respect to such money.
Any money deposited with the Fiscal Agent or any Paying Agent in trust for the payment of the
principal of or interest or Additional Amounts (if applicable) on any Note and remaining unclaimed for two years
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after such principal, interest or Additional Amounts have become due and payable and paid to the Fiscal Agent
shall, upon receipt of a Company Request, be paid by the Fiscal Agent or such Paying Agent to the Company
and, to the extent permitted by law, the Holder of such Note shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the Fiscal Agent or such Paying Agent with
respect to such trust money shall thereupon cease.
SECTION 9.4.
Statement by Officers as to Default.
The Company shall deliver to the Fiscal Agent, reasonably promptly after the Company
becomes aware of the occurrence of (i) any Event of Default or an event which, with notice or the lapse or time
or both, would constitute an Event of Default or (ii) any default in the performance by the Company of any
obligation under the Notes or this Agreement, an Officer’s Certificate setting forth the details of such Event of
Default or default and the action which the Company proposes to take with respect thereto.
The Company will deliver to the Fiscal Agent, within 120 days after the end of each fiscal year
of the Company ending after the date hereof or within 10 Business Days of any request by the Fiscal Agent, an
Officer’s Certificate of the Company, in substantially the form set forth in Exhibit D hereto, stating whether or
not to the knowledge of the signer thereof the Company is in default in the performance and observance of any of
the terms, provisions and conditions under this Agreement (without regard to any period of grace or requirement
of notice provided hereunder) and if the Company shall be in default specifying all such defaults and the nature
and status thereof of which the signer may have knowledge. As of the date hereof, the fiscal year of the Company
ends on March 31 of each calendar year.
SECTION 9.5. Additional Amounts.
All payments of principal and interest
in respect of the Notes shall be made without
withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied by or on behalf of Japan, or any authority thereof or therein having
power to tax (“Taxes”), unless such withholding or deduction is required by law or by the authority. In such
event, the Company shall pay such additional amounts (“Additional Amounts”) as will result in the receipt by
the Holders of such amounts as would have been received by them had no such withholding or deduction been
required, except that no such Additional Amounts shall be payable with respect to any Notes under any of the
following circumstances:
(i)
the Holder or beneficial owner of the Notes is an individual non-resident of Japan or a
non-Japanese corporation and is liable for such Taxes in respect of such Notes by reason of its
(A) having some present or former connection with Japan other than the mere holding of such Notes or
(B) being a person having a special relationship with the Company (a “specially-related person of the
Company”) as described in Article 6, paragraph (4) of the Act on Special Measures Concerning
Taxation of Japan (Act No. 26 of 1957, as amended) (together with the cabinet order thereunder
(Cabinet Order No. 43 of 1957, as amended), the “Act on Special Taxation Measures”);
(ii)
the Holder or beneficial owner of the Notes would otherwise be exempt from any such
withholding or deduction but fails to comply with any applicable requirement to provide Interest
Recipient Information (as defined below) or to submit a Written Application for Tax Exemption (as
defined below) to the relevant Paying Agent
to whom the relevant Notes are presented (where
presentation is required), or whose Interest Recipient Information is not duly communicated through the
relevant Participant (as defined below) and the relevant international clearing organization to such
Paying Agent;
(iii)
the Holder or beneficial owner of the Notes is for Japanese tax purposes treated as an
individual resident of Japan or a Japanese corporation (except for (A) a Designated Financial Institution
(as defined below) that complies with the requirement to provide Interest Recipient Information or to
37
submit a Written Application for Tax Exemption and (B) an individual resident of Japan or a Japanese
corporation that duly notifies (directly, through the Participant or otherwise) the relevant Paying Agent
of its status as not being subject to Taxes to be withheld or deducted by the Company by reason of
receipt by such individual resident of Japan or Japanese corporation of interest on such Notes through a
payment handling agent in Japan appointed by it);
(iv)
the Note is presented for payment (where presentation is required) more than 30 days
after the day on which such payment on the Notes became due or after the full payment was provided
for, whichever occurs later, except to the extent the Holder thereof would have been entitled to
Additional Amounts on presenting the same for payment on the last day of such period of 30 days;
(v)
the withholding or deduction is imposed on a Holder or beneficial owner that could
have avoided such withholding or deduction by presenting its Notes (where presentation is required) to
another Paying Agent maintained by the Company;
(vi)
the Holder is a fiduciary or partnership or is not the solebeneficial owner of the
payment of the principal of, or any interest on, any Note, and Japanese law requires the payment to be
included for tax purposes in the income of a beneficiary or settlor with respect to such fiduciary or a
member of such partnership or a beneficial owner, in each case, who would not have been entitled to
such Additional Amounts had it been the Holder of such Note; or
(vii)
any combination of (i) through (vi) above.
For the avoidance of doubt, none of the Company, the Fiscal Agent, any Paying Agent or any other
person shall be required to pay any Additional Amounts with respect to any withholding or deduction imposed on
or in respect of any Note pursuant to Sections 1471 to 1474 of the Internal Revenue Code of 1986, as amended,
commonly referred to as FATCA, any treaty, law, regulation or other official guidance implementing FATCA, or
any agreement between the Company,
the Fiscal Agent, a Paying Agent or any other person and the
United States, any other jurisdiction, or any authority of any of the foregoing implementing FATCA.
Where the Notes are held through a participant of an international clearing organization or a
financial intermediary (each, within this Section 9.5, referred to as a “Participant”), in order to receive payments
free of withholding or deduction by the Company for or on account of Taxes, if the relevant beneficial owner of
the Notes is (a) an individual non-resident of Japan or a non-Japanese corporation (other than a specially-related
person of the Company) or (b) a Japanese financial institution (each, a “Designated Financial Institution”)
falling under certain categories prescribed by the Act on Special Taxation Measures, all in accordance with the
Act on Special Taxation Measures, such beneficial owner of the Notes must, at the time of entrusting a
Participant with the custody of the relevant Notes, provide certain information prescribed by the Act on Special
Taxation Measures (“Interest Recipient Information”) to enable the Participant to establish that such beneficial
owner is exempted from the requirement for Taxes to be withheld or deducted, and advise the Participant if the
beneficial owner of the Notes ceases to be so exempted (including the case where a beneficial owner of the Notes
that is an individual non-resident of Japan or a non-Japanese corporation becomes a specially-related person of
the Company).
Where Notes are not held by a Participant, in order to receive payments free of withholding or
deduction by the Company for or on account of Taxes, if the relevant beneficial owner of the Notes is (a) an
individual non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the
Company) or (b) a Designated Financial Institution, all in accordance with the Act on Special Taxation
Measures, such beneficial owner must, prior to each time at which it receives interest, submit to the relevant
Paying Agent a written application for tax exemption (hikazei tekiyo shinkokusho) (“Written Application for
Tax Exemption”) in a form obtainable from the Paying Agent stating, inter alia, the name and address of the
beneficial owner, the title of the Notes, the relevant Interest Payment Date, the amount of interest and the fact
38
that the beneficial owner is qualified to submit the Written Application for Tax Exemption, together with
documentary evidence regarding its identity and residence.
The Company shall make any required withholding or deduction and remit the full amount
withheld or deducted to the Japanese taxing authority in accordance with applicable law. The Company shall use
reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any tax, duty, assessment,
fee or other governmental charge so withheld or deducted from the Japanese taxing authority imposing such tax,
duty, assessment, fee or other governmental charge, and if certified copies are not available, the Company shall
use reasonable efforts to obtain other evidence satisfactory to the Fiscal Agent, and the Fiscal Agent shall make
such certified copies or other evidence available to the Holders or beneficial owners of the Notes upon reasonable
request to the Fiscal Agent.
The obligation to pay Additional Amounts with respect to any taxes, duties, assessments and
other governmental charges shall not apply to (A) any estate, inheritance, gift, sales, transfer, personal property
or any similar tax, duty, assessment, fee or other governmental charge or (B) any tax, duty, assessment, fee or
other governmental charge which is payable otherwise than by withholding or deduction from payments of
principal or interest on the Notes; provided that, except as otherwise set forth in the Notes and in this Agreement,
the Company will pay all stamp, court or documentary taxes or any excise or property taxes, charges or similar
levies and other duties, if any, which may be imposed by Japan, the United States or any political subdivision or
any taxing authority thereof or therein, with respect to this Agreement or as a consequence of the initial issuance,
execution, delivery, registration or enforcement of the Notes.
References to principal or interest in respect of the Notes shall be deemed to include any
Additional Amounts due which may be payable as set forth in the Notes and this Agreement.
SECTION 9.6. Appointment to Fill a Vacancy in Office of Fiscal Agent.
The Company, whenever necessary to avoid or fill a vacancy in the office of Fiscal Agent, will
appoint, in the manner provided in Section 5.8, a Fiscal Agent, so that there shall at all times be a Fiscal Agent
hereunder.
SECTION 9.7.
Indemnification of Judgment Currency.
The Company agrees to indemnify each Holder to the full extent permitted by applicable law
against any loss incurred by such Holder as a result of any judgment or order being given or made for any
amount due under such Note and such judgment or order being expressed and paid in a currency (the “Judgment
Currency”) other than Euros (the “Required Currency”) and as a result of any variation as between (a) the rate
of exchange at which the Required Currency is converted into the Judgment Currency for the purpose of such
judgment or order and (b) the spot rate of exchange in London at which the Holder on the date that payment is
made pursuant to such judgment or order is able to purchase the Required Currency with the amount of the
Judgment Currency actually received by the Holder. The Company’s obligations under this Agreement to make
payments in the Required Currency (i) shall not be discharged or satisfied by any tender, or any recovery
pursuant to any judgment, 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 Agreement.
SECTION 9.8. Rule 144A Information.
At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act and
is not exempt from reporting requirements under the Exchange Act pursuant to Rule 12g3-2(b) under the
39
Exchange Act, upon the request of a Holder of, or owner of a beneficial interest in, a Note, the Company shall
promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder or beneficial
owner or to a prospective purchaser of such Note designated by such Holder or beneficial owner or to the Fiscal
Agent for delivery to such Holder or beneficial owner or prospective purchaser, as the case may be, in order to
permit compliance by such Holder or beneficial owner with Rule 144A under the Securities Act in connection
therein by such Holder or beneficial owner. “Rule 144A
with the resale of such Note or any interest
Information” shall be such information as is at the time of such proposed purchase specified pursuant to Rule
144A(d)(4) under the Securities Act, as amended (or any successor provision thereto).
SECTION 9.9. Reporting Requirements.
For as long as any Notes are Outstanding, the Company will promptly furnish to the Fiscal
Agent (A) such other documents, reports and information as shall be furnished by the Company to its security
holders generally; (B) within six months after the end of each fiscal year, an annual report in English including a
consolidated balance sheet and consolidated statements of operations, surplus and cash flows of the Company
audited by independent public accountants and prepared in conformity with International Financial Reporting
Standards; and (C) as soon as practicable after the end of each interim period (other than the last interim period
of a fiscal year) an interim report in English including financial statements of the Company (or, if consolidated
financial statements are prepared, its consolidated financial statements).
SECTION 9.10. Negative Pledge.
So long as any Note remains outstanding, the Company shall not, and shall procure that none of
its Principal Subsidiaries shall, create or permit to subsist any Lien on any of its, or, as the case may be, such
Principal Subsidiary’s, property, assets or revenues, present or future, to secure for the benefit of the holders of
Public External Indebtedness payment of any sum owing in respect of any such Public External Indebtedness,
any payment under any guarantee of any such Public External Indebtedness or any payment under any indemnity
or other like obligation relating to any such Public External Indebtedness, unless contemporaneously therewith
effective provision is made to secure the Notes equally and ratably with such Public External Indebtedness with a
similar Lien on the same property, assets or revenues securing such Public External Indebtedness for so long as
such Public External Indebtedness are secured by such Lien.
ARTICLE X
REDEMPTION AND PURCHASE OF SECURITIES
SECTION 10.1. Optional Redemption of Fixed Rate Notes.
The 2020 Notes, the 2022 Notes, the 2026 Notes and the 2030 Notes may be redeemed at any
time at the option and sole discretion of the Company, in whole or in part, at any time prior to the maturity date
with respect to the 2020 Notes, October 21, 2022 (the “2022 Par Call Date”) with respect to the 2022 Notes,
August 21, 2026 (the “2026 Par Call Date”) with respect to the 2026 Notes and August 21, 2030 (the “2030 Par
Call Date”) with respect to the 2030 Notes, in each case, upon giving not less than 30 nor more than 60 days’
notice of redemption to the Fiscal Agent and the Holders (which notice shall be irrevocable and shall conform, as
applicable, to the additional notice requirements set forth in Section 10.5), at a redemption price equal to the
greater of:
(a) 100% of the principal amount of the Notes being redeemed; or
(b) the sum of the present values of the principal and the remaining scheduled payments of
interest on the Notes being redeemed (exclusive of interest accrued to the Redemption Date) that would be due if
such Notes were (a) held to the maturity date with respect to the 2020 notes or (b) redeemed on the applicable par
40
call date, in each case discounted to the Redemption Date on an annual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Comparable Government Bond Rate plus 15 basis points in the case of the 2020
Notes, 25 basis points in the case of the 2022 Notes, 35 basis points in the case of the 2026 Notes and 40 basis
points in the case of the 2030 Notes, plus, in each case, accrued and unpaid interest on the principal amount of
the Notes being redeemed up to, but excluding, the Redemption Date.
The 2022 Notes, the 2026 Notes and the 2030 Notes may be redeemed at any time at the option
and sole discretion of the Company, in whole or in part, at any time on or after the 2022 Par Call Date with
respect to the 2022 Notes, the 2026 Par Call Date with respect to the 2026 Notes, and the 2030 Par Call Date
with respect to the 2030 Notes, in each case upon giving not less than 30 nor more than 60 days’ notice of
redemption to the Fiscal Agent and the Holders (which notice shall be irrevocable and shall conform, as
applicable, to the additional notice requirements set forth in Section 10.5), at a redemption price equal to 100%
of the principal amount of the Notes being redeemed plus accrued and unpaid interest on the principal amount of
the Notes being redeemed to, but excluding, the Redemption Date.
If less than all of the Notes are to be redeemed, the Notes shall be redeemed on a pro rata basis
(or, in the case of Notes represented by global notes, in accordance with the procedures of Euroclear and/or
Clearstream), based on the then outstanding principal amount of each Note, provided, however, that if any such
pro-rated redemption would result in any Notes having an authorized principal amount of less than the minimum
authorized denomination, all such Notes shall be redeemed in full prior to the redemption of any other Notes,
except as may be provided in the form of Note or in any amendment or supplement hereto. For all purposes of
this Agreement, unless the context otherwise requires, all provisions relating to the redemption of the Notes shall
relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal amount of
such Note which has been or is to be redeemed.
SECTION 10.2. Optional Redemption due to an Additional Amounts Event.
Each series of the Notes may be redeemed at any time at the option and sole discretion of the
Company in whole, but not in part, subject to compliance with applicable regulatory requirements, upon giving
not less than 30 nor more than 60 days’ notice of redemption to the Fiscal Agent and the Holders (which notice
shall be irrevocable and shall conform, as applicable,
to the additional notice requirements set forth in
Section 10.5) at the principal amount of the Notes together with interest accrued to the date fixed for redemption
and any Additional Amounts thereon, if the Company has been or will be obliged to pay any Additional Amounts
with respect to such series as a result of (a) any change in, or amendment to, the laws or regulations of Japan or
any political subdivision or any authority thereof or therein having power to tax, or any change in application or
official interpretation of such laws or regulations, which change or amendment becomes effective on or after the
date of the issuance of the Notes or (b) after the completion of any Succession Event, any change in, or
amendment to, the laws or regulations of the jurisdiction of the Successor Person or any political subdivision or
any authority thereof or therein having power to tax, or any change in application or official interpretation of
such laws or regulations, which change or amendment becomes effective on or after the date of such Succession
Event, and in either case such obligation cannot be avoided by the Company or the Successor Person through the
taking of reasonable measures available to the Company or the Successor Person, as the case may be (an
“Additional Amounts Event”). No notice of redemption for an Additional Amounts Event pursuant to this
Section 10.2 shall be given sooner than 90 days prior to the earliest date on which the Company would actually
be obliged to pay such Additional Amounts on payments with respect to the Notes.
Prior to the publication of any notice of redemption pursuant to this Section 10.2, the Company
shall deliver to the Fiscal Agent (i) a certificate signed by an Authorized Officer stating that the conditions
precedent to its right to so redeem have been fulfilled and (ii) an opinion of independent legal advisors of
recognized standing confirming that an Additional Amounts Event has occurred. The Fiscal Agent shall accept
such opinion as sufficient evidence of the satisfaction of the conditions precedent described above, in which
event it shall be conclusive and binding on the Holders.
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SECTION 10.3. Special Mandatory Redemption.
If (i) the Shire Acquisition has not been consummated on or prior to the Long Stop Date or
(ii) the Company otherwise publicly announces that the Shire Acquisition will not be consummated, then the
Company will be required to redeem all outstanding Notes on the Special Mandatory Redemption Date at a
special mandatory redemption price equal to 101% of the aggregate principal amount of the Notes plus accrued
and unpaid interest, if any, to, but excluding, the Special Mandatory Redemption Date.
Notwithstanding the foregoing, installments of interest on the Notes that are due and payable
on Interest Payment Dates falling on or prior to the Special Mandatory Redemption Date will be payable on such
Interest Payment Dates to the registered Holders as of the close of business on the relevant Record Dates in
accordance with the terms of the Notes and this Agreement.
The Company will cause the notice of special mandatory redemption to be transmitted, with a
copy to the Fiscal Agent, within five Business Days after the occurrence of the event triggering the special
mandatory redemption to each Holder at its registered address. If funds sufficient to pay the special mandatory
redemption price of the outstanding notes to be redeemed on the Special Mandatory Redemption Date (plus
accrued and unpaid interest, if any, to, but excluding, such date) are deposited with the Fiscal Agent or a paying
agent on or before such Special Mandatory Redemption Date, and certain other conditions are satisfied, on and
after such Special Mandatory Redemption Date, the outstanding Notes will cease to bear interest.
Upon the consummation of the Shire Acquisition, the foregoing provisions regarding the
special mandatory redemption will cease to apply.
SECTION 10.4. Election to Redeem; Notice to Fiscal Agent.
The election of the Company to redeem any Notes shall be evidenced by a Company Order and
an Officer’s Certificate, both given to the Fiscal Agent.
SECTION 10.5. Notice of Redemption.
Notice of redemption shall be given transmitted not less than 30 nor more than 60 days prior to
the date for redemption (“Redemption Date”), to the Fiscal Agent and to each Holder of Notes to be redeemed
at his address appearing in the Notes Register. If by reason of any cause, it shall be impracticable to give notice
to the Holder in the manner prescribed herein, then such notification in lieu thereof as shall be made by the
Company or by the Fiscal Agent on behalf of and at the instruction of the Company (as set forth below) shall
constitute sufficient provision of such notice, if such notification shall, so far as may be practicable, approximate
the terms and conditions of the notice in lieu of which it is given. Neither the failure to give notice nor any defect
in any notice of redemption given to the Holder of any other Note shall affect the sufficiency of any notice with
respect to this Note.
All notices of redemption shall state:
(1)
(2)
the Redemption Date,
the redemption price and the amount of any accrued and unpaid interest payable on the
Redemption Date,
(3)
the ISIN and Common Code or other identifying number of the Notes,
(4)
that on the Redemption Date, the redemption price (together with any accrued and
unpaid interest payable on the Redemption Date) will become due and payable upon each such Notes to
be redeemed and that interest thereon will cease to accrue on and after said date, and
42
(5)
the place or places where such Notes are to be surrendered for payment of the
redemption price, and accrued interest, if any.
Notice of redemption of Notes to be redeemed at the election of the Company shall be given by
the Company or, at the Company’s request by the Fiscal Agent in the name and at the expense of the Company
(provided that the Company shall have delivered to the Fiscal Agent, at least five Business Days before notice of
redemption is required to be given to Holders (unless a shorter notice shall be agreed to by the Fiscal Agent), a
Company Request requesting that the Fiscal Agent give such notice and setting forth the information to be stated
in such notice as provided in the preceding paragraph) and shall be irrevocable.
SECTION 10.6. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the Fiscal Agent or with a
Paying Agent an amount of money sufficient to pay the redemption price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Notes which are to be redeemed on that date.
SECTION 10.7. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the
Redemption Date, become due and payable at the redemption price applicable thereto, and from and after such
date (unless the Company shall default in the payment of the redemption price and accrued interest) such Notes
shall cease to bear interest. Upon surrender of any such Note for redemption in accordance with said notice, such
Note shall be paid by the Company at the redemption price, together with accrued interest to the Redemption
Date; provided, however, that installments of interest whose payment date is on or prior to the Redemption Date
will be payable to the Holders of such Notes, registered as such at the close of business on the relevant Record
Date according to their terms.
If any Note called for redemption shall not be so paid upon surrender thereof for redemption,
the principal shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the terms
of the Note.
SECTION 10.8. Repurchase of Notes.
The Company or any subsidiary thereof may, at any time, purchase the Notes for cancellation
in the open market or otherwise at any price.
ARTICLE XI
CALCULATION AGENT
SECTION 11.1. Appointment.
The Company appoints MUFG Bank, Ltd. as the initial Calculation Agent in relation to any
Floating Rate Note issued under this Agreement. MUFG Bank, Ltd. accepts its appointment as Calculation
Agent, subject to the conditions of this Article.
SECTION 11.2. Calculation of Floating Interest.
The Calculation Agent shall calculate the interest rates and amounts of interest payable in
respect of the Floating Rate Notes at such dates and times and in accordance with such other terms and
conditions as set forth on any Registered Security of such series.
43
Unless otherwise instructed by the Company, the Calculation Agent will cause the interest rate,
the number of days in, and the interest amount for, the relevant interest period and the interest payment date, in
respect of each series of the Floating Rate Notes to be notified to the Company, the Fiscal Agent and Euroclear or
Clearstream, as applicable, or through Euroclear or Clearstream, as applicable, or through other reasonable
means to make such information available, in order that such information will be published or notified to the
Holders of record as soon as possible after their determination but in no event later than the first day of the
relevant interest period. If the Floating Rate Notes become due and payable as described in Article X or pursuant
to an acceleration upon an Event of Default other than on an interest payment date, the accrued interest payable,
the interest rate, the number of days in the relevant interest period and the interest payment date in respect of
such Floating Rate Notes shall nevertheless continue to be calculated and notified as previously in accordance
with the foregoing provisions and this Agreement. All determinations and calculations made by the Calculation
Agent, and any quotations obtained from the relevant banks for the purposes of calculating the interest rate and
interest amount, pursuant to the foregoing provisions will, in the absence of negligence, bad faith or manifest
error, be binding on the Holders, the Company, the Fiscal Agent, the Paying Agent and the Calculation Agent.
The interest rate payable on any Floating Rate Notes will not be higher than the maximum rate permitted by the
law of the State of New York as modified by United States law of general application or by Japanese law and as
notified to the Fiscal Agent and the paying agent in writing five Business Days prior to any interest payment
date, if applicable.
SECTION 11.3. Commissions; Incidental Acts.
The Company shall promptly pay to the Calculation Agent such fees as agreed in writing
between the Company and the Calculation Agent, in respect of the services of the Calculation Agent (plus any
applicable value added tax), in accordance with the provisions of this Agreement. The Calculation Agent shall
not charge any other commissions or expenses to any person in respect of its actions hereunder. The Company
and the Calculation Agent will carry out such other incidental acts as may reasonably be necessary to perform
each party’s respective obligations hereunder.
SECTION 11.4. Rights and Liabilities of the Calculation Agent.
No provision of this Agreement shall be construed to relieve the Calculation Agent from
liability for its own negligent action, its own negligent failure to act, its own bad faith or its own willful
misconduct.
(a)
The Calculation Agent (i) may engage and pay for the advice or services of any lawyers
or other experts whose advice or services it considers necessary or advisable and rely upon any advice
so obtained; (ii) may conclusively rely and shall be protected in acting or refraining from acting upon
any resolution, Officer’s Certificate or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, note, coupon, security or other paper or document
believed by it to be genuine and to have been signed or presented by the proper party or parties; and
(iii) shall be entitled to rely on and assume (without further inquiry) that any matter purported to be
authorized, approved or ratified by any Board Resolution or Officer’s Certificate is adequate and
complete authorization, approval and ratification in respect of the Company and its actions under this
Agreement.
(b)
The Calculation Agent shall not be deemed to have notice of any Event of Default
unless a Responsible Officer of the Calculation Agent has received written notice thereof and such
notice references the Floating Rate Notes and this Agreement.
(c)
In no event shall the Calculation Agent be liable for any action taken in accordance
with the instructions of the Company in the absence of bad faith, negligence or willful misconduct on its
part.
(d)
Notwithstanding the satisfaction or discharge of this Agreement or the resignation,
replacement or removal of the Calculation Agent, the Calculation Agent shall under no circumstances be
44
liable to any party for any special, indirect, punitive or consequential loss or damage of any kind
whatsoever (including, inter alia, loss of business, goodwill, opportunity or profit) even if advised of the
likelihood of such loss on damages and regardless of the form of action. The provisions of this
Section 11.04(d) shall survive the termination and discharge of this Agreement and the resignation or
removal of the Calculation Agent.
(e)
In no event shall the Calculation Agent be responsible or liable for any failure or delay
in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces
beyond its control, including, without limitation, existing or future law or regulation, any existing or
future act of governmental authority, strikes, work stoppages, accidents, acts of war or terrorism, civil or
military disturbances, nuclear or natural catastrophes or acts of God, interruptions, loss or malfunctions
of utilities, communications or computer (software and hardware) services, it being understood that the
Calculation Agent shall use reasonable efforts that are consistent with accepted practices in the banking
industry to resume performance as soon as practicable under the circumstances.
(f)
The Calculation Agent shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document
(except those issued by the Calculation Agent), but the Calculation Agent, in its discretion, may make
such reasonable further inquiry or investigation into such facts or matters as it may see fit, at the cost of
the Company, and shall incur no liability or additional liability of any kind by reason of such inquiry or
investigation.
(g)
The Calculation Agent may request that the Company deliver an Officer’s Certificate
setting forth the names of individuals and/or titles of officers authorized at such time to take specified
actions pursuant to this Agreement, 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.
(h)
The permissive right of the Calculation Agent hereunder to take or omit to take any
action shall not be construed as a duty.
(i)
The Company covenants to indemnify the Calculation Agent for, and to hold it harmless
against, any loss, liability or expense arising out of or in connection with the performance of its duties
hereunder, including the reasonable costs and expenses (including the properly incurred charges and
expenses of its agents and counsel) of defending itself against or investigating any claim of liability
arising out of or in connection with the same, except to the extent such loss, liability or expense is due to
the bad faith, negligence, or willful misconduct of the Calculation Agent. The obligations of the
Company under this Section 11.04 to compensate and indemnify the Calculation Agent and to pay or
reimburse the Calculation Agent for expenses shall survive the resignation or removal of the Calculation
Agent and the satisfaction and discharge of this Agreement.
(j)
None of the provisions contained in this Agreement shall require the Calculation Agent
to expend or risk its own funds or otherwise incur personal financial liability in the performance of any
of its duties or in the exercise of any of its rights or powers, unless it is indemnified and/or secured to its
reasonable satisfaction.
SECTION 11.5. Resignation and Removal.
The Calculation Agent may at any time resign as Calculation Agent by giving written notice to
the Company of such intention on its part, specifying the date on which its desired resignation shall become
effective; provided, however, that such date shall never be earlier than 30 days after the receipt of such notice by
the Company, unless the Company otherwise agrees in writing. The Calculation Agent may be removed at any
45
time by the filing with it of any instrument in writing signed on behalf of the Company and specifying such
removal and the date when it is intended to become effective. Such resignation or removal shall take effect upon
the date of the appointment by the Company, as hereinafter provided, of a successor Calculation Agent. If within
30 days after notice of resignation or removal has been given, a successor Calculation Agent has not been
appointed, the Calculation Agent may, on behalf of and at the expense of the Company, with prior notice to the
Company, appoint its own successor or the resigning Calculation Agent or the Company may petition any court
of competent jurisdiction for the appointment of a successor Calculation Agent. If at any time the Calculation
Agent shall resign or be removed, or be dissolved, or if the property or affairs of the Calculation Agent shall be
taken under the control of any State or federal court or administrative body because of bankruptcy or insolvency
or for any other reason, then a successor Calculation Agent shall as soon as practicable be appointed by the
Company by an instrument in writing filed with the predecessor Calculation Agent, the successor Calculation
Agent and the Fiscal Agent. Upon the appointment of a successor Calculation Agent and acceptance by it of such
appointment, the Calculation Agent so succeeded shall cease to be such Calculation Agent hereunder. Upon its
resignation or removal,
the Calculation Agent shall be entitled to the payment by the Company of its
compensation, if any is owed to it, for services rendered hereunder and to the reimbursement of all reasonable
out-of-pocket expenses (including properly incurred counsel fees and expenses) incurred in connection with the
services rendered by it hereunder and to the payment of all other amounts owed to it hereunder.
Any successor Calculation Agent appointed hereunder shall execute and deliver to its
predecessor, the Company and the Fiscal Agent an instrument accepting such appointment hereunder, and
thereupon such successor Calculation Agent, without any further act, deed or conveyance, shall become vested
with all the authority, rights, powers, trusts, immunities, duties and obligations of such predecessor with like
effect as if originally named as such Calculation Agent hereunder, and such predecessor, upon payment of its
charges and disbursements then unpaid, shall thereupon become obliged to transfer and deliver, and such
successor Calculation Agent shall be entitled to receive, copies of any relevant records maintained by such
predecessor Calculation Agent.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed
as of the day and year first above written.
TAKEDA PHARMACEUTICAL COMPANY
LIMITED
By: /s/ Mitsuhiro Okada
Name: Mitsuhiro Okada
Title: Head of Global Treasury & Finance
Management
MUFG BANK, LTD.,
as Fiscal Agent
By: /s/ Nikola Moore
Name: Nikola Moore
Title: Director
47
FORM OF RULE 144A GLOBAL NOTE
[FORM OF FACE OF NOTE]
EXHIBIT A-1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE HOLDER HEREOF
AGREES FOR THE BENEFIT OF TAKEDA PHARMACEUTICAL COMPANY LIMITED (THE
“COMPANY”) THAT THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1) TO THE COMPANY, (2) TO A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT (“RULE 144A”)) OR A PERSON WHO THE SELLER AND ANY
PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER IN ACCORDANCE WITH RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, (3) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
(4) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT,
PROVIDED THAT, AS A CONDITION TO THE REGISTRATION OF THE TRANSFER THEREOF, THE
COMPANY OR THE FISCAL AGENT MAY REQUIRE THE DELIVERY OF ANY DOCUMENTS,
INCLUDING AN OPINION OF COUNSEL, THAT IT,
IN ITS SOLE DISCRETION, MAY DEEM
NECESSARY OR APPROPRIATE TO EVIDENCE COMPLIANCE WITH SUCH EXEMPTION, OR
(5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES AND OTHER JURISDICTIONS. THE HOLDER HEREOF, BY, PURCHASING OR
ACCEPTING THIS NOTE, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT
IT WILL NOTIFY ANY PURCHASER OF THIS NOTE FROM THE HOLDER OF THE RESALE
RESTRICTIONS REFERRED TO ABOVE.
TRANSFERS AND EXCHANGES OF THIS NOTE, IN WHOLE OR IN PART, AND OF
BENEFICIAL INTERESTS IN THIS NOTE ARE SUBJECT TO RESTRICTIONS AS PROVIDED IN THE
FISCAL AGENCY AGREEMENT, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE
OFFICE OF THE FISCAL AGENT.
IS
BY
AN
THIS
UNLESS
PRESENTED
CERTIFICATE
AUTHORIZED
REPRESENTATIVE OF EUROCLEAR BANK SA/NV, AS OPERATOR OF THE EUROCLEAR SYSTEM
(“EUROCLEAR”) AND CLEARSTREAM BANKING S.A. (“CLEARSTREAM” AND, TOGETHER WITH
EUROCLEAR, “EUROCLEAR/CLEARSTREAM”), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF MUFG NOMINEES (UK) LIMITED OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR/CLEARSTREAM (AND ANY
PAYMENT IS MADE TO MUFG NOMINEES (UK) LIMITED OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR/CLEARSTREAM), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, MUFG NOMINEES
(UK) LIMITED, HAS AN INTEREST HEREIN.
INTEREST PAYMENTS ON THIS NOTE GENERALLY WILL BE SUBJECT TO
JAPANESE WITHHOLDING TAX UNLESS IT IS ESTABLISHED THAT THIS NOTE IS HELD BY OR
FOR THE ACCOUNT OF A BENEFICIAL OWNER THAT IS (I) FOR JAPANESE TAX PURPOSES,
NEITHER AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION, NOR AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A PERSON HAVING A SPECIAL RELATIONSHIP WITH THE COMPANY AS DESCRIBED IN
A-1-1
ARTICLE 6, PARAGRAPH (4) OF THE ACT ON SPECIAL MEASURES CONCERNING TAXATION OF
JAPAN (ACT NO. 26 OF 1957, AS AMENDED) (THE “ACT ON SPECIAL TAXATION MEASURES”) (A
“SPECIALLY-RELATED PERSON OF THE COMPANY”),
(II) A JAPANESE FINANCIAL
INSTITUTION OR A JAPANESE FINANCIAL INSTRUMENTS BUSINESS OPERATOR DESIGNATED IN
ARTICLE 3-2-2, PARAGRAPH (28) OF THE CABINET ORDER (CABINET ORDER NO. 43 OF 1957, AS
AMENDED) RELATING TO THE ACT ON SPECIAL TAXATION MEASURES WHICH COMPLIES WITH
THE REQUIREMENT FOR TAX EXEMPTION UNDER ARTICLE 6, PARAGRAPH (9) OF THE ACT ON
SPECIAL TAXATION MEASURES OR (III) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION
OR A FINANCIAL INSTRUMENTS BUSINESS OPERATOR, ETC. DESCRIBED IN ARTICLE 3-3,
PARAGRAPH (6) OF THE ACT ON SPECIAL TAXATION MEASURES WHICH HAS RECEIVED SUCH
PAYMENTS THROUGH A PAYMENT HANDLING AGENT IN JAPAN AS DESCRIBED IN PARAGRAPH
(1) OF SAID ARTICLE AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER
THAT PARAGRAPH.
INTEREST PAYMENTS ON THIS NOTE TO AN INDIVIDUAL RESIDENT OF JAPAN,
TO A JAPANESE CORPORATION NOT DESCRIBED IN THE PRECEDING PARAGRAPH, OR TO AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A SPECIALLY-RELATED PERSON OF THE COMPANY WILL BE SUBJECT TO JAPANESE
INCOME TAX AT THE TIME OF SUCH INTEREST PAYMENTS.
A-1-2
TAKEDA PHARMACEUTICAL COMPANY LIMITED
[0.375% Senior Notes due 2020]
[1.125% Senior Notes due 2022]
[2.250% Senior Notes due 2026]
[3.000% Senior Notes due 2030]
Principal Amount €Š
No. 144A-1
ISIN Š1
Common Code Š2
Takeda Pharmaceutical Company Limited (the “Company”), for value received, hereby
promises to pay to MUFG Nominees (UK) Limited, or registered assigns, the principal amount set forth above on
Š3, and to pay interest thereon from November 21, 2018 or from the most recent Interest Payment Date to which
interest has been paid or made available for payment, annually in arrears on each Interest Payment Date
commencing on November 21, 2019, at the rate of Š4% per annum, together with such Additional Amounts (if
any) as may be payable under this Note, until the principal hereof is paid or made available for payment. Interest
on this Note will accrue from the date of original issuance or, if interest has already been paid, from the date it
was most recently paid. Interest will be computed on the basis of the actual number of days in the period for
which interest is being calculated and the actual number of days from and including the last date on which
interest was paid on the fixed rate notes (or from November 21, 2018, if no interest has been paid on the fixed
rate notes) to, but excluding, the next scheduled interest payment date. This payment convention is referred to as
ACTUAL/ACTUAL (ICMA) (as defined in the rulebook of the International Capital Market Association).
Interest will be calculated per €1,000 in principal amount of the Notes. This Note will be the Company’s direct,
unsecured and unsubordinated general obligation and will have the same rank in liquidation as all of the
Company’s other unsecured and unsubordinated debt.
In any case in which any date for payment of principal or interest (or Additional Amounts, if
any) falls on a day that is not a Business Day, then payment of principal or interest (or Additional Amounts, if
any) need not be made on such date but may be made on the next succeeding Business Day. Any payment made
pursuant to the preceding sentence on such next succeeding Business Day shall have the same force and effect as
if made on the due date, and no interest shall accrue with respect to such payment for the period after such date.
“Interest Payment Date” means November 21 during the term of this Note.
“Business Day” means both a day on which the TARGET2 System is open, and a day other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banking institutions are
authorized or required by law, regulation or executive order to be closed in London or Tokyo.
Reference is hereby made to the further provisions of this Note set forth on the reverse hereof,
and such provisions shall for all purposes have the same effect as though fully set forth in this place.
1
2
3
4
XS1843449551 for the 2020 Notes; XS1843449635 for the 2022 Notes; XS1843448660 for the 2026 Notes;
XS1843448744 for the 2030 Notes.
184344955 for the 2020 Notes; 184344963 for the 2022 Notes; 184344866 for the 2026 Notes; 184344874
for the 2030 Notes.
November 21, 2020 for the 2020 Notes; November 21, 2022 for the 2022 Notes; November 21, 2026 for the
2026 Notes; November 21, 2030 for the 2030 Notes.
0.375% for the 2020 Notes; 1.125% for the 2022 Notes; 2.250% for the 2026 Notes; 3.000% for the 2030
Notes.
A-1-3
This Note shall not be valid or obligatory for any purpose until it shall have been manually
signed by the Fiscal Agent for authentication.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
TAKEDA PHARMACEUTICAL COMPANY
LIMITED
By
Name: [name]
Title:
[title]
This is one of the Notes referred to
in the within-mentioned Fiscal Agency Agreement:
Dated:
, 20
MUFG BANK, LTD.,
as Fiscal Agent
By
Authorized Signatory
A-1-4
[FORM OF REVERSE OF NOTE]
The principal amount of this Note shall be paid on any redemption date, in immediately
available funds in London upon surrender of the Note at the office designated herein or pursuant hereto of
MUFG Bank, Ltd., as fiscal agent (MUFG Bank, Ltd. or any duly appointed successor fiscal agent acting in such
capacity herein referred to as the “Fiscal Agent”), pursuant to an Fiscal Agency Agreement (such agreement, as
it may be amended from time to time, the “Agreement”), dated as of November 21, 2018, between Takeda
Pharmaceutical Company Limited (the “Company”) and the Fiscal Agent. The office of the Fiscal Agent at
which such payment shall be made is located at Ropemaker Place, 25 Ropemaker Street, London EC2Y 9AN or
at such other address as the Fiscal Agent shall specify (the “Fiscal Agent’s Office”) by notice to the Holder (as
defined in the Agreement). Terms used herein not otherwise defined shall have the meaning ascribed to such
term in the Agreement.
Payment of the principal of, and interest (including Additional Amounts, if applicable) on, this
Note shall be made by wire transfer in immediately available funds to a bank account in Europe designated by
the Holder in a written notice received by the Fiscal Agent (a) in the case of a payment of interest, prior to the
Record Date (as defined below) immediately preceding the date on which such payment is due and (b) in the case
of payment of principal on any redemption date, no less than 30 days and no more than 60 days prior to such
redemption date, provided that in the case of such payment of principal, this Note shall have been surrendered to
the Fiscal Agent for payment together with such notice. No interest shall accrue on this Note after redemption;
provided, however, that, to the extent permitted by applicable law, interest shall accrue, at the rate at which
interest accrues on the principal of this Note, on any amount of principal not paid when due upon surrender of
this Note to the Fiscal Agent. “Record Date” means, with respect to an Interest Payment Date, the day falling
one clearing system Business Day prior to such Interest Payment Date.
1.
Payments of principal of and interest (including Additional Amounts, if applicable) on
this Note shall be made in Euros or in such other coin or currency of the Eurozone as at the time of payment is
legal tender for the payment of public and private debts. Until the date on which the Notes shall have been
delivered to the Fiscal Agent for cancellation, or become due and payable and a sum sufficient to pay the
principal of and interest (including Additional Amounts, if applicable) on all of the Notes shall have been made
available for payment and either paid or returned to the Company as provided herein and in the Agreement (such
date being referred to herein as the “Termination Date”), the Company will at all times maintain an office or
agency in London, where Notes may be presented or surrendered for payment.
2.
This Note is transferable in whole or in part and may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations by the Holder in person, or by his attorney duly
authorized in writing, at the Fiscal Agent’s Office in London, where the Fiscal Agent shall maintain a register
providing for the registration of the Notes and any exchange or transfer thereof (the “Note Register”). Upon
surrender of this Note for exchange or registration of transfer, the Company shall execute and the Fiscal Agent
shall authenticate and deliver in exchange therefor a Note or Notes, each in a denomination of €100,000 or an
integral multiple of €1,000 in excess thereof, which has or have an aggregate denomination equal to the
denomination of this Note and is or are registered in such name or names requested by the Holder. Any Note
presented for exchange or registration of transfer shall be accompanied by a written instrument of transfer in
form and with guarantee of signature and evidence of authority satisfactory to the Fiscal Agent and with payment
by the transferor of any stamp or other tax or governmental charge payable in connection with such transfer (or
evidence that such tax or charge has been paid) and with such tax identification number or other information for
each person in whose name a new Note is to be issued as the Fiscal Agent may request to comply with applicable
law. No exchange or registration of transfer of this Note shall be made on or after the date upon which a notice of
redemption of this Note is transmitted to the Holder.
Notwithstanding any other provision of this Note or the Agreement to the contrary, this Note, if
in global form (a Note in such form being referred to herein as a “Global Note”), shall be exchangeable pursuant
A-1-5
to this Note and the Agreement only if: (i) Euroclear or Clearstream is closed for business for a continuous
period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention
permanently to cease business or does in fact do so or (ii) there shall have occurred and be continuing an Event of
Default (as defined in the Agreement) with respect to the Notes. Upon the occurrence of any such event, this
Note shall be exchangeable for definitive Notes, as provided in the Agreement. In the event and for so long as
definitive Notes are not issued to any owner of a beneficial interest in this Global Note after the occurrence of
one of the events set forth above, the Company expressly acknowledges, with respect to the right of a Holder to
pursue a remedy pursuant to Section 4.7 or Section 4.8 of the Agreement, the right of such owner to pursue such
remedy with respect to the portion of this Global Note that represents such owner’s Notes as if such definitive
Notes had been issued.
No service charge shall be made for any such exchange or registration of transfer, but the
Company may charge the party requesting any such exchange or registration of transfer a sum sufficient to
reimburse it for any tax or other governmental charge required to be paid in connection with such exchange or
registration.
All Notes issued upon any exchange or registration of transfer of this Note shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same benefits, as this Note.
Except in the circumstances referred to in the second paragraph of this Section 3, the Company
and the Fiscal Agent may treat the Holder as the absolute owner of this Note for the purpose of receiving
payments of principal of and interest (including, Additional Amounts, as defined in Section 5 of this Note) on
this Note and for all other purposes whatsoever, and the Company and the Fiscal Agent shall not be affected by
any notice to the contrary.
subject to payment at the option of the Company prior to Š5.
3.
Except as provided in Sections 5, 6, 7 and 8 of this Note, this Note is not redeemable or
4.
All payments of principal and interest in respect of this Note shall be made without
withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied by or on behalf of Japan, or any authority thereof or therein having
power to tax (“Taxes”), unless such withholding or deduction is required by law or by the authority. In such
event, the Company shall pay such additional amounts (“Additional Amounts”) as will result in the receipt by
the Holder of such amounts as would have been received by it had no such withholding or deduction been
required, except that no such Additional Amounts shall be payable with respect to this Note under any of the
following circumstances:
the Holder or beneficial owner of this Note is an individual non-resident of Japan or a
(i)
non-Japanese corporation and is liable for such Taxes in respect of this Note by reason of its
(A) having some present or former connection with Japan other than the mere holding of this
Note or (B) being a person having a special relationship with the Company (a “specially-
related person of the Company”) as described in Article 6, paragraph (4) of the Act on
Special Measures Concerning Taxation of Japan (Act No. 26 of 1957, as amended) (together
with the cabinet order thereunder (Cabinet Order No. 43 of 1957, as amended), the “Act on
Special Taxation Measures”);
the Holder or beneficial owner of this Note would otherwise be exempt from any such
(ii)
withholding or deduction but fails to comply with any applicable requirement to provide
Interest Recipient Information (as defined below) or to submit a Written Application for Tax
5
November 21, 2020 for the 2020 Notes; November 21, 2022 for the 2022 Notes; November 21, 2026 for the
2026 Notes; November 21, 2030 for the 2030 Notes.
A-1-6
Exemption (as defined below) to the relevant Paying Agent to whom this Note is presented
(where presentation is required), or whose Interest Recipient
Information is not duly
communicated through the relevant Participant
(as defined below) and the relevant
international clearing organization to such Paying Agent;
(iii)
the Holder or beneficial owner of this Note is for Japanese tax purposes treated as an
individual resident of Japan or a Japanese corporation (except for (A) a Designated Financial
Institution (as defined below) that complies with the requirement to provide Interest Recipient
Information or to submit a Written Application for Tax Exemption and (B) an individual
resident of Japan or a Japanese corporation that duly notifies (directly, through the Participant
or otherwise) the relevant Paying Agent of its status as not being subject to Taxes to be
withheld or deducted by the Company by reason of receipt by such individual resident of Japan
or Japanese corporation of interest on this Note through a payment handling agent in Japan
appointed by it);
(iv)
this Note is presented for payment (where presentation is required) more than 30 days
after the day on which such payment on this Note became due or after the full payment was
provided for, whichever occurs later, except to the extent the Holder hereof would have been
entitled to Additional Amounts on presenting the same for payment on the last day of such
period of 30 days;
the withholding or deduction is imposed on a Holder or beneficial owner that could have
(v)
avoided such withholding or deduction by presenting this Note (where presentation is required)
to another Paying Agent maintained by the Company;
the Holder is a fiduciary or partnership or is not the sole beneficial owner of the
(vi)
payment of the principal of, or any interest on, this Note, and Japanese law requires the
payment to be included for tax purposes in the income of a beneficiary or settlor with respect to
such fiduciary or a member of such partnership or a beneficial owner, in each case, who would
not have been entitled to such Additional Amounts had it been the Holder of this Note; or
(vii)
any combination of (i) through (vi) above.
For the avoidance of doubt, none of the Company, the Fiscal Agent, any Paying Agent or any
other person shall be required to pay any Additional Amounts with respect to any withholding or deduction
imposed on or in respect of any Note pursuant to Sections 1471 to 1474 of the Internal Revenue Code of 1986, as
amended, commonly referred to as FATCA, any treaty, law, regulation or other official guidance implementing
FATCA, or any agreement between the Company, the Fiscal Agent, a Paying Agent or any other person and the
United States, any other jurisdiction, or any authority of any of the foregoing implementing FATCA.
Where this Note is held through a participant of an international clearing organization or a
financial intermediary (each, a “Participant”), in order to receive payments free of withholding or deduction by
the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an individual
non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the Company) or
(b) a Japanese financial institution (each, a “Designated Financial Institution”) falling under certain categories
prescribed by the Act on Special Taxation Measures, all in accordance with the Act on Special Taxation
Measures, such beneficial owner of this Note must, at the time of entrusting a Participant with the custody of this
Note, provide certain information prescribed by the Act on Special Taxation Measures (“Interest Recipient
Information”) to enable the Participant to establish that such beneficial owner is exempted from the requirement
for Taxes to be withheld or deducted, and advise the Participant if the beneficial owner of this Note ceases to be
so exempted (including the case where a beneficial owner of this Note that is an individual non-resident of Japan
or a non-Japanese corporation becomes a specially-related person of the Company).
A-1-7
Where this Note is not held by a Participant, in order to receive payments free of withholding
or deduction by the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an
individual non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the
Company) or (b) a Designated Financial Institution, all in accordance with the Act on Special Taxation
Measures, such beneficial owner must, prior to each time at which it receives interest, submit to the relevant
Paying Agent a written application for tax exemption (hikazei tekiyo shinkokusho) (“Written Application for
Tax Exemption”) in a form obtainable from the Paying Agent stating, inter alia, the name and address of the
beneficial owner, the title of this Note, the relevant Interest Payment Date, the amount of interest and the fact that
together with
the beneficial owner is qualified to submit
documentary evidence regarding its identity and residence.
the Written Application for Tax Exemption,
The Company shall make any required withholding or deduction and remit the full amount
withheld or deducted to the Japanese taxing authority in accordance with applicable law. The Company shall use
reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any tax, duty, assessment,
fee or other governmental charge so withheld or deducted from the Japanese taxing authority imposing such tax,
duty, assessment, fee or other governmental charge, and if certified copies are not available, the Company shall
use reasonable efforts to obtain other evidence satisfactory to the Fiscal Agent, and the Fiscal Agent shall make
such certified copies or other evidence available to the Holders or beneficial owners of the Notes upon reasonable
request to the Fiscal Agent.
The obligation to pay Additional Amounts with respect to any taxes, duties, assessments and
other governmental charges shall not apply to (A) any estate, inheritance, gift, sales, transfer, personal property
or any similar tax, duty, assessment, fee or other governmental charge or (B) any tax, duty, assessment, fee or
other governmental charge which is payable otherwise than by withholding or deduction from payments of
principal or interest on this Note; provided that, except as otherwise set forth in this Note and in the Agreement,
the Company will pay all stamp, court or documentary taxes or any excise or property taxes, charges or similar
levies and other duties, if any, which may be imposed by Japan, the United States or any political subdivision or
any taxing authority thereof or therein, with respect to the Agreement or as a consequence of the initial issuance,
execution, delivery, registration or enforcement of the Notes.
References to principal or interest in respect of this Note shall be deemed to include any
Additional Amounts due which may be payable as set forth in this Note and the Agreement.
5.
This Note may be redeemed at any time at the option and sole discretion of the
Company, in whole or in part, at any time prior to Š6 [(the “Par Call Date”)]7, upon giving not less than 30 nor
more than 60 days’ notice of redemption to the Fiscal Agent and the Holders, at a redemption price equal to the
greater of (a) 100% of the principal amount of this Note being redeemed or (b) the sum of the present values of
the principal and the remaining scheduled payments of interest on this Note being redeemed (exclusive of interest
accrued to the Redemption Date (as defined in the Agreement)), that would be due if this Note were [held to the
maturity date]8 [redeemed on the Par Call Date]9, discounted to the Redemption Date on an annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Comparable Government Bond Rate (as
defined in the Agreement) plus Š10 basis points, plus, in each case, accrued and unpaid interest on the principal
amount of this Note being redeemed up to, but excluding, the Redemption Date.
6
7
8
9
10
November 21, 2020 for the 2020 Notes; October 21, 2022 for the 2022 Notes; August 21, 2026 for the 2026
Notes; August 21, 2030 for the 2030 Notes.
For the 2022 Notes, the 2026 Notes and the 2030 Notes.
For the 2020 Notes.
For the 2022 Notes, the 2026 Notes and the 2030 Notes.
15 for the 2020 Notes; 25 for the 2022 Notes; 35 for the 2026 Notes; 40 for the 2030 Notes.
A-1-8
[This Note may be redeemed at any time at the option and sole discretion of the Company, in
whole or in part, at any time on or after the Par Call Date, upon giving not less than 30 nor more than 60 days’
notice of redemption to the Fiscal Agent and the Holders, at a redemption price equal to 100% of the principal
amount of this Note being redeemed plus accrued and unpaid interest on the principal amount of this Note being
redeemed to, but excluding, the Redemption Date.]11
The redemption prices for this Note will be calculated on the basis of a 365-day year or a
366-day year, as applicable, and the actual number of days elapsed.
6.
This Note may be redeemed at any time at the option and sole discretion of the
Company in whole, but not in part, subject to compliance with applicable regulatory requirements, and upon
giving not less than 30 nor more than 60 days’ notice of redemption to the Fiscal Agent and the Holders (which
notice shall be irrevocable) at the principal amount of this Note together with interest accrued to the date fixed
for redemption and any Additional Amounts hereon, if the Company has been or will be obliged to pay any
Additional Amounts as a result of (a) any change in, or amendment to, the laws or regulations of Japan or any
political subdivision or any authority thereof or therein having power to tax, or any change in application or
official interpretation of such laws or regulations, which change or amendment becomes effective on or after the
date of the issuance of this Note or (b) after the completion of any Succession Event, any change in, or
amendment to, the laws or regulations of the jurisdiction of the Successor Person or any political subdivision or
any authority thereof or therein having power to tax, or any change in application or official interpretation of
such laws or regulations, which change or amendment becomes effective on or after the date of such Succession
Event, and in either case such obligation cannot be avoided by the Company or the Successor Person through the
taking of reasonable measures available to the Company or the Successor Person, as the case may be (an
“Additional Amounts Event”). No notice of redemption for an Additional Amounts Event pursuant to this
Section 6 shall be given sooner than 90 days prior to the earliest date on which the Company would actually be
obliged to pay such Additional Amounts on payments with respect to this Note.
Prior to the publication of any notice of redemption pursuant to this Section 6, the Company
shall deliver to the Fiscal Agent (i) a certificate signed by an Authorized Officer stating that the conditions
precedent to its right to so redeem have been fulfilled and (ii) an opinion of independent legal advisors of
recognized standing confirming that an Additional Amounts Event has occurred. The Fiscal Agent shall accept
such opinion as sufficient evidence of the satisfaction of the conditions precedent described above, in which
event it shall be conclusive and binding on the Holders.
7.
If (i) the Shire Acquisition (as defined in the Agreement) has not been consummated on
or prior to the Long Stop Date (as defined below) or (ii) the Company otherwise publicly announces that the
Shire Acquisition will not be consummated, then the Company will be required to redeem all outstanding Notes
on the Special Mandatory Redemption Date at a special mandatory redemption price equal to 101% of the
aggregate principal amount of the Notes plus accrued and unpaid interest, if any, to, but excluding, the Special
Mandatory Redemption Date.
The “Long Stop Date” means May 8, 2019, or such later date as may be agreed upon in
accordance with the Co-Operation Agreement, dated May 8, 2018, between Takeda Pharmaceutical Company
Limited and Shire plc.
Notwithstanding the foregoing, installments of interest on the Notes that are due and payable
on Interest Payment Dates falling on or prior to the Special Mandatory Redemption Date will be payable on such
Interest Payment Dates to the registered Holders as of the close of business on the relevant Record Dates in
accordance with the terms of the Notes and this Agreement.
11 Only for the 2022 Notes, the 2026 Notes and the 2030 Notes.
A-1-9
The Company will cause the notice of special mandatory redemption to be transmitted, with a
copy to the Fiscal Agent, within five Business Days after the occurrence of the event triggering the special
mandatory redemption to each Holder at its registered address. If funds sufficient to pay the special mandatory
redemption price of the outstanding notes to be redeemed on the Special Mandatory Redemption Date (plus
accrued and unpaid interest, if any, to, but excluding, such date) are deposited with the Fiscal Agent or a paying
agent on or before such Special Mandatory Redemption Date, and certain other conditions are satisfied, on and
after such Special Mandatory Redemption Date, the outstanding Notes will cease to bear interest.
Upon the consummation of the Shire Acquisition, the foregoing provisions regarding the
special mandatory redemption will cease to apply.
8.
In the case of any redemption of this Note as provided in Section 5, 6 or 7 of this Note,
notice of redemption of this Note shall be transmitted to the Holder at its address as it shall then appear in the
Note Register. If by reason of any cause, it shall be impracticable to give notice to the Holder in the manner
prescribed herein, then such notification in lieu thereof as shall be made by the Company or by the Fiscal Agent
on behalf of and at the instruction of the Company shall constitute sufficient provision of such notice, if such
notification shall, so far as may be practicable, approximate the terms and conditions of the notice in lieu of
which it is given. Neither the failure to give notice nor any defect in any notice of redemption given to the Holder
of any other Note shall affect the sufficiency of any notice with respect to this Note. Notice of redemption of this
Note having been so given, this Note shall become due and payable on the redemption date so specified and such
dates shall be deemed the maturity date of this Note.
9.
The Company shall, on or before each due date of the principal of or interest on this
Note, pay to the Fiscal Agent, who shall hold the same in trust for the benefit of the person entitled thereto, a sum
sufficient to pay the principal or interest so becoming due until such sum shall be paid to such person or
otherwise disposed of as herein provided. Any money held by the Fiscal Agent in trust for the payment of the
principal of or interest on this Note and remaining unclaimed for two years after such principal or interest has
become due and payable and paid to the Fiscal Agent shall be discharged from such trust, and repaid to the
Company, and all liability of the Fiscal Agent with respect to such money shall cease.
10.
If this Note shall at any time become mutilated, destroyed, stolen or lost, then,
provided that this Note, or evidence of the destruction, theft or loss hereof (together with the indemnity
hereinafter referred to and such other documents or proof as may be required hereunder) shall be delivered to the
Fiscal Agent, a replacement Note of like tenor and principal amount shall be authenticated and delivered by the
Fiscal Agent, in exchange for this Note, in the case of mutilation, or in lieu of this Note, in the case of
destruction, loss or theft, and provided further that, if this Note is destroyed, stolen or lost, (i) neither the
Company nor the Fiscal Agent shall have received notice that this Note has been acquired by a bona fide
purchaser, and (ii) the Fiscal Agent shall have received (a) satisfactory evidence (as so deemed by the Fiscal
Agent in its absolute discretion) that this Note was destroyed, stolen or lost, and (b) an indemnity for the benefit
of the Company and the Fiscal Agent satisfactory to each of them. All expenses and charges associated with
procuring such indemnity shall be borne by the Holder of this Note.
As provided in the Agreement, every new Note issued in exchange for or in lieu of any
mutilated, destroyed, stolen or lost Note shall constitute an original additional contractual obligation of the
Company, whether or not the mutilated, destroyed, stolen or lost Note shall be at any time enforceable by
anyone, and shall be entitled to the benefits of the Agreement equally and proportionately with any and all other
Notes duly issued thereunder. Any such new Note shall be so dated that neither gain nor loss of interest shall
result from such replacement. Upon the issuance of any such new Note, the Company may require the payment
of a sum sufficient to cover any stamp or other tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Fiscal Agent) connected therewith.
All notices to the Company under this Note shall be in writing and addressed to the
Company at Takeda Pharmaceutical Company Limited, 1-1, Nihonbashi-Honcho 2-Chome, Chuo-ku,
11.
A-1-10
Tokyo 103-8668, Japan, Fax: +81-3-3278-2198, Attention: Global Treasury & Finance Management, Group
Finance & Controlling, Global Finance, or to such other address as the Company may notify to the Holder. All
notices to the Holder shall be in writing and sent by mail or emailed, in PDF format to the Holder at his or its
address as set forth in the Note Register.
12.
This Note is one of the Š12% Senior Notes due Š13 (collectively, the “Notes” and,
individually, a “Note”) issued by the Company in accordance with the Agreement, copies of which are on file
and available for inspection at the Fiscal Agent’s Office. Under the terms of the Agreement, the Company may
remove any Fiscal Agent and appoint a new Fiscal Agent. The Company shall notify, or cause the Fiscal Agent to
notify, the Holders of Notes of the appointment of any Fiscal Agent.
€100,000 or integral multiples of €1,000 in excess thereof.
The Notes are issuable only as fully registered Notes without coupons in denominations of
the Notes, is hereby incorporated mutatis mutandis by reference herein.
13.
Article VIII of the Agreement, which provides for amendments to the Agreement and
14.
Subject to the authentication of this Note by the Fiscal Agent, the Company hereby
certifies and declares that all acts, conditions and things required to be done and performed and to have happened
precedent to the creation and issuance of this Note, and to constitute the same a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, have been done and performed and have
happened in due and strict compliance with all applicable law.
15.
Claims for payment of principal in respect of this Note shall be prescribed upon the
expiry of 6 years from any redemption date and claims for payment of interest (if any) in respect of this Note
shall be prescribed upon the expiry of 5 years from the due date hereof.
This Note shall be governed by and construed in accordance with the laws of the State of
New York.
12
13
0.375% for the 2020 Notes; 1.125% for the 2022 Notes; 2.250% for the 2026 Notes; 3.000% for the 2030
Notes.
2020 for the 2020 Notes; 2022 for the 2022 Notes; 2026 for the 2026 Notes; 2030 for the 2030 Notes.
A-1-11
FORM OF REGULATION S GLOBAL NOTE
[FORM OF FACE OF NOTE]
EXHIBIT A-2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR WITH ANY SECURITIES
REGULATORY AUTHORITY OF ANY JURISDICTION AND MAY NOT BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO A U.S. PERSON
(AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) EXCEPT PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT TO AN
EFFECTIVE
TAKEDA
PHARMACEUTICAL COMPANY LIMITED (THE “COMPANY”) HAS AGREED THAT THIS LEGEND
SHALL BE DEEMED TO HAVE BEEN REMOVED ON THE 41ST DAY FOLLOWING THE LATER OF
THE COMMENCEMENT OF THE OFFERING OF THE NOTES AND THE FINAL DELIVERY DATE
WITH RESPECT THERETO.
REGISTRATION STATEMENT UNDER
SECURITIES ACT.
THE
IS
BY
AN
THIS
UNLESS
PRESENTED
CERTIFICATE
AUTHORIZED
REPRESENTATIVE OF EUROCLEAR BANK SA/NV, AS OPERATOR OF THE EUROCLEAR SYSTEM
(“EUROCLEAR”) AND CLEARSTREAM BANKING S.A. (“CLEARSTREAM” AND, TOGETHER WITH
EUROCLEAR, “EUROCLEAR/CLEARSTREAM”), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF MUFG NOMINEES (UK) LIMITED OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR/CLEARSTREAM (AND ANY
PAYMENT IS MADE TO MUFG NOMINEES (UK) LIMITED OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR/CLEARSTREAM), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, MUFG NOMINEES
(UK) LIMITED, HAS AN INTEREST HEREIN.
INTEREST PAYMENTS ON THIS NOTE GENERALLY WILL BE SUBJECT TO
JAPANESE WITHHOLDING TAX UNLESS IT IS ESTABLISHED THAT THIS NOTE IS HELD BY OR
FOR THE ACCOUNT OF A BENEFICIAL OWNER THAT IS (I) FOR JAPANESE TAX PURPOSES,
NEITHER AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION, NOR AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A PERSON HAVING A SPECIAL RELATIONSHIP WITH THE COMPANY AS DESCRIBED IN
ARTICLE 6, PARAGRAPH (4) OF THE ACT ON SPECIAL MEASURES CONCERNING TAXATION OF
JAPAN (ACT NO. 26 OF 1957, AS AMENDED) (THE “ACT ON SPECIAL TAXATION MEASURES”) (A
“SPECIALLY-RELATED PERSON OF THE COMPANY”),
(II) A JAPANESE FINANCIAL
INSTITUTION OR A JAPANESE FINANCIAL INSTRUMENTS BUSINESS OPERATOR DESIGNATED IN
ARTICLE 3-2-2, PARAGRAPH (28) OF THE CABINET ORDER (CABINET ORDER NO. 43 OF 1957, AS
AMENDED) RELATING TO THE ACT ON SPECIAL TAXATION MEASURES WHICH COMPLIES WITH
THE REQUIREMENT FOR TAX EXEMPTION UNDER ARTICLE 6, PARAGRAPH (9) OF THE ACT ON
SPECIAL TAXATION MEASURES OR (III) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION
OR A FINANCIAL INSTRUMENTS BUSINESS OPERATOR, ETC. DESCRIBED IN ARTICLE 3-3,
PARAGRAPH (6) OF THE ACT ON SPECIAL TAXATION MEASURES WHICH HAS RECEIVED SUCH
PAYMENTS THROUGH A PAYMENT HANDLING AGENT IN JAPAN AS DESCRIBED IN PARAGRAPH
(1) OF SAID ARTICLE AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER
THAT PARAGRAPH.
INTEREST PAYMENTS ON THIS NOTE TO AN INDIVIDUAL RESIDENT OF JAPAN,
TO A JAPANESE CORPORATION NOT DESCRIBED IN THE PRECEDING PARAGRAPH, OR TO AN
A-2-1
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A SPECIALLY-RELATED PERSON OF THE COMPANY WILL BE SUBJECT TO JAPANESE
INCOME TAX AT THE TIME OF SUCH INTEREST PAYMENTS.
A-2-2
TAKEDA PHARMACEUTICAL COMPANY LIMITED
[0.375% Senior Notes due 2020]
[1.125% Senior Notes due 2022]
[2.250% Senior Notes due 2026]
[3.000% Senior Notes due 2030]
Principal Amount €Š
No. Reg S-1
ISIN Š14
Common Code Š15
Takeda Pharmaceutical Company Limited (the “Company”), for value received, hereby
promises to pay to MUFG Nominees (UK) Limited, or registered assigns, the principal amount set forth above on
Š16, and to pay interest thereon from November 21, 2018 or from the most recent Interest Payment Date to which
interest has been paid or made available for payment, annually in arrears on each Interest Payment Date
commencing on November 21, 2019, at the rate of Š17% per annum, together with such Additional Amounts (if
any) as may be payable under this Note, until the principal hereof is paid or made available for payment. Interest
on this Note will accrue from the date of original issuance or, if interest has already been paid, from the date it
was most recently paid. Interest will be computed on the basis of the actual number of days in the period for
which interest is being calculated and the actual number of days from and including the last date on which
interest was paid on the fixed rate notes (or from November 21, 2018, if no interest has been paid on the fixed
rate notes) to, but excluding, the next scheduled interest payment date. This payment convention is referred to as
ACTUAL/ACTUAL (ICMA) (as defined in the rulebook of the International Capital Market Association).
Interest will be calculated per €1,000 in principal amount of the Notes. This Note will be the Company’s direct,
unsecured and unsubordinated general obligation and will have the same rank in liquidation as all of the
Company’s other unsecured and unsubordinated debt.
In any case in which any date for payment of principal or interest (or Additional Amounts, if
any) falls on a day that is not a Business Day, then payment of principal or interest (or Additional Amounts, if
any) need not be made on such date but may be made on the next succeeding Business Day. Any payment made
pursuant to the preceding sentence on such next succeeding Business Day shall have the same force and effect as
if made on the due date, and no interest shall accrue with respect to such payment for the period after such date.
“Interest Payment Date” means November 21 during the term of this Note.
“Business Day” means both a day on which the TARGET2 System is open, and a day other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banking institutions are
authorized or required by law, regulation or executive order to be closed in London or Tokyo.
Reference is hereby made to the further provisions of this Note set forth on the reverse hereof,
and such provisions shall for all purposes have the same effect as though fully set forth in this place.
14 XS1843449981 for the 2020 Notes; XS1843449049 for the 2022 Notes; XS1843449122 for the 2026 Notes;
15
XS1843449395 for the 2030 Notes.
184344998 for the 2020 Notes; 184344904 for the 2022 Notes; 184344912 for the 2026 Notes; 184344939
for the 2030 Notes.
16 November 21, 2020 for the 2020 Notes; November 21, 2022 for the 2022 Notes; November 21, 2026 for the
17
2026 Notes; November 21, 2030 for the 2030 Notes.
0.375% for the 2020 Notes; 1.125% for the 2022 Notes; 2.250% for the 2026 Notes; 3.000% for the 2030
Notes.
A-2-3
This Note shall not be valid or obligatory for any purpose until it shall have been manually
signed by the Fiscal Agent for authentication.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
TAKEDA PHARMACEUTICAL COMPANY
LIMITED
By
Name: [name]
Title:
[title]
This is one of the Notes referred to
in the within-mentioned Fiscal Agency Agreement:
Dated:
, 20
MUFG BANK, LTD.,
as Fiscal Agent
By
Authorized Signatory
A-2-4
[FORM OF REVERSE OF NOTE]
The principal amount of this Note shall be paid on any redemption date, in immediately
available funds in London upon surrender of the Note at the office designated herein or pursuant hereto of
MUFG Bank, Ltd., as fiscal agent (MUFG Bank, Ltd. or any duly appointed successor fiscal agent acting in such
capacity herein referred to as the “Fiscal Agent”), pursuant to an Fiscal Agency Agreement (such agreement, as
it may be amended from time to time, the “Agreement”), dated as of November 21, 2018, between Takeda
Pharmaceutical Company Limited (the “Company”) and the Fiscal Agent. The office of the Fiscal Agent at
which such payment shall be made is located at Ropemaker Place, 25 Ropemaker Street, London EC2Y 9AN or
at such other address as the Fiscal Agent shall specify (the “Fiscal Agent’s Office”) by notice to the Holder (as
defined in the Agreement). Terms used herein not otherwise defined shall have the meaning ascribed to such
term in the Agreement.
Payment of the principal of, and interest (including Additional Amounts, if applicable) on, this
Note shall be made by wire transfer in immediately available funds to a bank account in Europe designated by
the Holder in a written notice received by the Fiscal Agent (a) in the case of a payment of interest, prior to the
Record Date (as defined below) immediately preceding the date on which such payment is due and (b) in the case
of payment of principal on any redemption date, no less than 30 days and no more than 60 days prior to such
redemption date, provided that in the case of such payment of principal, this Note shall have been surrendered to
the Fiscal Agent for payment together with such notice. No interest shall accrue on this Note after redemption;
provided, however, that, to the extent permitted by applicable law, interest shall accrue, at the rate at which
interest accrues on the principal of this Note, on any amount of principal not paid when due upon surrender of
this Note to the Fiscal Agent. “Record Date” means, with respect to an Interest Payment Date, the day falling
one clearing system Business Day prior to such Interest Payment Date.
1.
Payments of principal of and interest (including Additional Amounts, if applicable) on
this Note shall be made in Euros or in such other coin or currency of the Eurozone as at the time of payment is
legal tender for the payment of public and private debts. Until the date on which the Notes shall have been
delivered to the Fiscal Agent for cancellation, or become due and payable and a sum sufficient to pay the
principal of and interest (including Additional Amounts, if applicable) on all of the Notes shall have been made
available for payment and either paid or returned to the Company as provided herein and in the Agreement (such
date being referred to herein as the “Termination Date”), the Company will at all times maintain an office or
agency in London, where Notes may be presented or surrendered for payment.
2.
This Note is transferable in whole or in part and may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations by the Holder in person, or by his attorney duly
authorized in writing, at the Fiscal Agent’s Office in London, where the Fiscal Agent shall maintain a register
providing for the registration of the Notes and any exchange or transfer thereof (the “Note Register”). Upon
surrender of this Note for exchange or registration of transfer, the Company shall execute and the Fiscal Agent
shall authenticate and deliver in exchange therefor a Note or Notes, each in a denomination of €100,000 or an
integral multiple of €1,000 in excess thereof, which has or have an aggregate denomination equal to the
denomination of this Note and is or are registered in such name or names requested by the Holder. Any Note
presented for exchange or registration of transfer shall be accompanied by a written instrument of transfer in
form and with guarantee of signature and evidence of authority satisfactory to the Fiscal Agent and with payment
by the transferor of any stamp or other tax or governmental charge payable in connection with such transfer (or
evidence that such tax or charge has been paid) and with such tax identification number or other information for
each person in whose name a new Note is to be issued as the Fiscal Agent may request to comply with applicable
law. No exchange or registration of transfer of this Note shall be made on or after the date upon which a notice of
redemption of this Note is transmitted to the Holder.
Notwithstanding any other provision of this Note or the Agreement to the contrary, this Note, if
in global form (a Note in such form being referred to herein as a “Global Note”), shall be exchangeable pursuant
A-2-5
to this Note and the Agreement only if: (i) Euroclear or Clearstream is closed for business for a continuous
period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention
permanently to cease business or does in fact do so or (ii) there shall have occurred and be continuing an Event of
Default (as defined in the Agreement) with respect to the Notes. Upon the occurrence of any such event, this
Note shall be exchangeable for definitive Notes, as provided in the Agreement. In the event and for so long as
definitive Notes are not issued to any owner of a beneficial interest in this Global Note after the occurrence of
one of the events set forth above, the Company expressly acknowledges, with respect to the right of a Holder to
pursue a remedy pursuant to Section 4.7 or Section 4.8 of the Agreement, the right of such owner to pursue such
remedy with respect to the portion of this Global Note that represents such owner’s Notes as if such definitive
Notes had been issued.
No service charge shall be made for any such exchange or registration of transfer, but the
Company may charge the party requesting any such exchange or registration of transfer a sum sufficient to
reimburse it for any tax or other governmental charge required to be paid in connection with such exchange or
registration.
All Notes issued upon any exchange or registration of transfer of this Note shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same benefits, as this Note.
Except in the circumstances referred to in the second paragraph of this Section 3, the Company
and the Fiscal Agent may treat the Holder as the absolute owner of this Note for the purpose of receiving
payments of principal of and interest (including, Additional Amounts, as defined in Section 5 of this Note) on
this Note and for all other purposes whatsoever, and the Company and the Fiscal Agent shall not be affected by
any notice to the contrary.
subject to payment at the option of the Company prior to Š18.
3.
Except as provided in Sections 5, 6, 7 and 8 of this Note, this Note is not redeemable or
4.
All payments of principal and interest in respect of this Note shall be made without
withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied by or on behalf of Japan, or any authority thereof or therein having
power to tax (“Taxes”), unless such withholding or deduction is required by law or by the authority. In such
event, the Company shall pay such additional amounts (“Additional Amounts”) as will result in the receipt by
the Holder of such amounts as would have been received by it had no such withholding or deduction been
required, except that no such Additional Amounts shall be payable with respect to this Note under any of the
following circumstances:
the Holder or beneficial owner of this Note is an individual non-resident of Japan or a
(i)
non-Japanese corporation and is liable for such Taxes in respect of this Note by reason of its
(A) having some present or former connection with Japan other than the mere holding of this
Note or (B) being a person having a special relationship with the Company (a “specially-
related person of the Company”) as described in Article 6, paragraph (4) of the Act on
Special Measures Concerning Taxation of Japan (Act No. 26 of 1957, as amended) (together
with the cabinet order thereunder (Cabinet Order No. 43 of 1957, as amended), the “Act on
Special Taxation Measures”);
the Holder or beneficial owner of this Note would otherwise be exempt from any such
(ii)
withholding or deduction but fails to comply with any applicable requirement to provide
Interest Recipient Information (as defined below) or to submit a Written Application for Tax
18 November 21, 2020 for the 2020 Notes; November 21, 2022 for the 2022 Notes; November 21, 2026 for the
2026 Notes; November 21, 2030 for the 2030 Notes.
A-2-6
Exemption (as defined below) to the relevant Paying Agent to whom this Note is presented
(where presentation is required), or whose Interest Recipient
Information is not duly
communicated through the relevant Participant
(as defined below) and the relevant
international clearing organization to such Paying Agent;
(iii)
the Holder or beneficial owner of this Note is for Japanese tax purposes treated as an
individual resident of Japan or a Japanese corporation (except for (A) a Designated Financial
Institution (as defined below) that complies with the requirement to provide Interest Recipient
Information or to submit a Written Application for Tax Exemption and (B) an individual
resident of Japan or a Japanese corporation that duly notifies (directly, through the Participant
or otherwise) the relevant Paying Agent of its status as not being subject to Taxes to be
withheld or deducted by the Company by reason of receipt by such individual resident of Japan
or Japanese corporation of interest on this Note through a payment handling agent in Japan
appointed by it);
(iv)
this Note is presented for payment (where presentation is required) more than 30 days
after the day on which such payment on this Note became due or after the full payment was
provided for, whichever occurs later, except to the extent the Holder hereof would have been
entitled to Additional Amounts on presenting the same for payment on the last day of such
period of 30 days;
the withholding or deduction is imposed on a Holder or beneficial owner that could have
(v)
avoided such withholding or deduction by presenting this Note (where presentation is required)
to another Paying Agent maintained by the Company;
the Holder is a fiduciary or partnership or is not the sole beneficial owner of the
(vi)
payment of the principal of, or any interest on, this Note, and Japanese law requires the
payment to be included for tax purposes in the income of a beneficiary or settlor with respect to
such fiduciary or a member of such partnership or a beneficial owner, in each case, who would
not have been entitled to such Additional Amounts had it been the Holder of this Note; or
(vii)
any combination of (i) through (vi) above.
For the avoidance of doubt, none of the Company, the Fiscal Agent, any Paying Agent or any
other person shall be required to pay any Additional Amounts with respect to any withholding or deduction
imposed on or in respect of any Note pursuant to Sections 1471 to 1474 of the Internal Revenue Code of 1986, as
amended, commonly referred to as FATCA, any treaty, law, regulation or other official guidance implementing
FATCA, or any agreement between the Company, the Fiscal Agent, a Paying Agent or any other person and the
United States, any other jurisdiction, or any authority of any of the foregoing implementing FATCA.
Where this Note is held through a participant of an international clearing organization or a
financial intermediary (each, a “Participant”), in order to receive payments free of withholding or deduction by
the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an individual
non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the Company) or
(b) a Japanese financial institution (each, a “Designated Financial Institution”) falling under certain categories
prescribed by the Act on Special Taxation Measures, all in accordance with the Act on Special Taxation
Measures, such beneficial owner of this Note must, at the time of entrusting a Participant with the custody of this
Note, provide certain information prescribed by the Act on Special Taxation Measures (“Interest Recipient
Information”) to enable the Participant to establish that such beneficial owner is exempted from the requirement
for Taxes to be withheld or deducted, and advise the Participant if the beneficial owner of this Note ceases to be
so exempted (including the case where a beneficial owner of this Note that is an individual non-resident of Japan
or a non-Japanese corporation becomes a specially-related person of the Company).
A-2-7
Where this Note is not held by a Participant, in order to receive payments free of withholding
or deduction by the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an
individual non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the
Company) or (b) a Designated Financial Institution, all in accordance with the Act on Special Taxation
Measures, such beneficial owner must, prior to each time at which it receives interest, submit to the relevant
Paying Agent a written application for tax exemption (hikazei tekiyo shinkokusho) (“Written Application for
Tax Exemption”) in a form obtainable from the Paying Agent stating, inter alia, the name and address of the
beneficial owner, the title of this Note, the relevant Interest Payment Date, the amount of interest and the fact that
together with
the beneficial owner is qualified to submit
documentary evidence regarding its identity and residence.
the Written Application for Tax Exemption,
The Company shall make any required withholding or deduction and remit the full amount
withheld or deducted to the Japanese taxing authority in accordance with applicable law. The Company shall use
reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any tax, duty, assessment,
fee or other governmental charge so withheld or deducted from the Japanese taxing authority imposing such tax,
duty, assessment, fee or other governmental charge, and if certified copies are not available, the Company shall
use reasonable efforts to obtain other evidence satisfactory to the Fiscal Agent, and the Fiscal Agent shall make
such certified copies or other evidence available to the Holders or beneficial owners of the Notes upon reasonable
request to the Fiscal Agent.
The obligation to pay Additional Amounts with respect to any taxes, duties, assessments and
other governmental charges shall not apply to (A) any estate, inheritance, gift, sales, transfer, personal property
or any similar tax, duty, assessment, fee or other governmental charge or (B) any tax, duty, assessment, fee or
other governmental charge which is payable otherwise than by withholding or deduction from payments of
principal or interest on this Note; provided that, except as otherwise set forth in this Note and in the Agreement,
the Company will pay all stamp, court or documentary taxes or any excise or property taxes, charges or similar
levies and other duties, if any, which may be imposed by Japan, the United States or any political subdivision or
any taxing authority thereof or therein, with respect to the Agreement or as a consequence of the initial issuance,
execution, delivery, registration or enforcement of the Notes.
References to principal or interest in respect of this Note shall be deemed to include any
Additional Amounts due which may be payable as set forth in this Note and the Agreement.
5.
This Note may be redeemed at any time at the option and sole discretion of the
Company, in whole or in part, at any time prior to Š19 [(the “Par Call Date”)]20, upon giving not less than 30 nor
more than 60 days’ notice of redemption to the Fiscal Agent and the Holders, at a redemption price equal to the
greater of (a) 100% of the principal amount of this Note being redeemed or (b) the sum of the present values of
the principal and the remaining scheduled payments of interest on this Note being redeemed (exclusive of interest
accrued to the Redemption Date (as defined in the Agreement)), that would be due if this Note were [held to the
maturity date]21 [redeemed on the Par Call Date]22, discounted to the Redemption Date on an annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Comparable Government Bond Rate (as
defined in the Agreement) plus Š23 basis points, plus, in each case, accrued and unpaid interest on the principal
amount of this Note being redeemed up to, but excluding, the Redemption Date.
[This Note may be redeemed at any time at the option and sole discretion of the Company, in
whole or in part, at any time on or after the Par Call Date, upon giving not less than 30 nor more than 60 days’
19 November 21, 2020 for the 2020 Notes; October 21, 2022 for the 2022 Notes; August 21, 2026 for the 2026
Notes; August 21, 2030 for the 2030 Notes.
For the 2022 Notes, the 2026 Notes and the 2030 Notes.
For the 2020 Notes.
For the 2022 Notes, the 2026 Notes and the 2030 Notes.
15 for the 2020 Notes; 25 for the 2022 Notes; 35 for the 2026 Notes; 40 for the 2030 Notes.
20
21
22
23
A-2-8
notice of redemption to the Fiscal Agent and the Holders, at a redemption price equal to 100% of the principal
amount of this Note being redeemed plus accrued and unpaid interest on the principal amount of this Note being
redeemed to, but excluding, the Redemption Date.]24
The redemption prices for this Note will be calculated on the basis of a 365-day year or a
366-day year, as applicable, and the actual number of days elapsed.
6.
This Note may be redeemed at any time at the option and sole discretion of the
Company in whole, but not in part, subject to compliance with applicable regulatory requirements, and upon
giving not less than 30 nor more than 60 days’ notice of redemption to the Fiscal Agent and the Holders (which
notice shall be irrevocable) at the principal amount of this Note together with interest accrued to the date fixed
for redemption and any Additional Amounts hereon, if the Company has been or will be obliged to pay any
Additional Amounts as a result of (a) any change in, or amendment to, the laws or regulations of Japan or any
political subdivision or any authority thereof or therein having power to tax, or any change in application or
official interpretation of such laws or regulations, which change or amendment becomes effective on or after the
date of the issuance of this Note or (b) after the completion of any Succession Event, any change in, or
amendment to, the laws or regulations of the jurisdiction of the Successor Person or any political subdivision or
any authority thereof or therein having power to tax, or any change in application or official interpretation of
such laws or regulations, which change or amendment becomes effective on or after the date of such Succession
Event, and in either case such obligation cannot be avoided by the Company or the Successor Person through the
taking of reasonable measures available to the Company or the Successor Person, as the case may be (an
“Additional Amounts Event”). No notice of redemption for an Additional Amounts Event pursuant to this
Section 6 shall be given sooner than 90 days prior to the earliest date on which the Company would actually be
obliged to pay such Additional Amounts on payments with respect to this Note.
Prior to the publication of any notice of redemption pursuant to this Section 6, the Company
shall deliver to the Fiscal Agent (i) a certificate signed by an Authorized Officer stating that the conditions
precedent to its right to so redeem have been fulfilled and (ii) an opinion of independent legal advisors of
recognized standing confirming that an Additional Amounts Event has occurred. The Fiscal Agent shall accept
such opinion as sufficient evidence of the satisfaction of the conditions precedent described above, in which
event it shall be conclusive and binding on the Holders.
7.
If (i) the Shire Acquisition (as defined in the Agreement) has not been consummated on
or prior to the Long Stop Date (as defined below) or (ii) the Company otherwise publicly announces that the
Shire Acquisition will not be consummated, then the Company will be required to redeem all outstanding Notes
on the Special Mandatory Redemption Date at a special mandatory redemption price equal to 101% of the
aggregate principal amount of the Notes plus accrued and unpaid interest, if any, to, but excluding, the Special
Mandatory Redemption Date.
The “Long Stop Date” means May 8, 2019, or such later date as may be agreed upon in
accordance with the Co-Operation Agreement, dated May 8, 2018, between Takeda Pharmaceutical Company
Limited and Shire plc.
Notwithstanding the foregoing, installments of interest on the Notes that are due and payable
on Interest Payment Dates falling on or prior to the Special Mandatory Redemption Date will be payable on such
Interest Payment Dates to the registered Holders as of the close of business on the relevant Record Dates in
accordance with the terms of the Notes and this Agreement.
The Company will cause the notice of special mandatory redemption to be transmitted, with a
copy to the Fiscal Agent, within five Business Days after the occurrence of the event triggering the special
24 Only for the 2022 Notes, the 2026 Notes and the 2030 Notes.
A-2-9
mandatory redemption to each Holder at its registered address. If funds sufficient to pay the special mandatory
redemption price of the outstanding notes to be redeemed on the Special Mandatory Redemption Date (plus
accrued and unpaid interest, if any, to, but excluding, such date) are deposited with the Fiscal Agent or a paying
agent on or before such Special Mandatory Redemption Date, and certain other conditions are satisfied, on and
after such Special Mandatory Redemption Date, the outstanding Notes will cease to bear interest.
Upon the consummation of the Shire Acquisition, the foregoing provisions regarding the
special mandatory redemption will cease to apply.
8.
In the case of any redemption of this Note as provided in Section 5, 6 or 7 of this Note,
notice of redemption of this Note shall be transmitted to the Holder at its address as it shall then appear in the
Note Register. If by reason of any cause, it shall be impracticable to give notice to the Holder in the manner
prescribed herein, then such notification in lieu thereof as shall be made by the Company or by the Fiscal Agent
on behalf of and at the instruction of the Company shall constitute sufficient provision of such notice, if such
notification shall, so far as may be practicable, approximate the terms and conditions of the notice in lieu of
which it is given. Neither the failure to give notice nor any defect in any notice of redemption given to the Holder
of any other Note shall affect the sufficiency of any notice with respect to this Note. Notice of redemption of this
Note having been so given, this Note shall become due and payable on the redemption date so specified and such
dates shall be deemed the maturity date of this Note.
9.
The Company shall, on or before each due date of the principal of or interest on this
Note, pay to the Fiscal Agent, who shall hold the same in trust for the benefit of the person entitled thereto, a sum
sufficient to pay the principal or interest so becoming due until such sum shall be paid to such person or
otherwise disposed of as herein provided. Any money held by the Fiscal Agent in trust for the payment of the
principal of or interest on this Note and remaining unclaimed for two years after such principal or interest has
become due and payable and paid to the Fiscal Agent shall be discharged from such trust, and repaid to the
Company, and all liability of the Fiscal Agent with respect to such money shall cease.
10.
If this Note shall at any time become mutilated, destroyed, stolen or lost, then, provided
that this Note, or evidence of the destruction, theft or loss hereof (together with the indemnity hereinafter referred
to and such other documents or proof as may be required hereunder) shall be delivered to the Fiscal Agent, a
replacement Note of like tenor and principal amount shall be authenticated and delivered by the Fiscal Agent, in
exchange for this Note, in the case of mutilation, or in lieu of this Note, in the case of destruction, loss or theft,
and provided further that, if this Note is destroyed, stolen or lost, (i) neither the Company nor the Fiscal Agent
shall have received notice that this Note has been acquired by a bona fide purchaser, and (ii) the Fiscal Agent
shall have received (a) satisfactory evidence (as so deemed by the Fiscal Agent in its absolute discretion) that this
Note was destroyed, stolen or lost, and (b) an indemnity for the benefit of the Company and the Fiscal Agent
satisfactory to each of them. All expenses and charges associated with procuring such indemnity shall be borne
by the Holder of this Note.
As provided in the Agreement, every new Note issued in exchange for or in lieu of any
mutilated, destroyed, stolen or lost Note shall constitute an original additional contractual obligation of the
Company, whether or not the mutilated, destroyed, stolen or lost Note shall be at any time enforceable by
anyone, and shall be entitled to the benefits of the Agreement equally and proportionately with any and all other
Notes duly issued thereunder. Any such new Note shall be so dated that neither gain nor loss of interest shall
result from such replacement. Upon the issuance of any such new Note, the Company may require the payment
of a sum sufficient to cover any stamp or other tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Fiscal Agent) connected therewith.
11.
All notices to the Company under this Note shall be in writing and addressed to the
Company at Takeda Pharmaceutical Company Limited, 1-1, Nihonbashi-Honcho 2-Chome, Chuo-ku,
Tokyo 103-8668, Japan, Fax: +81-3-3278-2198, Attention: Global Treasury & Finance Management, Group
A-2-10
Finance & Controlling, Global Finance, or to such other address as the Company may notify to the Holder. All
notices to the Holder shall be in writing and sent by mail or emailed, in PDF format to the Holder at his or its
address as set forth in the Note Register.
12.
This Note is one of the Š25% Senior Notes due Š26 (collectively, the “Notes” and,
individually, a “Note”) issued by the Company in accordance with the Agreement, copies of which are on file
and available for inspection at the Fiscal Agent’s Office. Under the terms of the Agreement, the Company may
remove any Fiscal Agent and appoint a new Fiscal Agent. The Company shall notify, or cause the Fiscal Agent to
notify, the Holders of Notes of the appointment of any Fiscal Agent.
€100,000 or integral multiples of €1,000 in excess thereof.
The Notes are issuable only as fully registered Notes without coupons in denominations of
the Notes, is hereby incorporated mutatis mutandis by reference herein.
13.
Article VIII of the Agreement, which provides for amendments to the Agreement and
14.
Subject to the authentication of this Note by the Fiscal Agent, the Company hereby
certifies and declares that all acts, conditions and things required to be done and performed and to have happened
precedent to the creation and issuance of this Note, and to constitute the same a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, have been done and performed and have
happened in due and strict compliance with all applicable law.
15.
Claims for payment of principal in respect of this Note shall be prescribed upon the
expiry of 6 years from any redemption date and claims for payment of interest (if any) in respect of this Note
shall be prescribed upon the expiry of 5 years from the due date hereof.
This Note shall be governed by and construed in accordance with the laws of the State of
New York.
25
26
0.375% for the 2020 Notes; 1.125% for the 2022 Notes; 2.250% for the 2026 Notes; 3.000% for the 2030
Notes.
2020 for the 2020 Notes; 2022 for the 2022 Notes; 2026 for the 2026 Notes; 2030 for the 2030 Notes.
A-2-11
FORM OF RULE 144A GLOBAL NOTE
[FORM OF FACE OF NOTE]
EXHIBIT A-3
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE HOLDER HEREOF
AGREES FOR THE BENEFIT OF TAKEDA PHARMACEUTICAL COMPANY LIMITED (THE
“COMPANY”) THAT THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1) TO THE COMPANY, (2) TO A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT (“RULE 144A”)) OR A PERSON WHO THE SELLER AND ANY
PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER IN ACCORDANCE WITH RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, (3) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
(4) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT,
PROVIDED THAT, AS A CONDITION TO THE REGISTRATION OF THE TRANSFER THEREOF, THE
COMPANY OR THE FISCAL AGENT MAY REQUIRE THE DELIVERY OF ANY DOCUMENTS,
INCLUDING AN OPINION OF COUNSEL, THAT IT,
IN ITS SOLE DISCRETION, MAY DEEM
NECESSARY OR APPROPRIATE TO EVIDENCE COMPLIANCE WITH SUCH EXEMPTION, OR
(5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES AND OTHER JURISDICTIONS. THE HOLDER HEREOF, BY, PURCHASING OR
ACCEPTING THIS NOTE, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT
IT WILL NOTIFY ANY PURCHASER OF THIS NOTE FROM THE HOLDER OF THE RESALE
RESTRICTIONS REFERRED TO ABOVE.
TRANSFERS AND EXCHANGES OF THIS NOTE, IN WHOLE OR IN PART, AND OF
BENEFICIAL INTERESTS IN THIS NOTE ARE SUBJECT TO RESTRICTIONS AS PROVIDED IN THE
FISCAL AGENCY AGREEMENT, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE
OFFICE OF THE FISCAL AGENT.
IS
BY
AN
THIS
UNLESS
PRESENTED
CERTIFICATE
AUTHORIZED
REPRESENTATIVE OF EUROCLEAR BANK SA/NV, AS OPERATOR OF THE EUROCLEAR SYSTEM
(“EUROCLEAR”) AND CLEARSTREAM BANKING S.A. (“CLEARSTREAM” AND, TOGETHER WITH
EUROCLEAR, “EUROCLEAR/CLEARSTREAM”), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF MUFG NOMINEES (UK) LIMITED OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR/CLEARSTREAM (AND ANY
PAYMENT IS MADE TO MUFG NOMINEES (UK) LIMITED OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR/CLEARSTREAM), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, MUFG NOMINEES
(UK) LIMITED, HAS AN INTEREST HEREIN.
INTEREST PAYMENTS ON THIS NOTE GENERALLY WILL BE SUBJECT TO
JAPANESE WITHHOLDING TAX UNLESS IT IS ESTABLISHED THAT THIS NOTE IS HELD BY OR
FOR THE ACCOUNT OF A BENEFICIAL OWNER THAT IS (I) FOR JAPANESE TAX PURPOSES,
NEITHER AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION, NOR AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A PERSON HAVING A SPECIAL RELATIONSHIP WITH THE COMPANY AS DESCRIBED IN
A-3-1
ARTICLE 6, PARAGRAPH (4) OF THE ACT ON SPECIAL MEASURES CONCERNING TAXATION OF
JAPAN (ACT NO. 26 OF 1957, AS AMENDED) (THE “ACT ON SPECIAL TAXATION MEASURES”) (A
“SPECIALLY-RELATED PERSON OF THE COMPANY”),
(II) A JAPANESE FINANCIAL
INSTITUTION OR A JAPANESE FINANCIAL INSTRUMENTS BUSINESS OPERATOR DESIGNATED IN
ARTICLE 3-2-2, PARAGRAPH (28) OF THE CABINET ORDER (CABINET ORDER NO. 43 OF 1957, AS
AMENDED) RELATING TO THE ACT ON SPECIAL TAXATION MEASURES WHICH COMPLIES WITH
THE REQUIREMENT FOR TAX EXEMPTION UNDER ARTICLE 6, PARAGRAPH (9) OF THE ACT ON
SPECIAL TAXATION MEASURES OR (III) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION
OR A FINANCIAL INSTRUMENTS BUSINESS OPERATOR, ETC. DESCRIBED IN ARTICLE 3-3,
PARAGRAPH (6) OF THE ACT ON SPECIAL TAXATION MEASURES WHICH HAS RECEIVED SUCH
PAYMENTS THROUGH A PAYMENT HANDLING AGENT IN JAPAN AS DESCRIBED IN PARAGRAPH
(1) OF SAID ARTICLE AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER
THAT PARAGRAPH.
INTEREST PAYMENTS ON THIS NOTE TO AN INDIVIDUAL RESIDENT OF JAPAN,
TO A JAPANESE CORPORATION NOT DESCRIBED IN THE PRECEDING PARAGRAPH, OR TO AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A SPECIALLY-RELATED PERSON OF THE COMPANY WILL BE SUBJECT TO JAPANESE
INCOME TAX AT THE TIME OF SUCH INTEREST PAYMENTS.
A-3-2
TAKEDA PHARMACEUTICAL COMPANY LIMITED
[Senior Floating Rate Notes due 2020]
[Senior Floating Rate Notes due 2022]
Principal Amount €Š
No. 144A-1
ISIN Š27
Common Code Š28
Takeda Pharmaceutical Company Limited (the “Company”), for value received, hereby
promises to pay to MUFG Nominees (UK) Limited, or registered assigns, the principal amount set forth above on
Š29. The Company will make interest payments on the Notes on each February 21, May 21, August 21 and
November 21 of each year, with the first interest payment being made on February 21, 2019. The Company will
make interest payments to the person in whose name the Notes are registered at the close of business on the day
falling one clearing system business day prior to the respective interest payment date.
The per annum interest rate on the Notes in effect for each day of a Floating Rate Interest
Period (as defined below) will be equal to the Applicable EURIBOR Rate plus Š30 basis points (the “Floating
Interest Rate”), provided, however, that in no event shall the interest rate be less than zero. The Floating Interest
Rate for each Floating Rate Interest Period will be set on February 21, May 21, August 21 and November 21 of
each year, and will be set for the initial Floating Rate Interest Period on November 21, 2018 (each such date, a
“Floating Rate Interest Reset Date”) until the principal on the Notes is paid or made available for payment (the
“Floating Rate Principal Payment Date”). If any Floating Rate Interest Reset Date (other than the initial
Floating Rate Interest Reset Date occurring on February 21, 2019) and Floating Rate Interest Payment Date
would otherwise be a day that is not a EURIBOR Business Day, such Floating Rate Interest Reset Date and
Floating Rate Interest Payment Date shall be the next succeeding EURIBOR Business Day, unless the next
succeeding EURIBOR Business Day is in the next succeeding calendar month, in which case such Floating Rate
Interest Reset Date and Floating Rate Interest Payment Date shall be the immediately preceding EURIBOR
Business Day.
“EURIBOR Business Day” means any day that is not a Saturday or Sunday, that is neither a
legal holiday nor a day on which commercial banking institutions are authorized or required by law, regulation or
executive order to be closed in London, and is a day on which the TARGET2 System, or any successor thereto,
operates.
“Floating Rate Interest Period” shall mean the period from and including a Floating Rate
Interest Reset Date to but excluding the next succeeding Floating Rate Interest Reset Date and, in the case of the
last such period, from and including the Floating Rate Interest Reset Date immediately preceding the maturity
date or Floating Rate Principal Payment Date, as the case may be, to but not including such maturity date or
Floating Rate Principal Payment Date, as the case may be. If the Floating Rate Principal Payment Date or
maturity date is not a EURIBOR Business Day, then the principal amount of the Notes plus accrued and unpaid
interest thereon shall be paid on the next succeeding EURIBOR Business Day and no interest shall accrue for the
maturity date, Floating Rate Principal Payment Date or any day thereafter.
27 XS1843450054 for the 2020 Floating Rate Notes; XS1843449478 for the 2022 Floating Rate Notes.
28
184345005 for the 2020 Floating Rate Notes; 184344947 for the 2022 Floating Rate Notes.
29 November 21, 2020 for the 2020 Floating Rate Notes; November 21, 2022 for the 2022 Floating Rate Notes.
30
0.55% for the 2020 Floating Rate Notes; 1.10% for the 2022 Floating Rate Notes.
A-3-3
The “Applicable EURIBOR Rate” shall mean the rate determined in accordance with the
following provisions:
(1) Two prior TARGET days on which dealings in deposits in euros are transacted in the euro-
zone interbank market preceding each Floating Rate Interest Reset Date (each such date, an
“Interest Determination Date”), MUFG Bank, Ltd. (the “Calculation Agent”), as agent for
the Company, will determine the Applicable EURIBOR Rate which shall be the rate for
deposits in euro having a maturity of three months commencing on the first day of the
applicable interest period that appears on the Reuters Screen EURIBOR01 Page as of
time, on such Interest Determination Date. “Reuters Screen
11:00 a.m., Brussels
EURIBOR01 Page” means the display designated on page “EURIBOR01” on Reuters (or such
other page as may replace the EURIBOR01 page on that service or any successor service for
the purpose of displaying euro-zone interbank offered rates for euro-denominated deposits of
major banks). If the Applicable EURIBOR Rate on such Interest Determination Date does not
appear on the Reuters Screen EURIBOR01 Page, the Applicable EURIBOR Rate will be
determined as described in (2) below.
(2) With respect to an Interest Determination Date for which the Applicable EURIBOR Rate
does not appear on the Reuters Screen EURIBOR01 Page as specified in (1) above, the
Applicable EURIBOR Rate will be determined on the basis of the rates at which deposits in
euro are offered by four major banks in the euro-zone interbank market selected by the
Company (the “Reference Banks”) at approximately 11:00 a.m., Brussels time, on such
Interest Determination Date to prime banks in the euro-zone interbank market having a
maturity of three months, and in a principal amount equal to an amount of not less than
€1,000,000 that is representative for a single transaction in such market at such time. The
Company will request the principal euro-zone office of each of such Reference Banks to
provide a quotation of its rate. If at least two such quotations are provided, the Applicable
EURIBOR Rate on such Interest Determination Date will be the arithmetic mean (rounded
upwards) of such quotations. If fewer than two quotations are provided, the Applicable
EURIBOR Rate on such Interest Determination Date will be the arithmetic mean (rounded
upwards) of the rates quoted by three major banks in the euro-zone selected by the Company at
approximately 11:00 a.m., Brussels time, on such Interest Determination Date for loans in euro
to leading European banks, having a maturity of three months, and in a principal amount equal
to an amount of not less than €1,000,000 that is representative for a single transaction in such
market at such time; provided, however, that if the banks so selected as aforesaid by the
Company are not quoting as mentioned in this sentence, the relevant Floating Interest Rate for
the Floating Rate Interest Period commencing on the Floating Rate Interest Reset Date
following such Interest Determination Date will be the Floating Interest Rate in effect on such
Interest Determination Date (i.e.,
the same as the rate determined for the immediately
preceding Floating Rate Interest Reset Date).
(3) If the Applicable EURIBOR Rate for the relevant Floating Rate Interest Period has ceased
to be published on the Reuters Screen EURIBOR01 Page as a result of the Applicable
EURIBOR Rate ceasing to be calculated or administered and a suitable substitute reference rate
is available which either is officially announced as successor to the Applicable EURIBOR Rate
or, failing that,
in our opinion after consultation with an independent financial adviser
appointed by the Company, comes as close as possible to the composition of the existing
Applicable EURIBOR Rate and is not prejudicial to the holders of the floating rate notes, the
existing Applicable EURIBOR Rate will be replaced for the remaining term to maturity of the
Notes by this substitute reference rate and such substitute reference rate shall be the Applicable
EURIBOR Rate in relation to the Notes for all future Floating Rate Interest Periods. A
precondition for this is that, in accordance with Article 29(1) of the Regulation (EU) 2016/1011
A-3-4
of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks
in financial instruments and financial contracts or to measure the performance of investment
funds (the “Benchmark Regulation”), the substitute reference rate (x) will be provided by an
administrator located in the European Union and which will be included in the register as
referred to in Article 36 of the Benchmark Regulation or (y) will be provided by an
administrator located in a third country for use in the European Union and the substitute
reference rate as well as the administrator will be included in the register as referred to in
Article 36 of the Benchmark Regulation. If no suitable substitute reference rate is officially
announced as successor to the Applicable EURIBOR Rate or if the Company is unable or
unwilling to determine the substitute reference rate prior to the Interest Determination Date
relating to the next succeeding Floating Rate Interest Period in accordance with this paragraph,
the Applicable EURIBOR Rate applicable to such Floating Rate Interest Period shall be equal
to the offered quotation on the Reuters Screen EURIBOR01 Page, as described above, on the
last day preceding the Interest Determination Date on which such offered quotation was
displayed, all as determined by the Calculation Agent.
The amount of interest to be paid on the Notes for any Floating Rate Interest Period will be
calculated on the basis of the actual number of days in the relevant Floating Rate Interest Period divided by 360
(known as the “Actual/360” day count).
The Floating Interest Rate and amount of interest to be paid on the Notes for each Floating
Rate Interest Period will be determined by the Calculation Agent, rounding the amount of interest to the nearest
sub-unit, half of any such sub-unit being rounded upwards. Interest will be calculated per €1,000 in principal
amount of the Notes. The Calculation Agent will, upon the request of any holder of the Notes, provide the
interest rate at the time of the last interest payment date with respect to the Notes. All calculations made by the
Calculation Agent shall in the absence of manifest error be conclusive for all purposes and binding on the
Company and the holders of the Notes. So long as the Applicable EURIBOR Rate is required to be determined
with respect to the Notes, there will at all times be a Calculation Agent. In the event that any then acting
Calculation Agent shall be unable or unwilling to act, or that such Calculation Agent shall fail duly to establish
the Applicable EURIBOR Rate for any Interest Period, or that the Company proposes to remove such Calculation
Agent, the Company shall appoint itself or another person which is a bank, trust company, investment banking
firm or other financial institution to act as the Calculation Agent.
This Note will be the Company’s direct, unsecured and unsubordinated general obligation and
will have the same rank in liquidation as all of the Company’s other unsecured and unsubordinated debt.
“Business Day” means both a day on which the TARGET2 System is open, and a day other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banking institutions are
authorized or required by law, regulation or executive order to be closed in London or Tokyo.
Reference is hereby made to the further provisions of this Note set forth on the reverse hereof,
and such provisions shall for all purposes have the same effect as though fully set forth in this place.
A-3-5
This Note shall not be valid or obligatory for any purpose until it shall have been manually
signed by the Fiscal Agent for authentication.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
TAKEDA PHARMACEUTICAL COMPANY
LIMITED
By
Name: [name]
Title:
[title]
This is one of the Notes referred to
in the within-mentioned Fiscal Agency Agreement:
Dated:
, 20
MUFG BANK, LTD.,
as Fiscal Agent
By
Authorized Signatory
A-3-6
[FORM OF REVERSE OF NOTE]
The principal amount of this Note shall be paid on any redemption date, in immediately
available funds in London upon surrender of the Note at the office designated herein or pursuant hereto of
MUFG Bank, Ltd., as fiscal agent (MUFG Bank, Ltd. or any duly appointed successor fiscal agent acting in such
capacity herein referred to as the “Fiscal Agent”), pursuant to an Fiscal Agency Agreement (such agreement, as
it may be amended from time to time, the “Agreement”), dated as of November 21, 2018, between Takeda
Pharmaceutical Company Limited (the “Company”) and the Fiscal Agent. The office of the Fiscal Agent at
which such payment shall be made is located at Ropemaker Place, 25 Ropemaker Street, London EC2Y 9AN or
at such other address as the Fiscal Agent shall specify (the “Fiscal Agent’s Office”) by notice to the Holder (as
defined in the Agreement). Terms used herein not otherwise defined shall have the meaning ascribed to such
term in the Agreement.
Payment of the principal of, and interest (including Additional Amounts, if applicable) on, this
Note shall be made by wire transfer in immediately available funds to a bank account in Europe designated by
the Holder in a written notice received by the Fiscal Agent (a) in the case of a payment of interest, prior to the
Record Date (as defined below) immediately preceding the date on which such payment is due and (b) in the case
of payment of principal on any redemption date, no less than 30 days and no more than 60 days prior to such
redemption date, provided that in the case of such payment of principal, this Note shall have been surrendered to
the Fiscal Agent for payment together with such notice. No interest shall accrue on this Note after redemption;
provided, however, that, to the extent permitted by applicable law, interest shall accrue, at the rate at which
interest accrues on the principal of this Note, on any amount of principal not paid when due upon surrender of
this Note to the Fiscal Agent.
1.
Payments of principal of and interest (including Additional Amounts, if applicable) on
this Note shall be made in Euros or in such other coin or currency of the Eurozone as at the time of payment is
legal tender for the payment of public and private debts. Until the date on which the Notes shall have been
delivered to the Fiscal Agent for cancellation, or become due and payable and a sum sufficient to pay the
principal of and interest (including Additional Amounts, if applicable) on all of the Notes shall have been made
available for payment and either paid or returned to the Company as provided herein and in the Agreement (such
date being referred to herein as the “Termination Date”), the Company will at all times maintain an office or
agency in London, where Notes may be presented or surrendered for payment.
2.
This Note is transferable in whole or in part and may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations by the Holder in person, or by his attorney duly
authorized in writing, at the Fiscal Agent’s Office in London, where the Fiscal Agent shall maintain a register
providing for the registration of the Notes and any exchange or transfer thereof (the “Note Register”). Upon
surrender of this Note for exchange or registration of transfer, the Company shall execute and the Fiscal Agent
shall authenticate and deliver in exchange therefor a Note or Notes, each in a denomination of €100,000 or an
integral multiple of €1,000 in excess thereof, which has or have an aggregate denomination equal to the
denomination of this Note and is or are registered in such name or names requested by the Holder. Any Note
presented for exchange or registration of transfer shall be accompanied by a written instrument of transfer in
form and with guarantee of signature and evidence of authority satisfactory to the Fiscal Agent and with payment
by the transferor of any stamp or other tax or governmental charge payable in connection with such transfer (or
evidence that such tax or charge has been paid) and with such tax identification number or other information for
each person in whose name a new Note is to be issued as the Fiscal Agent may request to comply with applicable
law. No exchange or registration of transfer of this Note shall be made on or after the date upon which a notice of
redemption of this Note is transmitted to the Holder.
Notwithstanding any other provision of this Note or the Agreement to the contrary, this Note, if
in global form (a Note in such form being referred to herein as a “Global Note”), shall be exchangeable pursuant
to this Note and the Agreement only if: (i) Euroclear or Clearstream is closed for business for a continuous
A-3-7
period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention
permanently to cease business or does in fact do so or (ii) there shall have occurred and be continuing an Event of
Default (as defined in the Agreement) with respect to the Notes. Upon the occurrence of any such event, this
Note shall be exchangeable for definitive Notes, as provided in the Agreement. In the event and for so long as
definitive Notes are not issued to any owner of a beneficial interest in this Global Note after the occurrence of
one of the events set forth above, the Company expressly acknowledges, with respect to the right of a Holder to
pursue a remedy pursuant to Section 4.7 or Section 4.8 of the Agreement, the right of such owner to pursue such
remedy with respect to the portion of this Global Note that represents such owner’s Notes as if such definitive
Notes had been issued.
No service charge shall be made for any such exchange or registration of transfer, but the
Company may charge the party requesting any such exchange or registration of transfer a sum sufficient to
reimburse it for any tax or other governmental charge required to be paid in connection with such exchange or
registration.
All Notes issued upon any exchange or registration of transfer of this Note shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same benefits, as this Note.
Except in the circumstances referred to in the second paragraph of this Section 3, the Company
and the Fiscal Agent may treat the Holder as the absolute owner of this Note for the purpose of receiving
payments of principal of and interest (including, Additional Amounts, as defined in Section 5 of this Note) on
this Note and for all other purposes whatsoever, and the Company and the Fiscal Agent shall not be affected by
any notice to the contrary.
subject to payment at the option of the Company prior to Š31.
3.
Except as provided in Sections 5, 6 and 7 of this Note, this Note is not redeemable or
4.
All payments of principal and interest in respect of this Note shall be made without
withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied by or on behalf of Japan, or any authority thereof or therein having
power to tax (“Taxes”), unless such withholding or deduction is required by law or by the authority. In such
event, the Company shall pay such additional amounts (“Additional Amounts”) as will result in the receipt by
the Holder of such amounts as would have been received by it had no such withholding or deduction been
required, except that no such Additional Amounts shall be payable with respect to this Note under any of the
following circumstances:
(i)
the Holder or beneficial owner of this Note is an individual non-resident of Japan or a
non-Japanese corporation and is liable for such Taxes in respect of this Note by reason of its
(A) having some present or former connection with Japan other than the mere holding of this
Note or (B) being a person having a special relationship with the Company (a “specially-
related person of the Company”) as described in Article 6, paragraph (4) of the Act on
Special Measures Concerning Taxation of Japan (Act No. 26 of 1957, as amended) (together
with the cabinet order thereunder (Cabinet Order No. 43 of 1957, as amended), the “Act on
Special Taxation Measures”);
(ii)
the Holder or beneficial owner of this Note would otherwise be exempt from any such
withholding or deduction but fails to comply with any applicable requirement to provide
Interest Recipient Information (as defined below) or to submit a Written Application for Tax
Exemption (as defined below) to the relevant Paying Agent to whom this Note is presented
Information is not duly
(where presentation is required), or whose Interest Recipient
31 November 21, 2020 for the 2020 Floating Rate Notes; November 21, 2022 for the 2022 Floating Rate Notes.
A-3-8
communicated through the relevant Participant
international clearing organization to such Paying Agent;
(as defined below) and the relevant
(iii)
the Holder or beneficial owner of this Note is for Japanese tax purposes treated as an
individual resident of Japan or a Japanese corporation (except for (A) a Designated Financial
Institution (as defined below) that complies with the requirement to provide Interest Recipient
Information or to submit a Written Application for Tax Exemption and (B) an individual
resident of Japan or a Japanese corporation that duly notifies (directly, through the Participant
or otherwise) the relevant Paying Agent of its status as not being subject to Taxes to be
withheld or deducted by the Company by reason of receipt by such individual resident of Japan
or Japanese corporation of interest on this Note through a payment handling agent in Japan
appointed by it);
(iv)
this Note is presented for payment (where presentation is required) more than 30 days
after the day on which such payment on this Note became due or after the full payment was
provided for, whichever occurs later, except to the extent the Holder hereof would have been
entitled to Additional Amounts on presenting the same for payment on the last day of such
period of 30 days;
(v)
the withholding or deduction is imposed on a Holder or beneficial owner that could have
avoided such withholding or deduction by presenting this Note (where presentation is required)
to another Paying Agent maintained by the Company;
(vi)
the Holder is a fiduciary or partnership or is not the sole beneficial owner of the
payment of the principal of, or any interest on, this Note, and Japanese law requires the
payment to be included for tax purposes in the income of a beneficiary or settlor with respect to
such fiduciary or a member of such partnership or a beneficial owner, in each case, who would
not have been entitled to such Additional Amounts had it been the Holder of this Note; or
(vii)
any combination of (i) through (vi) above.
For the avoidance of doubt, none of the Company, the Fiscal Agent, any Paying Agent or any
other person shall be required to pay any Additional Amounts with respect to any withholding or deduction
imposed on or in respect of any Note pursuant to Sections 1471 to 1474 of the Internal Revenue Code of 1986, as
amended, commonly referred to as FATCA, any treaty, law, regulation or other official guidance implementing
FATCA, or any agreement between the Company, the Fiscal Agent, a Paying Agent or any other person and the
United States, any other jurisdiction, or any authority of any of the foregoing implementing FATCA.
Where this Note is held through a participant of an international clearing organization or a
financial intermediary (each, a “Participant”), in order to receive payments free of withholding or deduction by
the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an individual
non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the Company) or
(b) a Japanese financial institution (each, a “Designated Financial Institution”) falling under certain categories
prescribed by the Act on Special Taxation Measures, all in accordance with the Act on Special Taxation
Measures, such beneficial owner of this Note must, at the time of entrusting a Participant with the custody of this
Note, provide certain information prescribed by the Act on Special Taxation Measures (“Interest Recipient
Information”) to enable the Participant to establish that such beneficial owner is exempted from the requirement
for Taxes to be withheld or deducted, and advise the Participant if the beneficial owner of this Note ceases to be
so exempted (including the case where a beneficial owner of this Note that is an individual non-resident of Japan
or a non-Japanese corporation becomes a specially-related person of the Company).
A-3-9
Where this Note is not held by a Participant, in order to receive payments free of withholding
or deduction by the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an
individual non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the
Company) or (b) a Designated Financial Institution, all in accordance with the Act on Special Taxation
Measures, such beneficial owner must, prior to each time at which it receives interest, submit to the relevant
Paying Agent a written application for tax exemption (hikazei tekiyo shinkokusho) (“Written Application for
Tax Exemption”) in a form obtainable from the Paying Agent stating, inter alia, the name and address of the
beneficial owner, the title of this Note, the relevant Interest Payment Date, the amount of interest and the fact that
together with
the beneficial owner is qualified to submit
documentary evidence regarding its identity and residence.
the Written Application for Tax Exemption,
The Company shall make any required withholding or deduction and remit the full amount
withheld or deducted to the Japanese taxing authority in accordance with applicable law. The Company shall use
reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any tax, duty, assessment,
fee or other governmental charge so withheld or deducted from the Japanese taxing authority imposing such tax,
duty, assessment, fee or other governmental charge, and if certified copies are not available, the Company shall
use reasonable efforts to obtain other evidence satisfactory to the Fiscal Agent, and the Fiscal Agent shall make
such certified copies or other evidence available to the Holders or beneficial owners of the Notes upon reasonable
request to the Fiscal Agent.
The obligation to pay Additional Amounts with respect to any taxes, duties, assessments and
other governmental charges shall not apply to (A) any estate, inheritance, gift, sales, transfer, personal property
or any similar tax, duty, assessment, fee or other governmental charge or (B) any tax, duty, assessment, fee or
other governmental charge which is payable otherwise than by withholding or deduction from payments of
principal or interest on this Note; provided that, except as otherwise set forth in this Note and in the Agreement,
the Company will pay all stamp, court or documentary taxes or any excise or property taxes, charges or similar
levies and other duties, if any, which may be imposed by Japan, the United States or any political subdivision or
any taxing authority thereof or therein, with respect to the Agreement or as a consequence of the initial issuance,
execution, delivery, registration or enforcement of the Notes.
References to principal or interest in respect of this Note shall be deemed to include any
Additional Amounts due which may be payable as set forth in this Note and the Agreement.
5.
This Note may be redeemed at any time at the option and sole discretion of the
Company in whole, but not in part, subject to compliance with applicable regulatory requirements, and upon
giving not less than 30 nor more than 60 days’ notice of redemption to the Fiscal Agent and the Holders (which
notice shall be irrevocable) at the principal amount of this Note together with interest accrued to the date fixed
for redemption and any Additional Amounts hereon, if the Company has been or will be obliged to pay any
Additional Amounts as a result of (a) any change in, or amendment to, the laws or regulations of Japan or any
political subdivision or any authority thereof or therein having power to tax, or any change in application or
official interpretation of such laws or regulations, which change or amendment becomes effective on or after the
date of the issuance of this Note or (b) after the completion of any Succession Event, any change in, or
amendment to, the laws or regulations of the jurisdiction of the Successor Person or any political subdivision or
any authority thereof or therein having power to tax, or any change in application or official interpretation of
such laws or regulations, which change or amendment becomes effective on or after the date of such Succession
Event, and in either case such obligation cannot be avoided by the Company or the Successor Person through the
taking of reasonable measures available to the Company or the Successor Person, as the case may be (an
“Additional Amounts Event”). No notice of redemption for an Additional Amounts Event pursuant to this
Section 5 shall be given sooner than 90 days prior to the earliest date on which the Company would actually be
obliged to pay such Additional Amounts on payments with respect to this Note.
Prior to the publication of any notice of redemption pursuant to this Section 5, the Company
shall deliver to the Fiscal Agent (i) a certificate signed by an Authorized Officer stating that the conditions
A-3-10
precedent to its right to so redeem have been fulfilled and (ii) an opinion of independent legal advisors of
recognized standing confirming that an Additional Amounts Event has occurred. The Fiscal Agent shall accept
such opinion as sufficient evidence of the satisfaction of the conditions precedent described above, in which
event it shall be conclusive and binding on the Holders.
6.
If (i) the Shire Acquisition (as defined in the Agreement) has not been consummated on
or prior to the Long Stop Date (as defined below) or (ii) the Company otherwise publicly announces that the
Shire Acquisition will not be consummated, then the Company will be required to redeem all outstanding Notes
on the Special Mandatory Redemption Date at a special mandatory redemption price equal to 101% of the
aggregate principal amount of the Notes plus accrued and unpaid interest, if any, to, but excluding, the Special
Mandatory Redemption Date.
The “Long Stop Date” means May 8, 2019, or such later date as may be agreed upon in
accordance with the Co-Operation Agreement, dated May 8, 2018, between Takeda Pharmaceutical Company
Limited and Shire plc.
Notwithstanding the foregoing, installments of interest on the Notes that are due and payable
on Interest Payment Dates falling on or prior to the Special Mandatory Redemption Date will be payable on such
Interest Payment Dates to the registered Holders as of the close of business on the relevant Record Dates in
accordance with the terms of the Notes and this Agreement.
The Company will cause the notice of special mandatory redemption to be transmitted, with a
copy to the Fiscal Agent, within five Business Days after the occurrence of the event triggering the special
mandatory redemption to each Holder at its registered address. If funds sufficient to pay the special mandatory
redemption price of the outstanding notes to be redeemed on the Special Mandatory Redemption Date (plus
accrued and unpaid interest, if any, to, but excluding, such date) are deposited with the Fiscal Agent or a paying
agent on or before such Special Mandatory Redemption Date, and certain other conditions are satisfied, on and
after such Special Mandatory Redemption Date, the outstanding Notes will cease to bear interest.
Upon the consummation of the Shire Acquisition, the foregoing provisions regarding the
special mandatory redemption will cease to apply.
7.
In the case of any redemption of this Note as provided in Section 5 or 6 of this Note,
notice of redemption of this Note shall be transmitted to the Holder at its address as it shall then appear in the
Note Register. If by reason of any cause, it shall be impracticable to give notice to the Holder in the manner
prescribed herein, then such notification in lieu thereof as shall be made by the Company or by the Fiscal Agent
on behalf of and at the instruction of the Company shall constitute sufficient provision of such notice, if such
notification shall, so far as may be practicable, approximate the terms and conditions of the notice in lieu of
which it is given. Neither the failure to give notice nor any defect in any notice of redemption given to the Holder
of any other Note shall affect the sufficiency of any notice with respect to this Note. Notice of redemption of this
Note having been so given, this Note shall become due and payable on the redemption date so specified and such
dates shall be deemed the maturity date of this Note.
8.
The Company shall, on or before each due date of the principal of or interest on this
Note, pay to the Fiscal Agent, who shall hold the same in trust for the benefit of the person entitled thereto, a sum
sufficient to pay the principal or interest so becoming due until such sum shall be paid to such person or
otherwise disposed of as herein provided. Any money held by the Fiscal Agent in trust for the payment of the
principal of or interest on this Note and remaining unclaimed for two years after such principal or interest has
become due and payable and paid to the Fiscal Agent shall be discharged from such trust, and repaid to the
Company, and all liability of the Fiscal Agent with respect to such money shall cease.
If this Note shall at any time become mutilated, destroyed, stolen or lost, then, provided
that this Note, or evidence of the destruction, theft or loss hereof (together with the indemnity hereinafter referred
9.
A-3-11
to and such other documents or proof as may be required hereunder) shall be delivered to the Fiscal Agent, a
replacement Note of like tenor and principal amount shall be authenticated and delivered by the Fiscal Agent, in
exchange for this Note, in the case of mutilation, or in lieu of this Note, in the case of destruction, loss or theft,
and provided further that, if this Note is destroyed, stolen or lost, (i) neither the Company nor the Fiscal Agent
shall have received notice that this Note has been acquired by a bona fide purchaser, and (ii) the Fiscal Agent
shall have received (a) satisfactory evidence (as so deemed by the Fiscal Agent in its absolute discretion) that this
Note was destroyed, stolen or lost, and (b) an indemnity for the benefit of the Company and the Fiscal Agent
satisfactory to each of them. All expenses and charges associated with procuring such indemnity shall be borne
by the Holder of this Note.
As provided in the Agreement, every new Note issued in exchange for or in lieu of any
mutilated, destroyed, stolen or lost Note shall constitute an original additional contractual obligation of the
Company, whether or not the mutilated, destroyed, stolen or lost Note shall be at any time enforceable by
anyone, and shall be entitled to the benefits of the Agreement equally and proportionately with any and all other
Notes duly issued thereunder. Any such new Note shall be so dated that neither gain nor loss of interest shall
result from such replacement. Upon the issuance of any such new Note, the Company may require the payment
of a sum sufficient to cover any stamp or other tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Fiscal Agent) connected therewith.
10.
All notices to the Company under this Note shall be in writing and addressed to the
Company at Takeda Pharmaceutical Company Limited, 1-1, Nihonbashi-Honcho 2-Chome, Chuo-ku,
Tokyo 103-8668, Japan, Fax: +81-3-3278-2198, Attention: Global Treasury & Finance Management, Group
Finance & Controlling, Global Finance, or to such other address as the Company may notify to the Holder. All
notices to the Holder shall be in writing and sent by mail or emailed, in PDF format to the Holder at his or its
address as set forth in the Note Register.
11.
This Note is one of the Senior Floating Rate Notes due Š32 (collectively, the “Notes”
and, individually, a “Note”) issued by the Company in accordance with the Agreement, copies of which are on
file and available for inspection at the Fiscal Agent’s Office. Under the terms of the Agreement, the Company
may remove any Fiscal Agent and appoint a new Fiscal Agent. The Company shall notify, or cause the Fiscal
Agent to notify, the Holders of Notes of the appointment of any Fiscal Agent.
€100,000 or integral multiples of €1,000 in excess thereof.
The Notes are issuable only as fully registered Notes without coupons in denominations of
the Notes, is hereby incorporated mutatis mutandis by reference herein.
12.
Article VIII of the Agreement, which provides for amendments to the Agreement and
13.
Subject to the authentication of this Note by the Fiscal Agent, the Company hereby
certifies and declares that all acts, conditions and things required to be done and performed and to have happened
precedent to the creation and issuance of this Note, and to constitute the same a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, have been done and performed and have
happened in due and strict compliance with all applicable law.
14.
Claims for payment of principal in respect of this Note shall be prescribed upon the
expiry of 6 years from any redemption date and claims for payment of interest (if any) in respect of this Note
shall be prescribed upon the expiry of 5 years from the due date hereof.
This Note shall be governed by and construed in accordance with the laws of the State of
New York.
32
2020 for the 2020 Floating Rate Notes; 2022 for the 2022 Floating Rate Notes.
A-3-12
FORM OF REGULATION S GLOBAL NOTE
[FORM OF FACE OF NOTE]
EXHIBIT A-4
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR WITH ANY SECURITIES
REGULATORY AUTHORITY OF ANY JURISDICTION AND MAY NOT BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO A U.S. PERSON
(AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) EXCEPT PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT TO AN
EFFECTIVE
TAKEDA
PHARMACEUTICAL COMPANY LIMITED (THE “COMPANY”) HAS AGREED THAT THIS LEGEND
SHALL BE DEEMED TO HAVE BEEN REMOVED ON THE 41ST DAY FOLLOWING THE LATER OF
THE COMMENCEMENT OF THE OFFERING OF THE NOTES AND THE FINAL DELIVERY DATE
WITH RESPECT THERETO.
REGISTRATION STATEMENT UNDER
SECURITIES ACT.
THE
IS
BY
AN
THIS
UNLESS
PRESENTED
CERTIFICATE
AUTHORIZED
REPRESENTATIVE OF EUROCLEAR BANK SA/NV, AS OPERATOR OF THE EUROCLEAR SYSTEM
(“EUROCLEAR”) AND CLEARSTREAM BANKING S.A. (“CLEARSTREAM” AND, TOGETHER WITH
EUROCLEAR, “EUROCLEAR/CLEARSTREAM”), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF MUFG NOMINEES (UK) LIMITED OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR/CLEARSTREAM (AND ANY
PAYMENT IS MADE TO MUFG NOMINEES (UK) LIMITED OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF EUROCLEAR/CLEARSTREAM), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, MUFG NOMINEES
(UK) LIMITED, HAS AN INTEREST HEREIN.
INTEREST PAYMENTS ON THIS NOTE GENERALLY WILL BE SUBJECT TO
JAPANESE WITHHOLDING TAX UNLESS IT IS ESTABLISHED THAT THIS NOTE IS HELD BY OR
FOR THE ACCOUNT OF A BENEFICIAL OWNER THAT IS (I) FOR JAPANESE TAX PURPOSES,
NEITHER AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION, NOR AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A PERSON HAVING A SPECIAL RELATIONSHIP WITH THE COMPANY AS DESCRIBED IN
ARTICLE 6, PARAGRAPH (4) OF THE ACT ON SPECIAL MEASURES CONCERNING TAXATION OF
JAPAN (ACT NO. 26 OF 1957, AS AMENDED) (THE “ACT ON SPECIAL TAXATION MEASURES”) (A
“SPECIALLY-RELATED PERSON OF THE COMPANY”),
(II) A JAPANESE FINANCIAL
INSTITUTION OR A JAPANESE FINANCIAL INSTRUMENTS BUSINESS OPERATOR DESIGNATED IN
ARTICLE 3-2-2, PARAGRAPH (28) OF THE CABINET ORDER (CABINET ORDER NO. 43 OF 1957, AS
AMENDED) RELATING TO THE ACT ON SPECIAL TAXATION MEASURES WHICH COMPLIES WITH
THE REQUIREMENT FOR TAX EXEMPTION UNDER ARTICLE 6, PARAGRAPH (9) OF THE ACT ON
SPECIAL TAXATION MEASURES OR (III) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION
OR A FINANCIAL INSTRUMENTS BUSINESS OPERATOR, ETC. DESCRIBED IN ARTICLE 3-3,
PARAGRAPH (6) OF THE ACT ON SPECIAL TAXATION MEASURES WHICH HAS RECEIVED SUCH
PAYMENTS THROUGH A PAYMENT HANDLING AGENT IN JAPAN AS DESCRIBED IN PARAGRAPH
(1) OF SAID ARTICLE AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER
THAT PARAGRAPH.
INTEREST PAYMENTS ON THIS NOTE TO AN INDIVIDUAL RESIDENT OF JAPAN,
TO A JAPANESE CORPORATION NOT DESCRIBED IN THE PRECEDING PARAGRAPH, OR TO AN
A-4-1
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A SPECIALLY-RELATED PERSON OF THE COMPANY WILL BE SUBJECT TO JAPANESE
INCOME TAX AT THE TIME OF SUCH INTEREST PAYMENTS.
A-4-2
TAKEDA PHARMACEUTICAL COMPANY LIMITED
[Senior Floating Rate Notes due 2020]
[Senior Floating Rate Notes due 2022]
Principal Amount €Š
No. Reg S-1
ISIN Š33
Common Code Š34
Takeda Pharmaceutical Company Limited (the “Company”), for value received, hereby
promises to pay to MUFG Nominees (UK) Limited, or registered assigns, the principal amount set forth above on
Š35. The Company will make interest payments on the Notes on each February 21, May 21, August 21 and
November 21 of each year, with the first interest payment being made on February 21, 2019. The Company will
make interest payments to the person in whose name the Notes are registered at the close of business on the day
falling one clearing system business day prior to the respective interest payment date.
The per annum interest rate on the Notes in effect for each day of a Floating Rate Interest
Period (as defined below) will be equal to the Applicable EURIBOR Rate plus Š36 basis points (the “Floating
Interest Rate”), provided, however, that in no event shall the interest rate be less than zero. The Floating Interest
Rate for each Floating Rate Interest Period will be set on February 21, May 21, August 21 and November 21 of
each year, and will be set for the initial Floating Rate Interest Period on November 21, 2018 (each such date, a
“Floating Rate Interest Reset Date”) until the principal on the Notes is paid or made available for payment (the
“Floating Rate Principal Payment Date”). If any Floating Rate Interest Reset Date (other than the initial
Floating Rate Interest Reset Date occurring on February 21, 2019) and Floating Rate Interest Payment Date
would otherwise be a day that is not a EURIBOR Business Day, such Floating Rate Interest Reset Date and
Floating Rate Interest Payment Date shall be the next succeeding EURIBOR Business Day, unless the next
succeeding EURIBOR Business Day is in the next succeeding calendar month, in which case such Floating Rate
Interest Reset Date and Floating Rate Interest Payment Date shall be the immediately preceding EURIBOR
Business Day.
“EURIBOR Business Day” means any day that is not a Saturday or Sunday, that is neither a
legal holiday nor a day on which commercial banking institutions are authorized or required by law, regulation or
executive order to be closed in London, and is a day on which the TARGET2 System, or any successor thereto,
operates.
“Floating Rate Interest Period” shall mean the period from and including a Floating Rate
Interest Reset Date to but excluding the next succeeding Floating Rate Interest Reset Date and, in the case of the
last such period, from and including the Floating Rate Interest Reset Date immediately preceding the maturity
date or Floating Rate Principal Payment Date, as the case may be, to but not including such maturity date or
Floating Rate Principal Payment Date, as the case may be. If the Floating Rate Principal Payment Date or
maturity date is not a EURIBOR Business Day, then the principal amount of the Notes plus accrued and unpaid
interest thereon shall be paid on the next succeeding EURIBOR Business Day and no interest shall accrue for the
maturity date, Floating Rate Principal Payment Date or any day thereafter.
33 XS1843450138 for the 2020 Floating Rate Notes; XS1843449809 for the 2022 Floating Rate Notes.
34
184345013 for the 2020 Floating Rate Notes; 184344980 for the 2022 Floating Rate Notes.
35 November 21, 2020 for the 2020 Floating Rate Notes; November 21, 2022 for the 2022 Floating Rate Notes.
36
0.55% for the 2020 Floating Rate Notes; 1.10% for the 2022 Floating Rate Notes.
A-4-3
The “Applicable EURIBOR Rate” shall mean the rate determined in accordance with the
following provisions:
(1) Two prior TARGET days on which dealings in deposits in euros are transacted in the euro-
zone interbank market preceding each Floating Rate Interest Reset Date (each such date, an
“Interest Determination Date”), MUFG Bank, Ltd. (the “Calculation Agent”), as agent for
the Company, will determine the Applicable EURIBOR Rate which shall be the rate for
deposits in euro having a maturity of three months commencing on the first day of the
applicable interest period that appears on the Reuters Screen EURIBOR01 Page as of 11:00
a.m., Brussels time, on such Interest Determination Date. “Reuters Screen EURIBOR01
Page” means the display designated on page “EURIBOR01” on Reuters (or such other page as
may replace the EURIBOR01 page on that service or any successor service for the purpose of
displaying euro-zone interbank offered rates for euro-denominated deposits of major banks). If
the Applicable EURIBOR Rate on such Interest Determination Date does not appear on the
Reuters Screen EURIBOR01 Page, the Applicable EURIBOR Rate will be determined as
described in (2) below.
(2) With respect to an Interest Determination Date for which the Applicable EURIBOR Rate
does not appear on the Reuters Screen EURIBOR01 Page as specified in (1) above, the
Applicable EURIBOR Rate will be determined on the basis of the rates at which deposits in
euro are offered by four major banks in the euro-zone interbank market selected by the
Company (the “Reference Banks”) at approximately 11:00 a.m., Brussels time, on such
Interest Determination Date to prime banks in the euro-zone interbank market having a
maturity of three months, and in a principal amount equal to an amount of not less than
€1,000,000 that is representative for a single transaction in such market at such time. The
Company will request the principal euro-zone office of each of such Reference Banks to
provide a quotation of its rate. If at least two such quotations are provided, the Applicable
EURIBOR Rate on such Interest Determination Date will be the arithmetic mean (rounded
upwards) of such quotations. If fewer than two quotations are provided, the Applicable
EURIBOR Rate on such Interest Determination Date will be the arithmetic mean (rounded
upwards) of the rates quoted by three major banks in the euro-zone selected by the Company at
approximately 11:00 a.m., Brussels time, on such Interest Determination Date for loans in euro
to leading European banks, having a maturity of three months, and in a principal amount equal
to an amount of not less than €1,000,000 that is representative for a single transaction in such
market at such time; provided, however, that if the banks so selected as aforesaid by the
Company are not quoting as mentioned in this sentence, the relevant Floating Interest Rate for
the Floating Rate Interest Period commencing on the Floating Rate Interest Reset Date
following such Interest Determination Date will be the Floating Interest Rate in effect on such
Interest Determination Date (i.e.,
the same as the rate determined for the immediately
preceding Floating Rate Interest Reset Date).
(3) If the Applicable EURIBOR Rate for the relevant Floating Rate Interest Period has ceased
to be published on the Reuters Screen EURIBOR01 Page as a result of the Applicable
EURIBOR Rate ceasing to be calculated or administered and a suitable substitute reference rate
is available which either is officially announced as successor to the Applicable EURIBOR Rate
or, failing that,
in our opinion after consultation with an independent financial adviser
appointed by the Company, comes as close as possible to the composition of the existing
Applicable EURIBOR Rate and is not prejudicial to the holders of the floating rate notes, the
existing Applicable EURIBOR Rate will be replaced for the remaining term to maturity of the
Notes by this substitute reference rate and such substitute reference rate shall be the Applicable
EURIBOR Rate in relation to the Notes for all future Floating Rate Interest Periods. A
precondition for this is that, in accordance with Article 29(1) of the Regulation (EU) 2016/1011
A-4-4
of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks
in financial instruments and financial contracts or to measure the performance of investment
funds (the “Benchmark Regulation”), the substitute reference rate (x) will be provided by an
administrator located in the European Union and which will be included in the register as
referred to in Article 36 of the Benchmark Regulation or (y) will be provided by an
administrator located in a third country for use in the European Union and the substitute
reference rate as well as the administrator will be included in the register as referred to in
Article 36 of the Benchmark Regulation. If no suitable substitute reference rate is officially
announced as successor to the Applicable EURIBOR Rate or if the Company is unable or
unwilling to determine the substitute reference rate prior to the Interest Determination Date
relating to the next succeeding Floating Rate Interest Period in accordance with this paragraph,
the Applicable EURIBOR Rate applicable to such Floating Rate Interest Period shall be equal
to the offered quotation on the Reuters Screen EURIBOR01 Page, as described above, on the
last day preceding the Interest Determination Date on which such offered quotation was
displayed, all as determined by the Calculation Agent.
The amount of interest to be paid on the Notes for any Floating Rate Interest Period will be
calculated on the basis of the actual number of days in the relevant Floating Rate Interest Period divided by 360
(known as the “Actual/360” day count).
The Floating Interest Rate and amount of interest to be paid on the Notes for each Floating
Rate Interest Period will be determined by the Calculation Agent, rounding the amount of interest to the nearest
sub-unit, half of any such sub-unit being rounded upwards. Interest will be calculated per €1,000 in principal
amount of the Notes. The Calculation Agent will, upon the request of any holder of the Notes, provide the
interest rate at the time of the last interest payment date with respect to the Notes. All calculations made by the
Calculation Agent shall in the absence of manifest error be conclusive for all purposes and binding on the
Company and the holders of the Notes. So long as the Applicable EURIBOR Rate is required to be determined
with respect to the Notes, there will at all times be a Calculation Agent. In the event that any then acting
Calculation Agent shall be unable or unwilling to act, or that such Calculation Agent shall fail duly to establish
the Applicable EURIBOR Rate for any Interest Period, or that the Company proposes to remove such Calculation
Agent, the Company shall appoint itself or another person which is a bank, trust company, investment banking
firm or other financial institution to act as the Calculation Agent.
This Note will be the Company’s direct, unsecured and unsubordinated general obligation and
will have the same rank in liquidation as all of the Company’s other unsecured and unsubordinated debt.
“Business Day” means both a day on which the TARGET2 System is open, and a day other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banking institutions are
authorized or required by law, regulation or executive order to be closed in London or Tokyo.
Reference is hereby made to the further provisions of this Note set forth on the reverse hereof,
and such provisions shall for all purposes have the same effect as though fully set forth in this place.
A-4-5
This Note shall not be valid or obligatory for any purpose until it shall have been manually
signed by the Fiscal Agent for authentication.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
TAKEDA PHARMACEUTICAL COMPANY
LIMITED
By
Name: [name]
Title:
[title]
This is one of the Notes referred to
in the within-mentioned Fiscal Agency Agreement:
Dated:
, 20
MUFG BANK, LTD.,
as Fiscal Agent
By
Authorized Signatory
A-4-6
[FORM OF REVERSE OF NOTE]
The principal amount of this Note shall be paid on any redemption date, in immediately
available funds in London upon surrender of the Note at the office designated herein or pursuant hereto of
MUFG Bank, Ltd., as fiscal agent (MUFG Bank, Ltd. or any duly appointed successor fiscal agent acting in such
capacity herein referred to as the “Fiscal Agent”), pursuant to an Fiscal Agency Agreement (such agreement, as
it may be amended from time to time, the “Agreement”), dated as of November 21, 2018, between Takeda
Pharmaceutical Company Limited (the “Company”) and the Fiscal Agent. The office of the Fiscal Agent at
which such payment shall be made is located at Ropemaker Place, 25 Ropemaker Street, London EC2Y 9AN or
at such other address as the Fiscal Agent shall specify (the “Fiscal Agent’s Office”) by notice to the Holder (as
defined in the Agreement). Terms used herein not otherwise defined shall have the meaning ascribed to such
term in the Agreement.
Payment of the principal of, and interest (including Additional Amounts, if applicable) on, this
Note shall be made by wire transfer in immediately available funds to a bank account in Europe designated by
the Holder in a written notice received by the Fiscal Agent (a) in the case of a payment of interest, prior to the
Record Date (as defined below) immediately preceding the date on which such payment is due and (b) in the case
of payment of principal on any redemption date, no less than 30 days and no more than 60 days prior to such
redemption date, provided that in the case of such payment of principal, this Note shall have been surrendered to
the Fiscal Agent for payment together with such notice. No interest shall accrue on this Note after redemption;
provided, however, that, to the extent permitted by applicable law, interest shall accrue, at the rate at which
interest accrues on the principal of this Note, on any amount of principal not paid when due upon surrender of
this Note to the Fiscal Agent.
1.
Payments of principal of and interest (including Additional Amounts, if applicable) on
this Note shall be made in Euros or in such other coin or currency of the Eurozone as at the time of payment is
legal tender for the payment of public and private debts. Until the date on which the Notes shall have been
delivered to the Fiscal Agent for cancellation, or become due and payable and a sum sufficient to pay the
principal of and interest (including Additional Amounts, if applicable) on all of the Notes shall have been made
available for payment and either paid or returned to the Company as provided herein and in the Agreement (such
date being referred to herein as the “Termination Date”), the Company will at all times maintain an office or
agency in London, where Notes may be presented or surrendered for payment.
2.
This Note is transferable in whole or in part and may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations by the Holder in person, or by his attorney duly
authorized in writing, at the Fiscal Agent’s Office in London, where the Fiscal Agent shall maintain a register
providing for the registration of the Notes and any exchange or transfer thereof (the “Note Register”). Upon
surrender of this Note for exchange or registration of transfer, the Company shall execute and the Fiscal Agent
shall authenticate and deliver in exchange therefor a Note or Notes, each in a denomination of €100,000 or an
integral multiple of €1,000 in excess thereof, which has or have an aggregate denomination equal to the
denomination of this Note and is or are registered in such name or names requested by the Holder. Any Note
presented for exchange or registration of transfer shall be accompanied by a written instrument of transfer in
form and with guarantee of signature and evidence of authority satisfactory to the Fiscal Agent and with payment
by the transferor of any stamp or other tax or governmental charge payable in connection with such transfer (or
evidence that such tax or charge has been paid) and with such tax identification number or other information for
each person in whose name a new Note is to be issued as the Fiscal Agent may request to comply with applicable
law. No exchange or registration of transfer of this Note shall be made on or after the date upon which a notice of
redemption of this Note is transmitted to the Holder.
Notwithstanding any other provision of this Note or the Agreement to the contrary, this Note, if
in global form (a Note in such form being referred to herein as a “Global Note”), shall be exchangeable pursuant
to this Note and the Agreement only if: (i) Euroclear or Clearstream is closed for business for a continuous
A-4-7
period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention
permanently to cease business or does in fact do so or (ii) there shall have occurred and be continuing an Event of
Default (as defined in the Agreement) with respect to the Notes. Upon the occurrence of any such event, this
Note shall be exchangeable for definitive Notes, as provided in the Agreement. In the event and for so long as
definitive Notes are not issued to any owner of a beneficial interest in this Global Note after the occurrence of
one of the events set forth above, the Company expressly acknowledges, with respect to the right of a Holder to
pursue a remedy pursuant to Section 4.7 or Section 4.8 of the Agreement, the right of such owner to pursue such
remedy with respect to the portion of this Global Note that represents such owner’s Notes as if such definitive
Notes had been issued.
No service charge shall be made for any such exchange or registration of transfer, but the
Company may charge the party requesting any such exchange or registration of transfer a sum sufficient to
reimburse it for any tax or other governmental charge required to be paid in connection with such exchange or
registration.
All Notes issued upon any exchange or registration of transfer of this Note shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same benefits, as this Note.
Except in the circumstances referred to in the second paragraph of this Section 3, the Company
and the Fiscal Agent may treat the Holder as the absolute owner of this Note for the purpose of receiving
payments of principal of and interest (including, Additional Amounts, as defined in Section 5 of this Note) on
this Note and for all other purposes whatsoever, and the Company and the Fiscal Agent shall not be affected by
any notice to the contrary.
subject to payment at the option of the Company prior to Š37.
3.
Except as provided in Sections 5, 6 and 7 of this Note, this Note is not redeemable or
4.
All payments of principal and interest in respect of this Note shall be made without
withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied by or on behalf of Japan, or any authority thereof or therein having
power to tax (“Taxes”), unless such withholding or deduction is required by law or by the authority. In such
event, the Company shall pay such additional amounts (“Additional Amounts”) as will result in the receipt by
the Holder of such amounts as would have been received by it had no such withholding or deduction been
required, except that no such Additional Amounts shall be payable with respect to this Note under any of the
following circumstances:
(i)
the Holder or beneficial owner of this Note is an individual non-resident of Japan or a
non-Japanese corporation and is liable for such Taxes in respect of this Note by reason of its
(A) having some present or former connection with Japan other than the mere holding of this
Note or (B) being a person having a special relationship with the Company (a “specially-
related person of the Company”) as described in Article 6, paragraph (4) of the Act on
Special Measures Concerning Taxation of Japan (Act No. 26 of 1957, as amended) (together
with the cabinet order thereunder (Cabinet Order No. 43 of 1957, as amended), the “Act on
Special Taxation Measures”);
(ii)
the Holder or beneficial owner of this Note would otherwise be exempt from any such
withholding or deduction but fails to comply with any applicable requirement to provide
Interest Recipient Information (as defined below) or to submit a Written Application for Tax
Exemption (as defined below) to the relevant Paying Agent to whom this Note is presented
(where presentation is required), or whose Interest Recipient
Information is not duly
communicated through the relevant Participant
(as defined below) and the relevant
international clearing organization to such Paying Agent;
37 November 21, 2020 for the 2020 Floating Rate Notes; November 21, 2022 for the 2022 Floating Rate Notes.
A-4-8
the Holder or beneficial owner of this Note is for Japanese tax purposes treated as an
(iii)
individual resident of Japan or a Japanese corporation (except for (A) a Designated Financial
Institution (as defined below) that complies with the requirement to provide Interest Recipient
Information or to submit a Written Application for Tax Exemption and (B) an individual
resident of Japan or a Japanese corporation that duly notifies (directly, through the Participant
or otherwise) the relevant Paying Agent of its status as not being subject to Taxes to be
withheld or deducted by the Company by reason of receipt by such individual resident of Japan
or Japanese corporation of interest on this Note through a payment handling agent in Japan
appointed by it);
(iv)
this Note is presented for payment (where presentation is required) more than 30 days
after the day on which such payment on this Note became due or after the full payment was
provided for, whichever occurs later, except to the extent the Holder hereof would have been
entitled to Additional Amounts on presenting the same for payment on the last day of such
period of 30 days;
(v)
the withholding or deduction is imposed on a Holder or beneficial owner that could have
avoided such withholding or deduction by presenting this Note (where presentation is required)
to another Paying Agent maintained by the Company;
(vi)
the Holder is a fiduciary or partnership or is not the sole beneficial owner of the
payment of the principal of, or any interest on, this Note, and Japanese law requires the
payment to be included for tax purposes in the income of a beneficiary or settlor with respect to
such fiduciary or a member of such partnership or a beneficial owner, in each case, who would
not have been entitled to such Additional Amounts had it been the Holder of this Note; or
(vii)
any combination of (i) through (vi) above.
For the avoidance of doubt, none of the Company, the Fiscal Agent, any Paying Agent or any
other person shall be required to pay any Additional Amounts with respect to any withholding or deduction
imposed on or in respect of any Note pursuant to Sections 1471 to 1474 of the Internal Revenue Code of 1986, as
amended, commonly referred to as FATCA, any treaty, law, regulation or other official guidance implementing
FATCA, or any agreement between the Company, the Fiscal Agent, a Paying Agent or any other person and the
United States, any other jurisdiction, or any authority of any of the foregoing implementing FATCA.
Where this Note is held through a participant of an international clearing organization or a
financial intermediary (each, a “Participant”), in order to receive payments free of withholding or deduction by
the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an individual
non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the Company) or
(b) a Japanese financial institution (each, a “Designated Financial Institution”) falling under certain categories
prescribed by the Act on Special Taxation Measures, all in accordance with the Act on Special Taxation
Measures, such beneficial owner of this Note must, at the time of entrusting a Participant with the custody of this
Note, provide certain information prescribed by the Act on Special Taxation Measures (“Interest Recipient
Information”) to enable the Participant to establish that such beneficial owner is exempted from the requirement
for Taxes to be withheld or deducted, and advise the Participant if the beneficial owner of this Note ceases to be
so exempted (including the case where a beneficial owner of this Note that is an individual non-resident of Japan
or a non-Japanese corporation becomes a specially-related person of the Company).
Where this Note is not held by a Participant, in order to receive payments free of withholding
or deduction by the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an
individual non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the
Company) or (b) a Designated Financial Institution, all in accordance with the Act on Special Taxation
A-4-9
Measures, such beneficial owner must, prior to each time at which it receives interest, submit to the relevant
Paying Agent a written application for tax exemption (hikazei tekiyo shinkokusho) (“Written Application for
Tax Exemption”) in a form obtainable from the Paying Agent stating, inter alia, the name and address of the
beneficial owner, the title of this Note, the relevant Interest Payment Date, the amount of interest and the fact that
together with
the beneficial owner is qualified to submit
documentary evidence regarding its identity and residence.
the Written Application for Tax Exemption,
The Company shall make any required withholding or deduction and remit the full amount
withheld or deducted to the Japanese taxing authority in accordance with applicable law. The Company shall use
reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any tax, duty, assessment,
fee or other governmental charge so withheld or deducted from the Japanese taxing authority imposing such tax,
duty, assessment, fee or other governmental charge, and if certified copies are not available, the Company shall
use reasonable efforts to obtain other evidence satisfactory to the Fiscal Agent, and the Fiscal Agent shall make
such certified copies or other evidence available to the Holders or beneficial owners of the Notes upon reasonable
request to the Fiscal Agent.
The obligation to pay Additional Amounts with respect to any taxes, duties, assessments and
other governmental charges shall not apply to (A) any estate, inheritance, gift, sales, transfer, personal property
or any similar tax, duty, assessment, fee or other governmental charge or (B) any tax, duty, assessment, fee or
other governmental charge which is payable otherwise than by withholding or deduction from payments of
principal or interest on this Note; provided that, except as otherwise set forth in this Note and in the Agreement,
the Company will pay all stamp, court or documentary taxes or any excise or property taxes, charges or similar
levies and other duties, if any, which may be imposed by Japan, the United States or any political subdivision or
any taxing authority thereof or therein, with respect to the Agreement or as a consequence of the initial issuance,
execution, delivery, registration or enforcement of the Notes.
References to principal or interest in respect of this Note shall be deemed to include any
Additional Amounts due which may be payable as set forth in this Note and the Agreement.
5.
This Note may be redeemed at any time at the option and sole discretion of the
Company in whole, but not in part, subject to compliance with applicable regulatory requirements, and upon
giving not less than 30 nor more than 60 days’ notice of redemption to the Fiscal Agent and the Holders (which
notice shall be irrevocable) at the principal amount of this Note together with interest accrued to the date fixed
for redemption and any Additional Amounts hereon, if the Company has been or will be obliged to pay any
Additional Amounts as a result of (a) any change in, or amendment to, the laws or regulations of Japan or any
political subdivision or any authority thereof or therein having power to tax, or any change in application or
official interpretation of such laws or regulations, which change or amendment becomes effective on or after the
date of the issuance of this Note or (b) after the completion of any Succession Event, any change in, or
amendment to, the laws or regulations of the jurisdiction of the Successor Person or any political subdivision or
any authority thereof or therein having power to tax, or any change in application or official interpretation of
such laws or regulations, which change or amendment becomes effective on or after the date of such Succession
Event, and in either case such obligation cannot be avoided by the Company or the Successor Person through the
taking of reasonable measures available to the Company or the Successor Person, as the case may be (an
“Additional Amounts Event”). No notice of redemption for an Additional Amounts Event pursuant to this
Section 5 shall be given sooner than 90 days prior to the earliest date on which the Company would actually be
obliged to pay such Additional Amounts on payments with respect to this Note.
Prior to the publication of any notice of redemption pursuant to this Section 5, the Company
shall deliver to the Fiscal Agent (i) a certificate signed by an Authorized Officer stating that the conditions
precedent to its right to so redeem have been fulfilled and (ii) an opinion of independent legal advisors of
recognized standing confirming that an Additional Amounts Event has occurred. The Fiscal Agent shall accept
such opinion as sufficient evidence of the satisfaction of the conditions precedent described above, in which
event it shall be conclusive and binding on the Holders.
A-4-10
6.
If (i) the Shire Acquisition (as defined in the Agreement) has not been consummated on
or prior to the Long Stop Date (as defined below) or (ii) the Company otherwise publicly announces that the
Shire Acquisition will not be consummated, then the Company will be required to redeem all outstanding Notes
on the Special Mandatory Redemption Date at a special mandatory redemption price equal to 101% of the
aggregate principal amount of the Notes plus accrued and unpaid interest, if any, to, but excluding, the Special
Mandatory Redemption Date.
The “Long Stop Date” means May 8, 2019, or such later date as may be agreed upon in
accordance with the Co-Operation Agreement, dated May 8, 2018, between Takeda Pharmaceutical Company
Limited and Shire plc.
Notwithstanding the foregoing, installments of interest on the Notes that are due and payable
on Interest Payment Dates falling on or prior to the Special Mandatory Redemption Date will be payable on such
Interest Payment Dates to the registered Holders as of the close of business on the relevant Record Dates in
accordance with the terms of the Notes and this Agreement.
The Company will cause the notice of special mandatory redemption to be transmitted, with a
copy to the Fiscal Agent, within five Business Days after the occurrence of the event triggering the special
mandatory redemption to each Holder at its registered address. If funds sufficient to pay the special mandatory
redemption price of the outstanding notes to be redeemed on the Special Mandatory Redemption Date (plus
accrued and unpaid interest, if any, to, but excluding, such date) are deposited with the Fiscal Agent or a paying
agent on or before such Special Mandatory Redemption Date, and certain other conditions are satisfied, on and
after such Special Mandatory Redemption Date, the outstanding Notes will cease to bear interest.
Upon the consummation of the Shire Acquisition, the foregoing provisions regarding the
special mandatory redemption will cease to apply.
7.
In the case of any redemption of this Note as provided in Section 5 or 6 of this Note,
notice of redemption of this Note shall be transmitted to the Holder at its address as it shall then appear in the
Note Register. If by reason of any cause, it shall be impracticable to give notice to the Holder in the manner
prescribed herein, then such notification in lieu thereof as shall be made by the Company or by the Fiscal Agent
on behalf of and at the instruction of the Company shall constitute sufficient provision of such notice, if such
notification shall, so far as may be practicable, approximate the terms and conditions of the notice in lieu of
which it is given. Neither the failure to give notice nor any defect in any notice of redemption given to the Holder
of any other Note shall affect the sufficiency of any notice with respect to this Note. Notice of redemption of this
Note having been so given, this Note shall become due and payable on the redemption date so specified and such
dates shall be deemed the maturity date of this Note.
8.
The Company shall, on or before each due date of the principal of or interest on this
Note, pay to the Fiscal Agent, who shall hold the same in trust for the benefit of the person entitled thereto, a sum
sufficient to pay the principal or interest so becoming due until such sum shall be paid to such person or
otherwise disposed of as herein provided. Any money held by the Fiscal Agent in trust for the payment of the
principal of or interest on this Note and remaining unclaimed for two years after such principal or interest has
become due and payable and paid to the Fiscal Agent shall be discharged from such trust, and repaid to the
Company, and all liability of the Fiscal Agent with respect to such money shall cease.
9.
If this Note shall at any time become mutilated, destroyed, stolen or lost, then, provided
that this Note, or evidence of the destruction, theft or loss hereof (together with the indemnity hereinafter referred
to and such other documents or proof as may be required hereunder) shall be delivered to the Fiscal Agent, a
replacement Note of like tenor and principal amount shall be authenticated and delivered by the Fiscal Agent, in
exchange for this Note, in the case of mutilation, or in lieu of this Note, in the case of destruction, loss or theft,
and provided further that, if this Note is destroyed, stolen or lost, (i) neither the Company nor the Fiscal Agent
A-4-11
shall have received notice that this Note has been acquired by a bona fide purchaser, and (ii) the Fiscal Agent
shall have received (a) satisfactory evidence (as so deemed by the Fiscal Agent in its absolute discretion) that this
Note was destroyed, stolen or lost, and (b) an indemnity for the benefit of the Company and the Fiscal Agent
satisfactory to each of them. All expenses and charges associated with procuring such indemnity shall be borne
by the Holder of this Note.
As provided in the Agreement, every new Note issued in exchange for or in lieu of any
mutilated, destroyed, stolen or lost Note shall constitute an original additional contractual obligation of the
Company, whether or not the mutilated, destroyed, stolen or lost Note shall be at any time enforceable by
anyone, and shall be entitled to the benefits of the Agreement equally and proportionately with any and all other
Notes duly issued thereunder. Any such new Note shall be so dated that neither gain nor loss of interest shall
result from such replacement. Upon the issuance of any such new Note, the Company may require the payment
of a sum sufficient to cover any stamp or other tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Fiscal Agent) connected therewith.
10.
All notices to the Company under this Note shall be in writing and addressed to the
Company at Takeda Pharmaceutical Company Limited, 1-1, Nihonbashi-Honcho 2-Chome, Chuo-ku,
Tokyo 103-8668, Japan, Fax: +81-3-3278-2198, Attention: Global Treasury & Finance Management, Group
Finance & Controlling, Global Finance, or to such other address as the Company may notify to the Holder. All
notices to the Holder shall be in writing and sent by mail or emailed, in PDF format to the Holder at his or its
address as set forth in the Note Register.
11.
This Note is one of the Senior Floating Rate Notes due Š38 (collectively, the “Notes”
and, individually, a “Note”) issued by the Company in accordance with the Agreement, copies of which are on
file and available for inspection at the Fiscal Agent’s Office. Under the terms of the Agreement, the Company
may remove any Fiscal Agent and appoint a new Fiscal Agent. The Company shall notify, or cause the Fiscal
Agent to notify, the Holders of Notes of the appointment of any Fiscal Agent.
€100,000 or integral multiples of €1,000 in excess thereof.
The Notes are issuable only as fully registered Notes without coupons in denominations of
the Notes, is hereby incorporated mutatis mutandis by reference herein.
12.
Article VIII of the Agreement, which provides for amendments to the Agreement and
13.
Subject to the authentication of this Note by the Fiscal Agent, the Company hereby
certifies and declares that all acts, conditions and things required to be done and performed and to have happened
precedent to the creation and issuance of this Note, and to constitute the same a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, have been done and performed and have
happened in due and strict compliance with all applicable law.
14.
Claims for payment of principal in respect of this Note shall be prescribed upon the
expiry of 6 years from any redemption date and claims for payment of interest (if any) in respect of this Note
shall be prescribed upon the expiry of 5 years from the due date hereof.
This Note shall be governed by and construed in accordance with the laws of the State of
New York.
38
2020 for the 2020 Floating Rate Notes; 2022 for the 2022 Floating Rate Notes.
A-4-12
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM RULE 144A GLOBAL
NOTE TO REGULATION S GLOBAL NOTE
(Transfers Pursuant to Section 2.6(e) of the Fiscal Agency Agreement)
EXHIBIT B
MUFG Bank, Ltd.
as Fiscal Agent
Ropemaker Place, 25 Ropemaker Street,
London EC2Y 9AN
Re:
Takeda Pharmaceutical Company Limited
[Š% Senior Notes due Š][Senior Floating Rate Notes due Š]
Reference is hereby made to the Fiscal Agency Agreement dated as of November 21, 2018 (the
“Agreement”) between Takeda Pharmaceutical Company Limited (the “Company”) and MUFG Bank, Ltd., as
Fiscal Agent. Capitalized terms used but not defined herein shall have the meanings given to them in the
Agreement.
This letter relates to €Š principal amount of [Š% Senior Notes due Š][Senior Floating Rate Notes due Š]
which are evidenced by one or more Rule 144A Global Notes (ISIN Š39; Common Code Š40) and held with
Euroclear or Clearstream in the name of [insert name of transferor] (the “Transferor”). The Transferor has
requested a transfer of such beneficial interest in the Notes to a person that will take delivery thereof in the form
of an equal principal amount of Notes evidenced by one or more Regulation S Global Notes (ISIN Š41; Common
Code Š42).
In connection with such request and in respect of such Notes, the Transferor hereby certifies that such
exchange or transfer has been effected in accordance with the transfer restrictions set forth in the Notes and
(i) that, with respect to transfer made in reliance on Regulation S (“Regulation S”) under the U. S. Securities Act
of 1933, as amended (the “Securities Act”):
(a)
the offer of the Notes was made to a person other than a “U.S. Person” (as defined in
Regulation S);
(b)
either:
(1) at the time the buy order was originated, the transferee was outside the
United States or the Transferor and any person acting on its behalf reasonably
believed that the transferee was outside the United States, or
39 XS1843449551 for the 2020 Notes; XS1843450054 for the 2020 Floating Rate Notes; XS1843449635 for
the 2022 Notes; XS1843449478 for the 2022 Floating Rate Notes; XS1843448660 for the 2026 Notes; and
XS1843448744 for the 2030 Notes.
184344955 for the 2020 Notes; 184345005 for the 2020 Floating Rate Notes; 184344963 for the 2022
Notes; 184344947 for the 2022 Floating Rate Notes; 184344866 for the 2026 Notes; and 184344874 for the
2030 Notes.
40
41 XS1843449981 for the 2020 Notes; XS1843450138 for the 2020 Floating Rate Notes; XS1843449049 for
the 2022 Notes; XS1843449809 for the 2022 Floating Rate Notes; XS1843449122 for the 2026 Notes; and
XS1843449395 for the 2030 Notes.
184344998 for the 2020 Notes; 184345013 for the 2020 Floating Rate Notes; 184344904 for the 2022
Notes; 184344980 for the 2022 Floating Rate Notes; 184344912 for the 2026 Notes; and 184344939 for the
2030 Notes.
42
B-1
(2) the transaction was executed in, on or through the facilities of a
designated offshore securities market described in paragraph (b) of Rule 902 of
Regulation S and neither the Transferor nor any person acting on its behalf knows that
the transaction was pre-arranged with a buyer in the United States;
(c)
(d)
(e)
(f)
no directed selling efforts have been made in contravention of the requirements of
Rule 903 or 904 of Regulation S, as applicable;
the transaction is not part of a plan or scheme to evade the registration requirements of
the Securities Act;
the Transferor has advised the transferee of the transfer restrictions applicable in the
Notes;
if the Transferor is a dealer in securities or has received a selling concession, fee or
other remuneration in respect of the Notes and the transfer is to occur prior to the
expiration of the restricted period then the requirements of Rule 904(b)(1) of
Regulation S have been satisfied;
AND (II) THAT, WITH RESPECT TO TRANSFERS MADE IN RELIANCE OF RULE 144 UNDER THE
SECURITIES ACT, THE TRANSFEROR HAS HELD THE INTEREST IN RULE 144A GLOBAL NOTES TO
BE EXCHANGED BEYOND THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD SET FORTH
IN RULE 144(D)(1) AND THE TRANSFEROR IS NOT AND HAS NOT BEEN AN AFFILIATE (AS
DEFINED IN RULE 144) OF THE COMPANY DURING THE PRECEDING THREE MONTHS.
We understand that this certificate is required in connection with certain securities laws of the United
States. In connection therewith,
if administrative or legal proceedings are commenced or threatened in
connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this
certificate to any interested party in such proceeding. This certificate and the statements contained herein are
made for your benefit and the benefit of the Company and the initial purchasers.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:
,
cc:
Takeda Pharmaceutical Company Limited
B-2
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM REGULATION S GLOBAL
NOTE TO RULE 144A GLOBAL NOTE
(Transfers Pursuant to Section 2.6(f) of the Fiscal Agency Agreement)
EXHIBIT C
MUFG Bank, Ltd.
as Fiscal Agent
Ropemaker Place, 25 Ropemaker Street,
London EC2Y 9AN
Re:
Takeda Pharmaceutical Company Limited
[Š% Senior Notes due Š][Senior Floating Rate Notes due Š]
Reference is hereby made to the Fiscal Agency Agreement dated as of November [21], 2018 (the
“Agreement”) between Takeda Pharmaceutical Company Limited (the “Company”) and MUFG Bank, Ltd., as
Fiscal Agent. Capitalized terms used but not defined herein shall have the meanings given to them in the
Agreement.
This letter relates to €Š principal amount of [Š% Senior Notes due Š][Senior Floating Rate Notes due Š]
which are evidenced by one or more Regulation S Global Notes (ISIN Š43; Common Code Š44) and held with
Euroclear or Clearstream in the name of [insert name of transferor] (the “Transferor”). The Transferor has
requested a transfer of such beneficial interest in Notes to a person that will take delivery thereof in the form of
an equal principal amount of Notes evidenced by one or more Rule 144A Global Notes (ISIN Š45; Common
Code Š46).
In connection with such request and in respect of such Notes, the Transferor hereby certifies that
(i) such Notes are being transferred to a transferee that the Transferor reasonably believes is a “qualified
institutional buyer” within the meaning of Rule 144A under the U. S. Securities Act of 1933, as amended,
purchasing the Notes for its own account (or for the account of one or more qualified institutional buyers over
which account the transferee exercises sole investment discretion), (ii) it has notified the transferee of the transfer
restrictions applicable to the Notes and (iii) the transfer is in accordance with any applicable securities laws of
any State of the United States or any other applicable jurisdiction.
43 XS1843449551 for the 2020 Notes; XS1843450054 for the 2020 Floating Rate Notes; XS1843449635 for
the 2022 Notes; XS1843449478 for the 2022 Floating Rate Notes; XS1843448660 for the 2026 Notes; and
XS1843448744 for the 2030 Notes.
184344955 for the 2020 Notes; 184345005 for the 2020 Floating Rate Notes; 184344963 for the 2022
Notes; 184344947 for the 2022 Floating Rate Notes; 184344866 for the 2026 Notes; and 184344874 for the
2030 Notes.
44
45 XS1843449981 for the 2020 Notes; XS1843450138 for the 2020 Floating Rate Notes; XS1843449049 for
the 2022 Notes; XS1843449809 for the 2022 Floating Rate Notes; XS1843449122 for the 2026 Notes; and
XS1843449395 for the 2030 Notes.
184344998 for the 2020 Notes; 184345013 for the 2020 Floating Rate Notes; 184344904 for the 2022
Notes; 184344980 for the 2022 Floating Rate Notes; 184344912 for the 2026 Notes; and 184344939 for the
2030 Notes.
46
This certificate and the statements contained herein are made for your benefit and the benefit of the
Company and the initial purchasers, if any, of the Notes being transferred.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:
,
cc:
Takeda Pharmaceutical Company Limited
FORM OF OFFICER’S CERTIFICATE AS TO DEFAULT
(Pursuant to Section 9.4 of the Fiscal Agency Agreement)
EXHIBIT D
[Date]
MUFG Bank, Ltd.
as Fiscal Agent
Ropemaker Place, 25 Ropemaker Street,
London EC2Y 9AN
Re:
Takeda Pharmaceutical Company Limited
Senior Floating Rate Notes due [Š]
Senior Floating Rate Notes due [Š]
[Š]% Senior Notes due [Š]
[Š]% Senior Notes due [Š] (collectively, the “Notes”)
Reference is hereby made to the Fiscal Agency Agreement dated as of November 21, 2018 (the
“Agreement”) between Takeda Pharmaceutical Company Limited (the “Company”) and MUFG Bank, Ltd., as
Fiscal Agent relating to the issuance of the Notes. Capitalized terms used but not defined herein shall have the
meanings given to them in the Agreement.
I, [name], [title] of the Company, in such capacity, do hereby certify, pursuant to Section 9.4 of
the Agreement, that to my knowledge as at [Š], [the Company is in compliance with all conditions and covenants
under the Agreement / the Company has not complied with its following obligation[s] under the Agreement]:
[insert details]
IN WITNESS WHEREOF, I have hereunto signed my name as of [Š].
Takeda Pharmaceutical Company Limited
By:
Name:
Title:
Exhibit 10.12
TAKEDA PHARMACEUTICAL COMPANY LIMITED
The Company
MUFG UNION BANK, N.A.
Trustee
INDENTURE
Dated as of November 26, 2018
$1,000,000,000 3.800% Senior Notes due 2020
$1,250,000,000 4.000% Senior Notes due 2021
$1,500,000,000 4.400% Senior Notes due 2023
$1,750,000,000 5.000% Senior Notes due 2028
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . . .
SECTION 1.1.
SECTION 1.2.
SECTION 1.3.
SECTION 1.4.
SECTION 1.5.
SECTION 1.6.
SECTION 1.7.
SECTION 1.8.
SECTION 1.9.
SECTION 1.10.
SECTION 1.11.
SECTION 1.12.
SECTION 1.13.
SECTION 1.14.
SECTION 1.15.
SECTION 1.16.
SECTION 1.17.
SECTION 1.18.
Definitions.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compliance Certificates and Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form of Documents Delivered to Trustee.
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Acts of Holders; Record Dates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notices, Etc., to Trustee and the Company.
. . . . . . . . . . . . . . . . . . . . . . . . . .
Notice to Holders; Waiver.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of Headings and Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Successors and Assigns.
Separability Clause. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits of Indenture.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consent to Jurisdiction; Waiver of Immunities. . . . . . . . . . . . . . . . . . . . . . . .
Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments Due on Non-Business Days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications by Holders with Other Holders.
. . . . . . . . . . . . . . . . . . . . .
English Language. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conflict with any Provision of Indenture with Trust Indenture Act . . . . . . . .
ARTICLE II THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.1.
SECTION 2.2.
SECTION 2.3.
SECTION 2.4.
SECTION 2.5.
SECTION 2.6.
SECTION 2.7.
SECTION 2.8.
SECTION 2.9.
SECTION 2.10.
SECTION 2.11.
SECTION 2.12.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forms.
Certificate of Authentication.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issue and Delivery of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Registrar, Registration of Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . .
Global Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer Restrictions.
Mutilated, Destroyed, Lost and Stolen Notes.
. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Persons Deemed Owners.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancellation.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese Withholding Taxes.
Japanese Withholding Tax Legend.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange Offer.
ARTICLE III SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.1.
SECTION 3.2.
Satisfaction and Discharge of Indenture.
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Application of Trust Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IV REMEDIES OF THE TRUSTEE AND HOLDERS ON EVENT OF DEFAULT . . . . . . . .
SECTION 4.1.
SECTION 4.2.
SECTION 4.3.
SECTION 4.4.
SECTION 4.5.
SECTION 4.6.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Event of Default
Acceleration of Maturity; Rescission and Annulment
. . . . . . . . . . . . . . . . . .
Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustee May File Proofs of Claim.
. . . . . . . . . . . . .
Trustee May Enforce Claims Without Possession of Notes.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Application of Money Collected.
- i -
Page
1
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9
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17
17
18
20
21
23
24
24
24
25
26
27
27
28
28
28
29
30
31
31
32
SECTION 4.7.
SECTION 4.8.
SECTION 4.9.
SECTION 4.10.
SECTION 4.11.
SECTION 4.12.
SECTION 4.13.
SECTION 4.14.
SECTION 4.15.
SECTION 4.16.
Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right of Holders to Receive Principal and Interest.
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restoration of Rights and Remedies.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rights and Remedies Cumulative.
Delay or Omission Not Waiver.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Control by Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Waiver of Past Defaults.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustee to Give Notice of Default.
Undertaking for Costs.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Waiver of Stay or Extension Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE V THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.1.
SECTION 5.2.
SECTION 5.3.
SECTION 5.4.
SECTION 5.5.
SECTION 5.6.
SECTION 5.7.
SECTION 5.8.
SECTION 5.9.
SECTION 5.10.
SECTION 5.11.
Certain Duties and Responsibilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Not Responsible for Recitals or Issuance of Notes.
May Hold Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money Held in Trust.
Compensation and Reimbursement.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Trustee Required; Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Resignation and Removal; Appointment of Successor.
Acceptance of Appointment by Successor. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger, Conversion, Consolidation or Succession to Business. . . . . . . . . . . .
Conflicting Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VI HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY . . . . . . . . . . . . . . .
SECTION 6.1.
SECTION 6.2.
Company to Furnish Trustee Names and Addresses of Holders.
Preservation of Information; Communications to Holders.
. . . . . . . . . .
. . . . . . . . . . . . . .
ARTICLE VII MERGER, CONSOLIDATION, SALE OR DISPOSITION . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.1.
SECTION 7.2.
. . . . . . . . . . . . . .
Company May Consolidate, Etc., Only on Certain Terms.
Successor Substituted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VIII SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.1.
SECTION 8.2.
SECTION 8.3.
SECTION 8.4.
SECTION 8.5.
SECTION 8.6.
Supplemental Indentures Without Consent of Holders.
. . . . . . . . . . . . . . . . .
Supplemental Indentures With Consent of Holders. . . . . . . . . . . . . . . . . . . . .
Execution of Supplemental Indentures.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reference in Notes to Supplemental Indentures.
. . . . . . . . . . . . . . . . . . . . . .
Conformity with the Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IX COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.1.
SECTION 9.2.
SECTION 9.3.
SECTION 9.4.
Payment of Principal, Interest and Additional Amounts. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance of Office or Agency.
Money for Notes Payments to Be Held in Trust.
. . . . . . . . . . . . . . . . . . . . . .
Statement by Officers as to Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- ii -
Page
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34
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36
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38
38
38
39
39
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47
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47
50
50
50
51
51
51
51
52
52
53
53
54
54
55
55
55
SECTION 9.5.
SECTION 9.6.
SECTION 9.7.
SECTION 9.8.
SECTION 9.9.
SECTION 9.10.
SECTION 9.11.
SECTION 9.12.
Additional Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appointment to Fill a Vacancy in Office of Trustee.
. . . . . . . . . . . . . . . . . . .
Indemnification of Judgment Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rule 144A Information.
Reports by the Company.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports by the Trustee.
Annual Compliance Certificate.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Negative Pledge.
ARTICLE X REDEMPTION AND PURCHASE OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.1.
SECTION 10.2.
SECTION 10.3.
SECTION 10.4.
SECTION 10.5.
SECTION 10.6.
SECTION 10.7.
SECTION 10.8.
Optional Redemption of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Optional Redemption due to an Additional Amounts Event. . . . . . . . . . . . . .
Special Mandatory Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Election to Redeem; Notice to Trustee.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notice of Redemption.
Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes Payable on Redemption Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBITS
EXHIBIT A-1.
EXHIBIT A-2.
EXHIBIT A-3
EXHIBIT B.
EXHIBIT C.
EXHIBIT D.
Form of Rule 144A Global Note
Form of Regulation S Global Note
Form of Unrestricted Global Note
Form of Transfer Certificate for Transfer from Rule 144A Global Note to
Regulation S Global Note
Form of Transfer Certificate for Transfer from Regulation S Global Note to
Rule 144A Global Note
Form of Officer’s Certificate as to Default
- iii -
Cross-reference sheet of provisions of the Trust Indenture Act of 1939 and this Indenture:
CROSS REFERENCE SHEET
Section of the Act
310(a)(1) and (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
310(a)(3) and (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
310(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
311(a), (b) and (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
313(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
313(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
314(c)(1) and (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
314(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
315(a), (c) and (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
316(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
316(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section of Indenture
5.7
Inapplicable
Incorporated by Section 318(c)
5.8
Incorporated by Section 318(c)
6.1
Incorporated by Section 318(c)
Incorporated by Section 318(c)
9.09
Inapplicable
Incorporated by Section 318(c)
Incorporated by Section 318(c)
Incorporated by Section 318(c)
9.9, 9.11
Inapplicable
1.2
Inapplicable
Inapplicable
1.2
5.1
4.14
4.15
4.12
Inapplicable
4.8
Incorporated by Section 318(c)
4.3
9.3
1.18
Notes: This cross-reference sheet shall not, for any purpose, be deemed to be a part of this Indenture.
Attention should also be directed to Section 318(c) of the Trust Indenture Act (as defined in this Indenture),
which 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. Sections designated in the
cross-reference sheet above as “Incorporated by Section 318(c)” are not physically contained herein but are
incorporated automatically by Section 318(c) of the Trust Indenture Act.
- iv -
INDENTURE, dated as of November 26, 2018, between Takeda Pharmaceutical Company
Limited, a joint-stock corporation (kabushiki kaisha) organized under the laws of Japan (the “Company”), and
MUFG Union Bank, N.A., a national banking association organized under the laws of the United States, as
trustee (the “Trustee”).
W I T N E S S E T H
WHEREAS, the Company has duly authorized the issuance of its $1,000,000,000 3.800%
Senior Notes due 2020 (the “2020 Notes”), $1,250,000,000 4.000% Senior Notes due 2021 (the “2021 Notes”),
$1,500,000,000 4.400% Senior Notes due 2023 (the “2023 Notes”) and $1,750,000,000 5.000% Senior Notes due
2028 (the “2028 Notes” and, together with the 2020 Notes, the 2021 Notes and the 2023 Notes, the “Notes”) and
to provide, among other things, for the execution, authentication, delivery and administration thereof, the
Company has duly authorized the execution and delivery of this Indenture; and
WHEREAS, all things necessary to make the Notes, when executed and delivered by the
Company and authenticated and delivered as provided in this Indenture, the valid, binding and legal obligations
of the Company, and to constitute these presents a valid indenture and agreement of the Company according to
its terms have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Notes by the holders thereof, the
Company covenants and agrees for the equal and proportionate benefit of the respective holders of the Notes
from time to time as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(1)
the terms defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular;
(2)
all accounting terms not otherwise defined herein have the meanings assigned to them
in accordance with International Financial Reporting Standards;
(3)
unless the context otherwise requires, any reference to an “Article” or a “Section”
refers to an Article or a Section, as the case may be, of this Indenture;
(4)
the words “herein”, “hereof” and “hereunder” and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or other subdivision;
(5)
all references, in any context, to any interest or other amount payable on or with respect
to the Notes shall be deemed to include any additional obligations to pay interest on the Notes pursuant
to the Registration Rights Agreement (as defined herein); and
(6)
the following expressions shall have the following meanings:
“2021 Par Call Date” has the meaning specified in Section 10.1.
1
“2023 Par Call Date” has the meaning specified in Section 10.1.
“2028 Par Call Date” has the meaning specified in Section 10.1.
“Act”, when used with respect to any Holder, has the meaning specified in Section 1.4.
“Act on Special Taxation Measures” has the meaning specified in Section 9.5.
“Additional Amounts” has the meaning specified in Section 9.5.
“Additional Amounts Event” has the meaning specified in Section 10.2.
“Affiliate” of any specified Person means any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified Person. For the purposes of this
definition, “control” when used with respect to any specified Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Agent” means any Notes Registrar or Paying Agent.
“Applicable Procedures” has the meaning specified in Section 2.6(e).
“Authorized Officer” means any person (whether designated by name or the person for the
time being holding a designated office) appointed by or pursuant to a Board Resolution or otherwise for the
purpose, or a particular purpose, of this Indenture, provided that written notice of such appointment shall have
been given to the Trustee.
“Board of Directors” means the board of directors of the Company or any committee or
member thereof duly authorized to act for it in respect hereof.
“Board Resolution” means a copy of a resolution or decision certified by an authorized
Director or any other Authorized Officer of the Company to have been duly adopted or made by the Board of
Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.
“Business Day” means a day, other than a Saturday or Sunday, that is neither a legal holiday
nor a day on which commercial banking institutions are authorized or required by law, regulation or executive
order to be closed in The City of New York, London or Tokyo.
“Clearstream” means Clearstream Banking S.A.
“Closing Date” means November 26, 2018.
“Commission” means the U.S. Securities and Exchange Commission, as from time to time
constituted, created under the Exchange Act, or if at any time after the execution and delivery 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 on such date.
“Company” means the Person named as the “Company” in the first paragraph of this
instrument until a Successor Person shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter “Company” shall mean such Successor Person.
“Company Request” or “Company Order” means a written request or order signed in the
name of the Company by any of its Directors and/or Authorized Officers, and delivered to the Trustee.
2
“Comparable Treasury Issue” means the United States Treasury security or securities
selected by the Independent Investment Banker as having an actual or interpolated maturity comparable to the
term from the relevant Redemption Date to the Par Call Date that would be utilized, at the time of selection and
in accordance with customary financial practice, in pricing new issues of corporate debt securities of maturity
comparable to the term from the relevant Redemption Date to the Par Call Date.
“Comparable Treasury Price” means with respect to any Redemption Date, (1) the average
of four Reference Treasury Dealer Quotations for such Redemption Date or (2) if the Independent Investment
Banker is unable to obtain four Reference Treasury Dealer Quotations for such Redemption Date, the average of
all quotations obtained.
“Co-operation Agreement” means the Co-operation Agreement, dated May 8, 2018, between
the Company and Shire plc.
“Corporate Trust Office” means the corporate trust office of the Trustee in the Borough of
Manhattan, The City of New York at which at any particular time its corporate trust business shall be principally
administered, which as at the date hereof is located at 1251 Avenue of the Americas, 19th Floor, New York, New
York 10020, or such other address as the Trustee may designate from time to time by notice to the Holders and
the Company, or the principal corporate trust office of any successor Trustee (or such other address as such
successor Trustee may designate from time to time to the Holders and the Company).
“Depositary” means, with respect to the Global Notes, a clearing agency registered under the
Exchange Act that is designated to act as depositary for such Notes.
“Designated Financial Institution” has the meaning specified in Section 9.5.
“Director” means any member of the Board of Directors.
“DTC” means The Depository Trust Company.
“DTC Procedures” means the procedures set out in the memorandum titled “Operating
Manual—Japanese Withholding Tax on Certain International Issues Held Through DTC, Interim procedures to
reflect changes in Japanese tax rules affecting international securities offerings by Japanese issuers on or after
April 1, 2010, updated as of October 9, 2015” and prepared by the International Capital Market Association as
may be amended or supplemented from time to time by notice from such association.
“Euroclear” means Euroclear Bank SA/NV.
“Event of Default” has the meaning specified in Section 4.1.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“Exchange Notes” means the Notes issued in the Exchange Offer pursuant to Section 2.12
hereof.
“Exchange Offer” has the meaning set forth in the Registration Rights Agreement.
“Exchange Offer Registration Statement” has the meaning set forth in the Registration
Rights Agreement.
“Expiration Date” has the meaning specified in Section 1.4.
“Global Notes” has the meaning specified in Section 2.1.
3
“Holder” means a Person in whose name a Note is registered in the Notes Register.
“Incorporated Provision” has the meaning specified in Section 1.18.
“Indenture” means this instrument as originally executed and as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable
provisions hereof.
“Independent Investment Banker” means one of the Reference Treasury Dealers appointed
by the Company.
Indenture.
“Interest Payment Date” means each May 26 and November 26 during the term of this
“Interest Recipient Information” has the meaning specified in Section 9.5.
“Judgment Currency” has the meaning specified in Section 9.7.
“Legends” has the meaning specified in Section 2.6(a).
“Letter of Transmittal” means the letter of transmittal to be prepared by the Company and
sent to all Holders of Notes for use by such Holders of Notes in connection with an Exchange Offer.
“Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such property or asset, including, without limitation,
the right of a vendor, lessor or similar party under any conditional sales agreement, capital lease or other title
retention agreement relating to such property or asset, and any other right of or arrangement with any creditor to
have its claims satisfied out of any property or assets, or the proceeds therefrom, prior to any general creditor of
the owner thereof.
“Long Stop Date” means May 8, 2019, or such later date as may be agreed upon in accordance
with the Co-Operation Agreement; provided, however, that any such later date shall not extend beyond May 8,
2020.
“Note” or “Notes” means any 2020 Notes, 2021 Notes, 2023 Notes or 2028 Notes (including
any Exchange Notes issued in exchange therefor) authenticated and delivered under this Indenture.
“Notes Register” and “Notes Registrar” have the respective meanings specified in
Section 2.4.
“New York Business Day” means a day, other than a Saturday or Sunday, that is neither a
legal holiday nor a day on which commercial banking institutions are authorized or required by law, regulation or
executive order to be closed in The City of New York.
“Officer’s Certificate” means a certificate signed by any Director or Authorized Officer of the
Company and delivered to the Trustee. Each such certificate shall comply with Section 314 of the Trust
Indenture Act, if applicable, and include (except as otherwise expressly provided in this Indenture) the statements
provided in Section 1.2, if applicable
“Opinion of Counsel” means a written opinion of counsel, who may be an employee of or
counsel to the Company, or other counsel acceptable to the Trustee, in a form satisfactory to the Trustee. Each
such opinion shall comply with Section 314 of the Trust Indenture Act, if applicable, and include the statements
provided in Section 1.2, if and to the extent required thereby
4
“Outstanding”, when used with respect to any series of the Notes, means, as of the date of
determination, all Notes of such series theretofore authenticated and delivered under this Indenture, except:
(1)
Notes theretofore cancelled by the Notes Registrar or delivered to the Notes
Registrar for cancellation;
(2)
Notes for whose payment or redemption money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of
such Notes; provided that, if such Notes are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has
been made; and
(3)
Notes which have been paid pursuant to Section 2.7 or in exchange for or in
lieu of which other Notes have been authenticated and delivered pursuant to this Indenture,
other than any such Notes in respect of which there shall have been presented to the Trustee
proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands such
Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding
Notes of any series have given, made or taken any request, demand, authorization, direction, notice, consent,
waiver or other action hereunder as of any date, Notes owned by the Company or any other obligor upon the
Notes or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee or the Paying Agent shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Notes
which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Notes so
owned or beneficially held which have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee or the Paying Agent the pledgee’s right so to act with respect to such
Notes and that the pledgee is not the Company or any other obligor upon the Notes or any Affiliate of the
Company or of such other obligor.
“Owner Transferee” has the meaning specified in Section 2.6(e).
“Owner Transferor” has the meaning specified in Section 2.6(e).
“Participant” has the meaning specified in Section 9.5.
“Participant Transferee” has the meaning specified in Section 2.6(e).
“Participant Transferor” has the meaning specified in Section 2.6(e).
“Participants” has the meaning specified in Section 2.5.
“Participating Broker-Dealer” has the meaning set
forth in the Registration Rights
Agreement.
“Paying Agent” means any Person authorized by the Company to pay the principal of or
interest on any Notes (or Additional Amounts, if any) on behalf of the Company, which shall initially be MUFG
Union Bank, N.A.
“Person” means any individual, corporation, partnership, limited liability company, joint
venture, trust, unincorporated organization or government or any branch, agency or political subdivision thereof.
“Primary Treasury Dealer” means a primary U.S. government securities dealer.
5
“Principal Subsidiary” means, with respect to any Person, any Subsidiary (i) whose revenue,
as shown by the latest audited financial statements (consolidated in the case of a Subsidiary which itself has
Subsidiaries) of such Subsidiary, constitute at least 10% of the consolidated revenue of such Person and its
consolidated Subsidiaries as shown by the latest audited consolidated financial statements of such Person or
(ii) whose gross assets, as shown by the latest audited financial statements (consolidated in case of a Subsidiary
which itself has Subsidiaries) of such Subsidiary constitute at least 10% of the gross assets of such Person and its
consolidated Subsidiaries as shown by the latest audited consolidated financial statements of such Person.
“Public External Indebtedness” means bonds, debentures, notes or other similar investment
securities of the Company or any other person evidencing indebtedness with a maturity of not less than one year
from the issue date thereof, or any guarantees thereof, which are (a) either (i) by their terms payable, or confer a
right to receive payment, in any currency other than Japanese yen or (ii) denominated in Japanese yen and more
than 50% of the aggregate principal amount thereof is initially distributed outside of Japan by or with the
authorization of the Company thereof; and (b) for the time being, or are intended to be, quoted, listed, ordinarily
dealt in or traded, in each case primarily, on a stock exchange or over-the-counter or other securities market
outside Japan.
“Record Date” with respect to any Interest Payment Date shall have the meaning specified in
the form of the Notes.
“Redemption Date” has the meaning specified in Section 10.5.
“Reference Treasury Dealer” means each of J.P. Morgan Securities LLC, Morgan Stanley
MUFG Securities Co., Ltd., Mizuho Securities USA LLC and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (or their respective affiliates that are Primary Treasury Dealers) and their respective successors, a
Primary Treasury Dealer selected by SMBC Nikko Securities America, Inc. and two Primary Treasury Dealers
selected by the Company; provided, however, that if any of the foregoing shall cease to be a Primary Treasury
Dealer, the Company shall substitute therefor another Primary Treasury Dealer.
“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury
Dealer and any Redemption Date, the average, as determined by the Independent Investment Banker, of the bid
and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal
amount) quoted in writing to the Independent Investment Banker at 3:30 p.m., New York City time, on the third
New York Business Day preceding the Redemption Date.
“Registration Rights Agreement” means (i) the Registration Rights Agreement dated as of
the Closing Date between the Company and J.P. Morgan Securities LLC (“J.P. Morgan”), SMBC Nikko
Securities America, Inc., Morgan Stanley MUFG Securities Co., Ltd., Mizuho Securities USA LLC, and Merrill
Lynch, Pierce, Fenner & Smith Incorporated as representatives, for themselves and as representative of the Initial
Purchasers of the Notes.
“Regulation S Global Note” has the meaning specified in Section 2.1.
“Regulation S Global Transferred Amount” has the meaning specified in Section 2.6(f).
“Required Currency” has the meaning specified in Section 9.7.
“Responsible Officer” means, when used with respect to the Trustee, any officer within the
Trustee’s corporate trust department with responsibility for the administration of this Indenture and also means,
with respect to a particular corporate trust matter, any other officer of the Trustee to whom such matter is referred
because of such officer’s knowledge of and familiarity with the particular subject.
“Rule 144A Global Note” has the meaning specified in Section 2.1.
6
“Rule 144A Global Transferred Amount” has the meaning specified in Section 2.6(e).
“Rule 144A Information” has the meaning specified in Section 9.8.
“Securities Act” means the U.S. Securities Act of 1933, as amended.
“Special Mandatory Redemption Date” means the 20th day (or if such day is not a Business
Day, the first Business Day thereafter) after the earliest to occur of (1) the Long Stop Date, if the Shire
Acquisition has not been consummated on or prior to the Long Stop Date or (2) the date of public announcement
by the Company that the Shire Acquisition will not be consummated.
“Shelf Registration Statement” means the Shelf Registration Statement as defined in the
Registration Rights Agreement.
“Shire Acquisition” means the offer whereby the Company will acquire the entire issued and
to be issued ordinary share capital of Shire plc, pursuant to the Co-operation Agreement.
“specially-related person of the Company” has the meaning specified in Section 9.5.
“Subsidiary” means, with respect to any Person, any entity which is controlled or of which
more than 50% of its ownership interests are owned directly or indirectly by such Person.
“Succession Event” has the meaning specified in Section 7.1.
“Successor Person” has the meaning specified in Section 7.2.
“Tax Documentation” means any of certifications, claims for exemption, notifications or other
documentation required under Japanese tax law for interest payments to be made without withholding or
deduction for or on account of Japanese tax.
“Taxes” has the meaning specified in Section 9.5.
“Transfer Restrictions” has the meaning specified in Section 2.6(a).
“Treasury Rate” means, with respect to any Redemption Date, the rate per annum equal to the
semiannual equivalent yield to maturity or interpolated (on a day count basis) maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for such Redemption Date.
“Trust Indenture Act” means the Trust Indenture Act of 1939 as in force at the date as of
which this Indenture was originally executed; provided, however, that in the event that the Trust Indenture Act of
1939 is amended after such date, “Trust Indenture Act” means, to the extent required by any such amendment,
the Trust Indenture Act of 1939, as so amended.
“Trustee” means the Person named as the “Trustee” in the first paragraph of this instrument
until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and
thereafter “Trustee” shall mean or include each Person who is then a Trustee hereunder.
“United States” means the United States of America.
“Unrestricted Global Note” has the meaning specified in Section 2.1.
“Written Application for Tax Exemption” has the meaning specified in Section 9.5.
7
SECTION 1.2. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any action under any
provision of this Indenture, the Company shall furnish to the Trustee an Officer’s Certificate and an Opinion of
Counsel (provided, however, that at the time of issuance of the Notes, the Company shall furnish to the Trustee
an Officer’s Certificate) stating that all conditions precedent provided for in this Indenture relating to the
proposed action have been complied with. Each such certificate or opinion shall be given in the form of an
Officer’s Certificate, if to be given by an officer of the Company, or an Opinion of Counsel, if to be given by
counsel, and shall comply with the requirements set forth in this Indenture.
Every certificate or opinion with respect to compliance with a condition or covenant provided
for in this Indenture (except for certificates provided for in Section 9.4) shall include:
(1)
a statement that each individual signing such certificate or opinion has read such
condition or covenant and the definitions herein relating thereto;
(2)
a brief statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are based;
(3)
a statement that, in the opinion of each such individual, he has made such examination
or investigation as is necessary to enable him to express an informed opinion as to whether or not such
condition or covenant has been complied with; and
(4)
a statement as to whether, in the opinion of each such individual, such condition or
covenant has been complied with.
SECTION 1.3. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only
one such Person, or that they be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based, insofar as it relates to
legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or representations with respect to the
matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel
may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Company stating that the information with respect to such factual matters is in the
possession of the Company unless such counsel knows, or in the exercise of reasonable care should know, that
the certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests,
consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
SECTION 1.4. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver or other action provided
or permitted by this Indenture to be given, made or taken by Holders may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed
8
in writing; and, except as herein otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the “Act” of the Holders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this
Section 1.4.
The fact and date of the execution by any Person of any such instrument or writing may be
proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or
writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity
other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee deems sufficient.
The ownership of Notes shall be proved by the Notes Register.
Any request, demand, authorization, direction, notice, consent, waiver or other Act of the
Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is
made upon such Note.
The Company may set any day as a record date for the purpose of determining the Holders of
Outstanding Notes entitled to give, make or take any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Notes,
provided that the Company may not set a record date for, and the provisions of this paragraph shall not apply
with respect to, the giving or making of any notice, declaration, request or direction referred to in the next
paragraph. If any record date is set pursuant to this paragraph, the Holders of Outstanding Notes at the close of
business on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not
such Holders remain Holders after such record date; provided that no such action shall be effective hereunder
unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of
Outstanding Notes on such record date. Nothing in this paragraph shall be construed to prevent the Company
from setting a new record date for any action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with no action by any Person be
cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action
taken by Holders of the requisite principal amount of Outstanding Notes on the date such action is taken based on
such record date previously set. Promptly after any record date is set pursuant to this paragraph, the Company, at
its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Trustee in writing and to each Holder of Notes in the manner set forth in
Section 1.6.
The Trustee may set any day as a record date for the purpose of determining the Holders of
Outstanding Notes entitled to join in the giving or making of (i) any declaration of acceleration referred to in
Section 4.2, (ii) any request to institute proceedings referred to in Section 4.7 or (iii) any direction referred to in
Section 4.12. If any record date is set pursuant to this paragraph, the Holders of Outstanding Notes at the close of
business on such record date, and no other Holders, shall be entitled to join in such declaration, request or
direction, whether or not such Holders remain Holders after such record date; provided that no such action shall
be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite
principal amount of Outstanding Notes on such record date. Nothing in this paragraph shall be construed to
prevent the Trustee from setting a new record date for any action for which a record date has previously been set
9
pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by
any Person be cancelled and of no effect), provided, however, that nothing in this paragraph shall be construed to
render ineffective any action taken by Holders of the requisite principal amount of Outstanding Notes on the date
such action is taken based on such record date previously set. Promptly after any record date is set pursuant to
this paragraph, the Trustee, at the Company’s expense, shall cause notice of such record date, the proposed action
by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of
Notes in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section 1.4, the party hereto which sets
such record dates may designate any day as the “Expiration Date” and from time to time may change the
Expiration Date to any earlier or later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other parties hereto in writing, and to each Holder of Notes in the
manner set forth in Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date is not
designated with respect to any record date set pursuant to this Section 1.4, the party hereto which set such record
date shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding
the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with
regard to any particular Note may do so with regard to all or any part of the principal amount of such Note or by
one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or
any part of such principal amount of such Note.
SECTION 1.5. Notices, Etc., to Trustee and the Company.
Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,
(1)
the Trustee by any Holder or by the Company shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust
Office, or
(2)
the Company by the Trustee or by any Holder shall be sufficient for every purpose
hereunder if in writing and mailed, first-class postage prepaid to the Company at its address at 1-1,
Nihonbashi-Honcho 2-Chome, Chuo-ku, Tokyo 103-8668, Japan Attention: Global Treasury & Finance
Management, Group Finance & Controlling, Global Finance; or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage
prepaid, or emailed, in PDF format, to each Holder affected by such event, at his address as it appears in the
Notes Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for
the giving of such notice. In any case where notice to Holders is given by mail or email, neither the failure to
mail or email such notice, nor any defect in any notice so mailed or emailed, to any particular Holder shall affect
the sufficiency of such notice with respect to other Holders. 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.
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In case by reason of the suspension of regular mail service or by reason of any other cause it
shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of
the Trustee shall constitute a sufficient notification for every purpose hereunder.
SECTION 1.7. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 1.8.
Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind its successors and
assigns, whether so expressed or not.
SECTION 1.9.
Separability Clause.
In case any provision in this Indenture or in the Notes 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.
SECTION 1.10. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other
than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 1.11. Governing Law.
This Indenture and the Notes shall be governed by, and construed in accordance with, the laws
of the State of New York.
SECTION 1.12. Consent to Jurisdiction; Waiver of Immunities.
(a)
The Company hereby irrevocably and unconditionally submits to the non-exclusive
jurisdiction of the courts of New York State or the federal courts of the United States located in the Borough of
Manhattan, The City of New York over any suit, action or proceeding arising out of or relating to this Indenture
or any Note. The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding
brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been
brought in an inconvenient forum. To the extent that the Company has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process with respect to itself or its property, it irrevocably waives
such immunity in respect of its obligations hereunder or under any Note. The Company agrees that final
judgment in any such suit, action or proceeding brought in such a court shall be conclusive and binding upon the
Company and, to the extent permitted by applicable law, may be enforced in any court to the jurisdiction of
which the Company is subject by a suit upon such judgment or in any manner provided by law, provided that
service of process is effected upon the Company in the manner specified in the following paragraph or as
otherwise permitted by law.
(b)
As long as any of the Notes remain Outstanding, the Company will at all times have an
authorized agent in The City of New York upon whom process may be served in any legal action or proceeding
arising out of or relating to this Indenture or any Note. Service of process upon such agent and written notice of
such service mailed or delivered to the Company shall to the fullest extent permitted by law be deemed in every
respect effective service of process upon the Company in any such legal action or proceeding. The Company has
appointed Cogency Global Inc. as its agent for such purpose, and covenants and agrees that service of process in
any suit, action or proceeding may be made upon it at the offices of such agent. Cogency Global Inc. has
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accepted such appointment as agent for service of process. Notwithstanding the foregoing, the Company may,
with prior written notice to the Trustee, terminate the appointment of such agent and appoint another agent for
the above purposes so that the Company shall at all times have an agent for the above purposes in The City of
New York.
(c)
The Company hereby irrevocably waives, to the fullest extent permitted by law, any
requirement or other provision of law, rule, regulation or practice which requires or otherwise establishes as a
condition to the institution, prosecution or completion of any suit, action or proceeding (including appeals)
arising out of or relating to this Indenture or any Note, the posting of any bond or the furnishing, directly or
indirectly, of any other security.
SECTION 1.13. Waiver of Jury Trial.
EACH OF THE COMPANY 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
NOTES OR THE TRANSACTION CONTEMPLATED HEREBY.
SECTION 1.14. Payments Due on Non-Business Days.
In any case in which any Interest Payment Date falls on a day that is not a Business Day, then
payment of principal or interest (or Additional Amounts, if any) need not be made on such date but may be made
on the next succeeding Business Day. Any payment made pursuant to the preceding sentence on such next
succeeding Business Day shall have the same force and effect as if made on the due date, and no additional
interest shall accrue with respect to such payment for the period after such date.
SECTION 1.15. Communications by Holders with Other Holders.
Within five Business Days of receipt of a written application by a Holder stating that such
Holder desires to communicate with other Holders of Notes, the Trustee, provided it has received a copy of the
form of proxy or other communication which such applying Holder proposes to transmit and proof reasonably
satisfactory to the Trustee that such Holder has owned Notes for a period of at least six months prior to such
request, shall either (i) afford the applying Holder access to the requested information or (ii) transmit copies of
the communication prepared by the applying Holder to the registered Holders at the expense of such applying
Holder.
SECTION 1.16. English Language.
All certificates, opinions, notices, consents, requests or other documents or instruments
delivered pursuant hereto shall be in the English language.
SECTION 1.17. Counterparts
This Indenture may be executed in two or more counterparts, each of which shall be deemed to
be an original and all of which together shall constitute one and the same agreement. The exchange of copies of
this Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and
delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture and signature
pages for all purposes.
SECTION 1.18. Conflict with any Provision of Indenture with Trust
Indenture Act
If and to the extent that any provision of this Indenture limits, qualifies or conflicts with
another provision included in this Indenture by operation of Sections 310 to and including 317 of the Trust
Indenture Act (an “Incorporated Provision”), such Incorporated Provision shall control.
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ARTICLE II
THE SECURITIES
SECTION 2.1. Forms.
Upon the execution and delivery of this Indenture, the:
•
•
•
•
3.800% Senior Notes due 2020 in an aggregate principal amount of $1,000,000,000
4.000% Senior Notes due 2021 in an aggregate principal amount of $1,250,000,000,
4.400% Senior Notes due 2023 in an aggregate principal amount of $1,500,000,000 and
5.000% Senior Notes due 2028 in an aggregate principal amount of $1,750,000,000
may be executed and delivered by the Company to the Trustee for authentication, accompanied
by a Company Order directing such authentication, and the Trustee shall thereupon authenticate and deliver said
Notes to or upon the written order of the Company (as set forth in such Company Order) signed by an Authorized
Officer of the Company. The Trustee shall authenticate the Exchange Notes at any time from time to time.
Notwithstanding the foregoing, the Company, pursuant to a Board Resolution, may from time to time, without
the consent of Holders of Notes, create and issue further notes having the same terms and conditions as the Notes
of a series in all respects, except for the issue date, issue price and first Interest Payment Date thereon. Additional
notes issued in this manner may be consolidated with and form a single series with the previously outstanding
Notes of the relevant series; provided that if any additional notes are not fungible with the Notes of the relevant
series for U.S. federal income tax purposes, such additional notes will be issued as a separate series under this
Indenture and will have a separate “CUSIP” or similar identifying number from the Notes of the relevant series.
The Notes shall be issuable only in fully registered form without
interest coupons in
denominations of $200,000 and integral multiples of $1,000 in excess thereof. Notes issued in accordance with
Rule 144A of the Securities Act shall initially be issued in the form of one or more global notes in the form of
Exhibit A-1 hereto (each, a “Rule 144A Global Note”) and Notes issued in accordance with Regulation S of the
Securities Act shall initially be issued in the form of one or more global notes in the form of Exhibit A-2 hereto
(each, a “Regulation S Global Note”). Rule 144A Global Notes and Regulation S Global Notes exchanged for
Exchange Notes pursuant to Section 2.12 shall be in the form of one or more global notes in the form of Exhibit
A-3 hereto (each an “Unrestricted Global Note”, and, collectively with the Rule 144A Global Notes and the
Regulation S Global Notes, the “Global Notes”). Interests in any Global Note will be exchangeable for definitive
Notes in registered form only under the circumstances set forth herein.
The Notes may have such additional provisions, omissions, variations or substitutions as are
not inconsistent with the provisions of this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be required to comply with any law or
with any rules made pursuant thereto or with the rules of any securities exchange, any governmental agency or
the Depositary or as may, consistently herewith, be determined by the officers of the Company executing such
Notes, as evidenced by their execution thereof. All Notes shall be substantially identical except as to
denomination and as provided herein.
The Notes shall be executed on behalf of the Company by any Representative Director of the
Company. The signature of any Representative Director of the Company on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signatures of individuals who were at the time of
issuance of such Notes the proper Representative Director of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such offices thereafter.
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The definitive Notes shall be printed, lithographed or engraved on steel engraved borders or
may be produced in any other manner, all as determined by the Representative
Director of the Company executing such Notes, as evidenced by their execution thereof. Until
definitive Notes shall have been prepared, the Company may execute, and upon the written order of the
Company, the Trustee shall authenticate and deliver, in accordance with the provisions of this Indenture (in lieu
of definitive Notes), temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise
produced, substantially of the tenor referred to above. Such temporary Notes shall be subject to the same
limitations and conditions and entitled to the same rights and benefits as definitive Notes, except as provided
herein or therein. If temporary Notes are issued, the Company shall promptly cause definitive Notes to be
prepared. Temporary Notes shall be exchangeable at the principal office of the Trustee in The City of New York
(or at such other office in The City of New York as shall be specified in the text of such temporary Notes) for
definitive Notes when the latter shall be ready for delivery; and upon the surrender for exchange at said office of
such temporary Notes, the Company, at its own expense, shall execute, and the Trustee is authorized to
authenticate and deliver, in accordance with the provisions of Section 2.2 of this Indenture, in exchange for such
temporary Notes a like aggregate principal amount of definitive Notes of the appropriate form and denomination.
Temporary Notes shall be appropriately legended.
SECTION 2.2. Certificate of Authentication.
Only such Notes as shall bear thereon a certificate of authentication substantially as set forth in
the Form of Note in Exhibit A-1, A-2 or A-3 hereto, as applicable, executed by the Trustee by manual signature
of one of its Responsible Officers, shall be entitled to the benefits of this Indenture or be valid or obligatory for
any purpose. Such certification by the Trustee upon any Note executed by or on behalf of the Company shall be
conclusive evidence that the Note so authenticated has been duly authenticated and delivered hereunder and that
the Holder thereof is entitled to the benefits of this Indenture.
SECTION 2.3.
Issue and Delivery of Notes.
The Company has, by a purchase agreement dated November 19, 2018 among the Company
and J.P. Morgan Securities LLC, SMBC Nikko Securities America, Inc., Morgan Stanley MUFG Securities Co.,
Ltd., Mizuho Securities USA LLC, and Merrill Lynch, Pierce, Fenner & Smith Incorporated as representatives
(the “Representatives”) of the initial purchasers named therein (the “Initial Purchasers”), agreed to issue
•
•
•
•
$1,000,000,000 aggregate principal amount of 3.800% Senior Notes due 2020,
$1,250,000,000 aggregate principal amount of 4.000% Senior Notes due 2021,
$1,500,000,000 aggregate principal amount of 4.400% Senior Notes due 2023 and
$1,750,000,000 aggregate principal amount of 5.000% Senior Notes due 2028.
The aggregate principal amount of the Rule 144A Global Notes and the Regulation S Global Notes issued on the
Closing Date shall be $5,500,000,000. The principal amount of any Rule 144A Global Note and any Regulation
S Global Note may from time to time be increased or decreased by adjustments made on the records of the
Trustee, as provided in Section 2.6. The Global Notes will be dated November 26, 2018.
The Company initially shall execute and deliver the applicable Global Notes to the Trustee, and
the Trustee shall, upon the order of the Company as provided in Section 2.1, authenticate the Global Notes and
deliver them upon the order of the Company on or about November 26, 2018 to a custodian for DTC, for credit to
the respective accounts of the Initial Purchasers (or to such other accounts as the Representatives, on behalf of
the Initial Purchasers, may direct).
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SECTION 2.4. Registrar, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the
register maintained in such office and in any other office or agency of the Company herein sometimes
collectively referred to as the “Notes Register”) in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Trustee is
hereby appointed “Notes Registrar” for the purpose of registering Notes and transfers of such Notes as herein
provided. The Company may at any time designate additional transfer agents or rescind the designation of any
transfer agent or approve a change in the office through which any transfer agent acts; provided, however, that
there shall at all times be a transfer agent in the Borough of Manhattan, The City of New York. There shall be
only one Notes Registrar. The Notes Register will show the amount of the Notes, the date of issue, all subsequent
transfers and changes of ownership in respect thereof and the names, tax identifying numbers (if relevant to a
specific holder), addresses of the holders of the Notes and any payment instructions with respect thereto (if
different from a holder’s registered address). The Trustee will also maintain a record which will include notations
as to whether the Notes have been paid or cancelled, and, in the case of mutilated, destroyed, stolen or lost Notes,
whether such Notes have been replaced. In the case of the replacement of any of the Notes, such records will
include notations of each Note so replaced, and the Note issued in replacement thereof. In the case of the
cancellation of any of the Notes, such records will include notations of each Note so cancelled and the date on
which such Note was cancelled. The Trustee shall upon written request make the Notes Register and such records
available, during normal office hours and on reasonable written notice, to the Company, or any Person authorized
by the Company in writing, for inspection and for the taking of copies thereof or extracts therefrom, and, at the
expense of the Company, the Trustee shall deliver to such Persons all lists of Holders of Notes, their addresses
and amounts of such holdings as they may request.
Except as otherwise specifically provided herein, (i) all references in this Indenture to the
Trustee shall be deemed to refer to the Trustee in its capacity as Trustee and Notes Registrar and (ii) every
provision of this Indenture relating to the conduct, rights or privileges of the Trustee or affecting the liability or
offering protection, immunity or indemnity to the Trustee shall be deemed to apply with the same force and
effect to the Trustee acting in its capacities as Notes Registrar and Paying Agent and to each agent of the Trustee
employed to act hereunder.
Subject to this Section 2.4, Section 2.5 and Section 2.6, at the option of the Holder, Notes may
be presented for exchange for other Notes, of any authorized denominations and of like tenor and aggregate
principal amount or for registration of transfer by the Holder thereof or his attorney duly authorized in writing
and with the form of transfer thereon duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed, at the office of the Trustee or at the office of any transfer agent
designated by the Company for such purpose. Whenever any Notes are so surrendered for exchange, the
Company shall execute and the Trustee shall authenticate and deliver the Notes which the Holder making the
exchange is entitled to receive.
A beneficial interest in any Rule 144A Global Note or Regulation S Global Note may be
exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a
Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the
exchange or transfer complies with the requirements of this Section 2.4, and if:
(a)
such exchange or transfer is effected pursuant to the Exchange Offer in accordance
with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or
the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a
Participating Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of any Company;
(b)
such transfer is effected pursuant to the Shelf Registration Statement in accordance
with the Registration Rights Agreement; or
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(c)
such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange
Offer Registration Statement in accordance with the Registration Rights Agreement.
If any such transfer is effected pursuant to subparagraph (a), (b) or (c) above at a time when an
Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Officer’s
Certificate from the Company in accordance with Section 1.2 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial
interests transferred pursuant to subparagraph (a), (b) or (c) above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to
Persons who take delivery thereof in the form of, a beneficial interest in a Rule 144A Global Note or Regulation
S Global Note.
Upon surrender for registration of transfer of any Note at the office or agency of the Company,
the Company shall execute and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Notes, of any authorized denominations and of like tenor and
aggregate principal amount.
All Notes issued upon any registration of transfer or exchange of Notes shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as
the Notes surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or for exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company duly
executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange of Notes, but the
Company may require payment by the Holder of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any registration of transfer or exchange of Notes.
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 Note (including any transfers between or among Participants or beneficial owners of
interests in any Global Note) 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.
SECTION 2.5. Global Notes.
Each Global Note authenticated under this Indenture shall be registered in the name of the
Depositary designated for such Global Note or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Note shall constitute a single Note for all purposes of this
Indenture.
Ownership of beneficial interests in a Global Note will be limited to persons who have
accounts with the Depositary (“Participants”) or persons who hold interests through such Participants. Upon the
issuance of a Global Note, the Depositary or its custodian shall credit, on its internal system, the respective
principal amount of the individual beneficial interests represented by such Global Note to the accounts of its
Participants. Ownership of beneficial interests in a Global Note shall be shown only on, and the transfer of such
ownership interests shall be effected only through, records maintained by the Depositary or its nominee (with
respect to interests of Participants) or by any such Participant (with respect to interests of persons held by such
Participants on their behalf). Payments, transfers, exchanges and other matters relating to beneficial interests in a
16
Global Note may be subject to various policies and procedures adopted by the Depositary from time to time.
None of the Company, the Trustee or any of their respective agents shall have any responsibility or liability for
any aspect of the Depositary’s or any Participant’s records, policies or procedures relating to, or for payments
made on account of, beneficial interests in a Global Note or for any other aspect of the relationship between the
Depositary and its Participants, or for maintaining, supervising or reviewing any records relating to such
beneficial interests.
Notwithstanding any provision of this Indenture or any Note to the contrary, no Global Note
may be exchanged in whole or in part for Notes registered, and no transfer of a Global Note in whole or in part
may be registered, in the name of any Person other than the Depositary or its nominee unless (i) the Depositary
notifies the Company that the Depositary is unwilling or unable to continue as depositary for a Global Note or
has ceased to be qualified to act as such as required by this Indenture and the Company does not appoint a
successor Depositary within 90 days after the Company receives such notice or becomes aware of such
non-qualification or (ii) there shall have occurred and be continuing an Event of Default with respect to the
Notes. All definitive Notes issued in exchange for a Global Note or any portion thereof shall be registered in such
names as the Depositary shall direct. In the event and for so long as definitive Notes are not issued to any owner
of a beneficial interest in a Global Note after the occurrence of one of the events set forth above, the Company
expressly acknowledges, with respect to the right of a Holder to pursue a remedy pursuant to Section 4.7 or
Section 4.8, the right of such owner to pursue such remedy with respect to the portion of the Global Note that
represents such owner’s Notes as if such definitive Notes had been issued.
Except in the circumstances referred to in the preceding paragraph, as long as the Depositary,
or its nominee, is the registered Holder of a Global Note, the Depositary or such nominee, as the case may be,
shall be considered the sole owner and Holder of such Global Note (and of the Notes represented thereby) for all
purposes under this Indenture and the Notes. Except in the circumstances referred to in the preceding paragraph,
owners of beneficial interests in a Global Note shall not be entitled to have such Global Note or any Notes
represented thereby registered in their names, shall not receive or be entitled to receive physical delivery of
definitive Notes in exchange therefor and shall not be considered the owners or Holders of such Global Note (or
any Notes represented thereby) for any purpose under this Indenture or the Notes. In addition, no beneficial
owner of an interest in a Global Note shall be able to transfer that interest except in accordance with the
Depositary’s applicable procedures (in addition to those under this Indenture referred to herein and, if applicable,
those of Euroclear and Clearstream). All payments of interest on, principal of, or Additional Amounts on, a
Global Note shall be made to or to the order of the Depositary or its nominee, as the case may be, as the Holder
thereof.
Every Note authenticated and delivered upon registration of transfer of, or in exchange for or in
lieu of, a Global Note or any portion thereof, whether pursuant to this Section 2.5, Section 2.6, Section 2.7 or
otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Note, unless such Note is
registered in the name of a Person other than the Depositary for such Global Note or a nominee thereof.
Neither the Trustee nor any Agent shall have any responsibility or liability for any actions
taken or not taken by the Depositary.
SECTION 2.6. Transfer Restrictions.
(a)
The Global Notes shall be subject to the restrictions on transfers (the “Transfer
Restrictions”) provided in the applicable legends (the “Legends”) required to be set forth on the face of each
Global Note as provided in Exhibits A-1 and A-2 hereto, and each Holder of a Global Note and each owner of a
beneficial interest in a Global Note, by its acceptance thereof, agrees to be bound by and comply with the
Transfer Restrictions, in each case unless compliance with the Transfer Restrictions shall be waived by the
Company in writing delivered to the Trustee.
The Transfer Restrictions shall cease and terminate with respect to any particular
Global Note upon receipt by the Company of evidence satisfactory to it (which may include an opinion of
(b)
17
independent counsel experienced in matters of United States federal securities law) that, as of the date of
determination, such Global Note (a) has been sold pursuant to an effective registration statement under the
Securities Act or (b) has been transferred (i) in a transaction satisfying all the requirements of Rule 903 or 904
(as applicable) of Regulation S under the Securities Act or (ii) pursuant to Rule 144 under the Securities Act. All
references in the preceding sentence to any regulation, rule or provision thereof shall be deemed also to refer to
any successor provisions thereof.
(c)
At the request of the Holder and upon the surrender of such Global Note to the Trustee
for exchange in accordance with the provisions of this Section 2.6, any Global Note as to which the Transfer
Restrictions shall have terminated in accordance with the preceding paragraph shall be exchanged for a new
Note, of like tenor and aggregate principal amount, but without the Legends.
(d)
As used in this Section 2.6, the term “transfer” encompasses any sale, pledge, transfer
or other disposition of any Notes referred to herein.
(e)
Rule 144A Global Note to Regulation S Global Note. If the owner of a beneficial
interest (an “Owner Transferor”) in a Rule 144A Global Note wishes at any time to transfer such beneficial
interest to a Person (an “Owner Transferee”) who wishes to take delivery thereof in the form of a beneficial
interest in a Regulation S Global Note, such transfer may be effected, subject to the Applicable Procedures, only
in accordance with the provisions of this paragraph (e). “Applicable Procedures” means, with respect to any
transfer of a beneficial interest in a Global Note, the rules and procedures of DTC, Euroclear and Clearstream to
the extent the same are applicable to such transfer and shall be complied with by any Holder or any party which
has a beneficial interest in a Global Note; provided, however, the Trustee shall not be responsible for determining
any compliance with such rules and procedures. Upon receipt by the Trustee of (1) written instructions given in
accordance with the Applicable Procedures from a Participant whose account is to be debited (a “Participant
Transferor”) with respect to the Rule 144A Global Note directing the Trustee to credit or cause to be credited to
a specified account of another Participant (a “Participant Transferee”) a beneficial interest in a Regulation S
Global Note in a principal amount equal to that of the beneficial interest in the Rule 144A Global Note to be so
transferred (the “Rule 144A Global Transferred Amount”), (2) a written order given in accordance with the
Applicable Procedures containing information regarding the account of the Participant Transferee to be credited
with, and the account of the Participant Transferor to be debited for, the Rule 144A Global Transferred Amount
and (3) a certificate in substantially the form set forth in Exhibit B hereto given by the Owner Transferor stating
that the transfer has been made pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S under
the Securities Act, the Trustee shall instruct DTC to reduce the principal amount of the Rule 144A Global Note,
and to increase the principal amount of the Regulation S Global Note, by the Rule 144A Global Transferred
Amount, and to credit or cause to be credited to the account of the Participant Transferee a beneficial interest in
the Regulation S Global Note, and to debit or cause to be debited to the account of the Participant Transferor a
beneficial interest in the Rule 144A Global Note, in each case having a principal amount equal to the Rule 144A
Global Transferred Amount.
(f)
Regulation S Global Note to Rule 144A Global Note. If an Owner Transferor wishes at
any time to transfer a beneficial interest in a Regulation S Global Note to an Owner Transferee who wishes to
take delivery thereof in the form of a beneficial interest in a Rule 144A Global Note, such transfer may be
effected, subject to the Applicable Procedures, only in accordance with this Section 2.6(f). Upon receipt by the
Trustee of (1) written instructions given in accordance with the Applicable Procedures from the Participant
Transferor, directing the Trustee to credit or cause to be credited to a specified account of a Participant
Transferee a beneficial interest in a Rule 144A Global Note in a principal amount equal to that of the beneficial
interest in the Regulation S Global Note to be so transferred (the “Regulation S Global Transferred Amount”),
(2) a written order given in accordance with the Applicable Procedures containing information regarding the
account of the Participant Transferee to be credited with, and the account of the Participant Transferor to be
debited for, the Regulation S Global Amount, and (3) if the transfer is prior to or on the 40th day after the later of
the commencement of the offering of the Notes and the issue date of the Notes, a certificate in substantially the
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form set forth in Exhibit C hereto given by the Owner Transferor stating (A) that the Person transferring such
interest in a Regulation S Global Note (i) reasonably believes that the Person acquiring such interest in a Rule
144A Global Note is a Qualified Institutional Buyer purchasing for its own account (or for the account of one or
more Qualified Institutional Buyers over which account it exercises sole investment discretion), (ii) has notified
such Person of the transfer restrictions applicable to the Global Notes, and (B) the transfer is in accordance with
any applicable securities laws of any state of the United States or any other applicable jurisdiction, the Trustee
shall instruct DTC to reduce the principal amount of the Regulation S Global Note, and to increase the principal
amount of the Rule 144A Global Note, by the Regulation S Global Transferred Amount, and to credit or cause to
be credited to the account of the Participant Transferee a beneficial interest in the Rule 144A Global Note, and to
debit or cause to be debited to the account of the Participant Transferor a beneficial interest in the Regulation S
Global Note, in each case having a principal amount equal to the Regulation S Global Transferred Amount.
SECTION 2.7. Mutilated, Destroyed, Lost and Stolen Notes.
If any mutilated Note is surrendered to the Trustee, the Company shall execute, and the Trustee
shall authenticate and deliver in exchange therefor, a new Note of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of
the destruction, loss or theft of any Note and (ii) indemnity satisfactory to them to save each of them and any of
their agents harmless, from any losses or claims incurred in connection with the issuance of a new Note, then, in
the absence of notice to the Company or the Trustee that such Note has been acquired by a bona fide purchaser,
the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Note, a new Note of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become or is about to become
due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section 2.7, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section 2.7 in exchange for any mutilated Note or in
lieu of any destroyed, lost or stolen Note shall constitute an original contractual obligation of the Company,
whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly
issued hereunder.
The provisions of this Section 2.7 are exclusive and shall preclude (to the extent lawful) all
other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen
Notes.
SECTION 2.8. Persons Deemed Owners.
Prior to due presentment of a Note 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 Note is registered as the
owner of such Note for the purpose of receiving payment of principal of and any interest on such Note and for all
other purposes whatsoever, whether or not such Note 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. In considering the interests of the
Holders of Notes while title to the Notes is registered in the name of a nominee of the Depositary, the Trustee
may refer to any information made available to it by the Depositary as to the identity (either individually or by
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category) of its Participants or persons who hold interests through such Participants with entitlements to Notes
and may consider such interests as if such accountholders were the Holders of the Notes. For the purposes of
enforcement of the provisions of this Indenture against the Trustee, the persons named in a certificate of the
Holder of any Global Note in respect of which a global certificate is issued shall be recognized as the
beneficiaries of this Indenture, to the extent of the principal amounts of their interests in the Notes set out in the
certificate of the Holder, as if they were themselves the Holders of the Notes in such principal amounts.
SECTION 2.9. Cancellation.
All Notes surrendered for payment, redemption, registration of transfer or exchange shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by
it. The Company may at any time deliver to the Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the
Trustee (or to any other Person for delivery to the Trustee) for cancellation any Notes previously authenticated
hereunder which the Company has not issued and sold, and all Notes so delivered shall be promptly canceled by
the Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this
Section 2.9, except as expressly permitted by this Indenture. All canceled Notes (and all Notes paid in full at final
maturity thereof) held by the Trustee shall be disposed of in accordance with the Trustee’s customary practices.
SECTION 2.10.
Japanese Withholding Taxes.
(a)
In compliance with Japanese tax laws and the practices of tax authorities in Japan, in
respect of any interest payment on the Notes issued in global or book-entry form pursuant to this Indenture or
any supplemental indenture hereto, any Paying Agent shall act in accordance with the procedures and forms set
out in the DTC Procedures if DTC is acting as clearing organization with respect to the Notes or with respect to
depositary interests representing such Notes, or in accordance with such other similar procedures as may be
established by another clearing organization. Except as otherwise provided in this Indenture, any such Paying
Agent shall be responsible only for performing such services as are specifically provided for in the DTC
Procedures or such other procedures actually known by the Paying Agent, as applicable and as may be amended
or modified and communicated to the Paying Agent from time to time. Any such Paying Agent and the Company
may rely on the information provided in the claim for exemption from Japanese withholding taxes and other
documentation in the absence of actual knowledge to the contrary. If any interest payment on a Note is due to be
made hereunder, and if and so long as payments of interest (if any) by the Company to any Paying Agent may be
made without withholding or deduction for or on account of Japanese tax only upon receipt of Tax
Documentation, the relevant Paying Agent at the direction of the Company, shall (i) accept delivery of the
required Tax Documentation from the clearing organization (or Holders of the Notes, if definitive Notes have
been issued); (ii) provide to the Company any required confirmations of information available to it; and
(iii) deliver such Tax Documentation to, or on the written order of, the Company via facsimile no later than two
Business Days after the Paying Agent has received such Tax Documentation, followed by first class mail or
express courier at the address stipulated in Section 1.5, for filing with the relevant Japanese district tax office.
Any such Paying Agent may rely on the information provided in Tax Documentation (including, where relevant,
supporting documentation) in the absence of actual knowledge that such information is incorrect.
(b)
If a Holder of the Notes or the holder of a depositary interest representing the Notes
satisfies the requirements for claiming an exemption from Japanese withholding tax after the date on which an
amount in respect of such tax is withheld and before the date on which the tax is actually paid to the Japanese tax
authorities, then the Company or the Paying Agent acting at the direction of the Company may, to the extent
reasonably practicable, repay the amount withheld (after deduction of reasonable costs, including amounts in
respect of changes in foreign exchange rates) to the Holder.
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SECTION 2.11.
Japanese Withholding Tax Legend.
Global Note shall bear the following legend relating to Japanese withholding tax:
Each Global Note and each definitive Note issued for exchange for a beneficial interest in the
“INTEREST PAYMENTS ON THIS NOTE GENERALLY WILL BE SUBJECT TO
JAPANESE WITHHOLDING TAX UNLESS IT IS ESTABLISHED THAT THIS NOTE IS HELD BY OR
FOR THE ACCOUNT OF A BENEFICIAL OWNER THAT IS (I) FOR JAPANESE TAX PURPOSES,
NEITHER AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION, NOR AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A PERSON HAVING A SPECIAL RELATIONSHIP WITH THE COMPANY AS DESCRIBED IN
ARTICLE 6, PARAGRAPH (4) OF THE ACT ON SPECIAL MEASURES CONCERNING TAXATION OF
JAPAN (ACT NO. 26 OF 1957, AS AMENDED) (THE “ACT ON SPECIAL TAXATION MEASURES”) (A
“SPECIALLY-RELATED PERSON OF THE COMPANY”),
(II) A JAPANESE FINANCIAL
INSTITUTION OR A JAPANESE FINANCIAL INSTRUMENTS BUSINESS OPERATOR DESIGNATED IN
ARTICLE 3-2-2, PARAGRAPH (28) OF THE CABINET ORDER (CABINET ORDER NO. 43 OF 1957, AS
AMENDED) RELATING TO THE ACT ON SPECIAL TAXATION MEASURES WHICH COMPLIES WITH
THE REQUIREMENT FOR TAX EXEMPTION UNDER ARTICLE 6, PARAGRAPH (9) OF THE ACT ON
SPECIAL TAXATION MEASURES OR (III) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION
OR A FINANCIAL INSTRUMENTS BUSINESS OPERATOR, ETC. DESCRIBED IN ARTICLE 3-3,
PARAGRAPH (6) OF THE ACT ON SPECIAL TAXATION MEASURES WHICH HAS RECEIVED SUCH
PAYMENTS THROUGH A PAYMENT HANDLING AGENT IN JAPAN AS DESCRIBED IN PARAGRAPH
(1) OF SAID ARTICLE AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER
THAT PARAGRAPH.
INTEREST PAYMENTS ON THIS NOTE TO AN INDIVIDUAL RESIDENT OF JAPAN,
TO A JAPANESE CORPORATION NOT DESCRIBED IN THE PRECEDING PARAGRAPH, OR TO AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A SPECIALLY-RELATED PERSON OF THE COMPANY WILL BE SUBJECT TO JAPANESE
INCOME TAX AT THE TIME OF SUCH INTEREST PAYMENTS.”
SECTION 2.12. Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with the Registration Rights
Agreement, the Company shall issue and, upon receipt of an authentication order in the form of an Officer’s
Certificate of the Company in accordance with Section 1.2 hereof, the Trustee shall authenticate (i) one or more
Unrestricted Global Notes in an aggregate principal amount equal to the principal amount specified by the
Company of the beneficial interests in the Rule 144A Global Notes or the Regulation S Global Notes of the same
series tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not
Participating Broker-Dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they
are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and
(ii) unrestricted definitive Notes in an aggregate principal amount equal to the principal amount of the definitive
Notes of the same series tendered for acceptance by Persons that certify in the applicable Letters of Transmittal
that (x) they are not Participating Broker-Dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the
Exchange Offer, and make any other representations that are necessary for the Company to comply with
applicable laws and regulations, including the Companies Act of Japan and the Financial Instruments and
Exchange Act of Japan, or that are necessary for the Exchange Notes to qualify for an exemption from Japanese
withholding tax. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Rule 144A Global Note and Regulation S Global Note to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and mail to the Persons designated by the Holders
of definitive Notes so accepted unrestricted definitive Notes in the applicable principal amount. Any Notes that
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remain outstanding after the consummation of the Exchange Offer, and Exchange Notes issued in connection
with the Exchange Offer, shall be treated as a single class of securities under this Indenture.
ARTICLE III
SATISFACTION AND DISCHARGE
SECTION 3.1.
Satisfaction and Discharge of Indenture.
The Company may terminate all of its obligations under this Indenture (except as to any
surviving rights of registration of transfer or exchange of Notes herein expressly provided for), and the Trustee,
at the expense of the Company, shall execute instruments in form and substance satisfactory to the Trustee and
the Company acknowledging satisfaction and discharge of this Indenture, when
(1)
either
(A)
all Notes theretofore authenticated and delivered (other than Notes which have been
mutilated, destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.7)
have been delivered to the Trustee for cancellation; or
(B)
(i)
(ii)
all such Notes not theretofore delivered to the Trustee for cancellation
have become due and payable,
will become due and payable at their maturity date within one year, or
(iii)
are to be called for redemption pursuant to Section 10.1, Section 10.2, Section 10.3,
Section 10.4 or Section 10.5 within one year under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the
Trustee as trust funds in trust for such purpose money in an amount sufficient to pay and discharge the
entire indebtedness on such Notes not theretofore delivered to the Trustee for cancellation, for principal
and interest to the date of such deposit (in the case of Notes which have become due and payable) or to
the Redemption Date, as the case may be;
(2)
the Company has paid or caused to be paid or made provision satisfactory to the
Trustee for the payment of all other sums payable hereunder by the Company; and
(3)
the Company has delivered to the Trustee an Officer’s Certificate and an Opinion of
Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the
Company to the Trustee under Section 4.6, Section 5.6 and Section 9.3, any obligations of the Trustee under
Section 3.2 and any rights of registration of transfer, exchange or replacement of Notes provided in Section 2.4,
Section 2.5, Section 2.6, Section 2.7, or Section 9.2 and any rights to Additional Amounts pursuant to Section 9.5
shall survive such satisfaction and discharge.
SECTION 3.2. Application of Trust Money.
All money deposited with the Trustee pursuant to Section 3.1 shall be held in trust and applied
by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through
any Paying Agent as the Trustee may determine, to the Persons entitled thereto, of the principal and any interest
(or Additional Amounts, if any) for whose payment such money has been deposited with the Trustee.
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ARTICLE IV
REMEDIES OF THE TRUSTEE AND HOLDERS ON EVENT OF DEFAULT
SECTION 4.1. Event of Default. Unless otherwise established hereunder or by
any applicable supplemental indenture, an “Event of Default” with respect to the Notes shall mean any one of
the following events which shall have occurred and be continuing (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any administrative or governmental body):
1.
2.
3.
4.
5.
default shall be made for more than seven days in the payment of principal or for more
than 30 days in the payment of interest, or additional interest, if any, in respect of any
of the Notes; or
the Company defaults in the performance or observance of any covenant, condition or
provision contained in the Notes or in this Indenture for a period of 60 days after
written notification requesting such default to be remedied by the Company shall first
have been given to the Company (and to the Trustee in the case of notice by the
Holders referred to below) by the Trustee or Holders of at least 25% in principal
amount of the then Outstanding Notes (such notification must specify the Event of
Default, demand that it be remedied and state that the notification is a “Notice of
Default” hereunder); or
the Company shall have become bound as a consequence of a default by it in its
obligations in respect of any indebtedness for borrowed moneys having a total
principal amount then outstanding of at least $50,000,000 (or its equivalent in any
other currency or currencies) contracted or incurred by it prematurely to repay the
same, or the Company shall have defaulted in the repayment of any such indebtedness
contracted or incurred by it at the later of the maturity thereof or the expiration of any
applicable grace period therefor, or the Company shall have failed to pay when
properly called upon to do so, and after the expiration of any applicable grace period,
any guarantee contracted or incurred by it of any such indebtedness in accordance
with the terms of any such guarantee; provided, however, that, prior to any judgment,
if any such default under such indebtedness shall be cured by the Company, or be
waived by the holders of such indebtedness, in each case as may be permitted under
the terms of such indebtedness, then the Event of Default hereunder by reason of such
default shall be deemed likewise to have been thereupon cured or waived; or
a final and non-appealable order of a court of competent jurisdiction shall be made or
an effective resolution of the Company shall be passed for the winding-up or
dissolution of the Company except for the purposes of or pursuant to a consolidation,
amalgamation, merger or reconstruction under which the continuing corporation or the
corporation formed as a result thereof effectively assumes the entire obligations of the
Company under this Indenture in relation to the Notes; or
an encumbrancer shall have taken possession, or a trustee or receiver shall have been
appointed, in bankruptcy, civil rehabilitation, reorganization or insolvency of the
Company, of all or substantially all of its assets and undertakings and such possession
or appointment shall have continued undischarged and unstayed for a period of 60
days; or
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6.
7.
8.
the Company shall stop payment (within the meaning of the bankruptcy law of Japan)
or (otherwise than for the purposes of such a consolidation, amalgamation, merger or
reconstruction as is referred to in paragraph 4 above) shall cease to carry on business
or shall be unable to pay its debts generally as and when they fall due; or
a decree or order by any court having jurisdiction shall have been issued adjudging the
Company bankrupt or insolvent, or approving a petition seeking with respect to the
Company reorganization or
rehabilitation,
reorganization or insolvency law of Japan, and such decree or order shall have
continued undischarged and unstayed for a period of 60 days; or
liquidation under bankruptcy, civil
initiate or consent
the Company shall
to proceedings relating to itself under
bankruptcy, civil rehabilitation, reorganization or insolvency law of Japan or shall
make a conveyance or assignment for the benefit of, or shall enter into any
composition with, its creditors generally.
SECTION 4.2. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default with respect to the Notes occurs and is continuing, then in every such case (other than an Event
of Default specified in Section 4.1(7) or Section 4.1(8)) the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Notes of each affected series may declare the principal amount of all the
Notes of such affected series to be due and payable immediately, by a notice in writing to the Company (and to
the Trustee if given by Holders), and upon any such declaration such principal amount together with all accrued
and unpaid interest, and additional interest, if any, shall become immediately due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising under Section 4.1(7)
or Section 4.1(8) with respect to the Company, the principal of and interest on all outstanding notes will become
immediately due and payable without further action or notice. In addition, the Trustee shall have no obligation to
accelerate the Notes if, in the reasonable judgment of the trustee, acceleration is not in the best interest of the
holders.
At any time after such a declaration of acceleration with respect to the Notes has been made
and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in
this Article provided, the Holders of a majority in principal amount of the Outstanding Notes, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its consequences if
(1)
the Company has paid or deposited with the Trustee a sum sufficient to pay
(A)
all overdue interest on all Notes,
(B)
the principal of (and premium, if any, on) any Notes which have become due otherwise
than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor
in such Notes,
(C)
to the extent that payment of such interest is lawful, interest upon overdue interest at
the rate or rates prescribed therefor in such Notes, and
(D)
all sums paid or advanced by the Trustee hereunder and the compensation and the
reasonable expenses, disbursements and advances of the Trustee, its agents and counsel; and
(2)
all Events of Default with respect to Notes, other than the non-payment of the principal
of Notes which have become due solely by such declaration of acceleration, have been cured or waived
as provided in Section 4.13.
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No such rescission shall affect any subsequent default or impair any right consequent thereon.
SECTION 4.3. Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if
(1)
default is made in the payment of any interest on any Note when such interest becomes
due and payable and such default continues for a period of 30 days, or
(2)
default is made in the payment of the principal of (or premium, if any, on) any Note at
the maturity thereof and such default continues for a period of seven days,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such
Notes, the whole amount then due and payable on such Notes for principal and any premium and interest and, to
the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and
premium and on any overdue interest, at the rate or rates prescribed therefor in such Notes, if any, and, in
addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection,
including the compensation and the reasonable expenses, disbursements and advances of the Trustee, its agents
and counsel.
If an Event of Default with respect to the Notes occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the Holders of Notes by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
SECTION 4.4. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any other obligor upon the
Notes), its property or its creditors, the Trustee shall be entitled and empowered to institute any action or
proceedings at law or in equity for the collection of the sums due and unpaid, and may prosecute any such action
or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the
Company upon the Notes and collect in the manner provided by law out of the property of the Company,
wherever situated, the monies adjudged or decreed to be payable. In particular, the Trustee shall be authorized to
collect and receive any moneys or other property payable or deliverable on 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 it for the compensation and the reasonable expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section 5.6.
No provision of this Indenture shall be deemed to authorize 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 Notes or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim
of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote
for the election of a trustee in bankruptcy or similar official and be a member of a creditors’ or other similar
committee.
SECTION 4.5. Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the Notes may be prosecuted and
enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of
an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable
benefit of the Holders of the Notes in respect of which such judgment has been recovered.
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SECTION 4.6. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of
principal or any premium or interest, upon presentation of the Notes and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any predecessor Trustee under
Section 5.6; and
SECOND: To the payment of the amounts then due and unpaid for principal of and interest on
the Notes (including Additional Amounts, if any) in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on
such Notes for principal and interest, respectively.
SECTION 4.7. Limitation on Suits.
Other than the right to institute a suit for the enforcement of the payment of principal of, or
interest on (including, in each case, any Additional Amounts, if applicable), any Notes after the applicable due
date specified in the Notes, no Holder of any Note shall have any right to institute any proceeding with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such
Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not
less than 25% in aggregate principal amount of the Notes of each affected series shall have made written request
to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee; (c) such
Holder or Holders have offered to the Trustee indemnity reasonably satisfactory to it against the costs, expenses
and liabilities 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) no direction
inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of
a majority in aggregate principal amount of the Notes of each affected series.
No one or more of such Holders shall have any right in any manner whatsoever by virtue of, or
by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such
Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of
such Holders.
SECTION 4.8. Right of Holders to Receive Principal and Interest.
Notwithstanding any other provision of this Indenture and any provision of any Note, the right
of any Holder to receive payment of the principal of, and interest on, such Note on or after the respective due
dates expressed in such Note (or, in the case of redemption, on the Redemption Date), or to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.
SECTION 4.9. 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 Trustee and the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
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SECTION 4.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect
to the replacement or payment of mutilated,
destroyed, lost or stolen Notes in Section 2.7 and as provided in Section 4.7, 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.
SECTION 4.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Notes to exercise any right or
remedy accruing upon any Event of Default or otherwise 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 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.
SECTION 4.12. Control by Holders.
The Holders of a majority in principal amount of the Outstanding Notes shall have the right to
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, provided that
(1)
(2)
such direction shall not be in conflict with any rule of law or with this Indenture,
the action so directed would not be unjustly prejudicial to the Holders not taking part in
such direction or would involve the Trustee in personal liability,
(3)
the Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction, and
(4)
the Trustee shall not be advised by counsel that the action or proceeding so directed
may not lawfully be taken, and
provided further that the Trustee shall be under no obligation to determine whether any such
direction shall be in such conflict or so unjustly prejudicial to the Holders not taking part in such direction.
Nothing in this Indenture shall impair the right of the Trustee in its discretion to take any action
deemed proper by the Trustee and which is not inconsistent with such direction by Holders of Notes.
SECTION 4.13. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount of the Outstanding Notes
of the relevant series may, on behalf of the Holders of all the Notes of such series, waive any past default
hereunder, except a default
(1)
in the payment of the principal of or interest on any Note or any Additional Amounts
payable in respect thereof, or
(2)
in respect of a covenant or provision hereof which under Article VIII cannot be
modified or amended without the consent of the Holder of each Outstanding Note affected thereby.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose under this Indenture, but no such waiver shall
extend to any subsequent or other default or impair any right consequent thereon.
27
SECTION 4.14. Trustee to Give Notice of Default.
The Trustee shall give to the Holders, in the case of Notes registered in the Notes Register as
the names and addresses of such Holders appear on the Notes Register, notice by mail (or by other means
provided in a supplemental indenture hereto, pursuant to a Board Resolution and set forth in an Officer’s
Certificate under which the Notes are issued or in the form of the Notes) of all defaults known to the Trustee
which have occurred with respect to the Notes, such notice to be transmitted within 90 days after the occurrence
thereof, unless such defaults shall have been cured before the giving of such notice (the term “default” or
“defaults” for the purposes of this Section 4.14 being hereby defined to mean any event or condition which is, or
with notice or lapse of time or both would become, an Event of Default).
SECTION 4.15. 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, suffered or omitted by it as Trustee, a court may require any party
litigant in such suit to file an undertaking to pay the costs of such suit, and may assess reasonable costs, including
reasonable attorneys’ fees and expenses, against any such party litigant; provided that no court shall require such
an undertaking or to make such an assessment in any suit instituted by the Company, the Trustee or any Holder
or group of Holders holding in aggregate more than 10% in aggregate principal amount of the Outstanding Notes
of a series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or
interest on any Outstanding Note on or after the due date expressed in such Note.
SECTION 4.16. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it will not at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE V
THE TRUSTEE
SECTION 5.1. Certain Duties and Responsibilities.
(a)
Except during the continuance of an Event of Default,
(1)
the Trustee 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; and
(2)
in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any
such certificates or opinions which by any provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of
mathematical calculations stated therein).
In case an Event of Default has occurred and is continuing with respect to the Notes,
the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of
(b)
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care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that
(c)
No provision of this Indenture shall be construed to relieve the Trustee from liability
(1)
Section 5.1;
this paragraph (c) shall not be construed to limit the effect of paragraph (a) of this
(2)
the Trustee shall not be liable for any error of judgment made in good faith by a
Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent
facts;
(3)
the Trustee shall not be liable with respect to any action taken, or omitted to be taken
by it, in good faith in accordance with the direction of the Holders of a majority in principal amount of
the Outstanding Notes 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 with respect to the Notes;
(4)
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; and
(5)
The provisions of this Section 5.1 are in furtherance of and subject to Sections 315 and
316 of the Trust Indenture Act.
SECTION 5.2. Certain Rights of Trustee.
In furtherance of and subject to the Trust Indenture Act and subject to Section 5.1:
(1)
the Trustee may rely and shall be protected in acting or refraining from acting upon any
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 party or parties;
(2)
any request or direction of the Company mentioned herein shall be sufficiently
evidenced by a Company Request or Company Order, and any resolution of the Board of Directors shall
be sufficiently evidenced by a Board Resolution;
(3)
whenever in the administration of this Indenture the Trustee shall deem it desirable that
a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely
upon an Officer’s Certificate;
(4)
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 by it hereunder in good faith and in reliance thereon;
(5)
the Trustee shall be under no obligation to exercise any of the rights or powers vested
in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against
the costs, expenses and liabilities which might be incurred by it in compliance with such request or
direction;
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(6)
the Trustee shall not be bound to make any investigation into the facts or matters stated
in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or 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 to examine the books, records and premises of the Company, personally or by agent or attorney,
it being understood that all reasonable expenses incurred in connection with such inquiry or
investigation shall be borne by the Company and the Trustee shall incur no liability or additional
liability of any kind by reason of such inquiry or investigation;
(7)
the Trustee may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(8)
the Trustee shall not be deemed to have or charged with knowledge of any default or
Event of Default unless (a) a Responsible Officer of the Trustee shall have actual knowledge of such
default or Event of Default or (b) written notice of such default or Event of Default shall have been
given to a Responsible Officer of the Trustee by the Company or by any Holder of such Notes, and such
notice references this Indenture and the Notes;
(9)
the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it
in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers
conferred upon it by this Indenture;
(10)
the Trustee shall not be required to give any bond or surety in respect of the
performance of its powers and duties hereunder;
(11)
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
(12)
the Trustee may request that the Company deliver a certificate setting forth the names
of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this
Indenture.
SECTION 5.3. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except
the Trustee’s certificates of
authentication, shall be taken as the statements of the Company, and the Trustee does not assume any
responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes. The Trustee shall not be accountable for the use or application by the Company of the
Notes or the proceeds thereof.
SECTION 5.4. May Hold Notes.
The Trustee, any Paying Agent, the Notes Registrar or any other agent of the Trustee or the
Company, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise
deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Notes Registrar
or such other agent.
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SECTION 5.5. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from other funds except to
the extent required by law. The Trustee shall be under no liability for interest on or investment of any money
received by it hereunder except as otherwise agreed in writing with the Company.
SECTION 5.6. Compensation and Reimbursement.
The Company agrees
(1)
to pay to the Trustee from time to time such compensation for all services rendered by
it hereunder in such amounts as shall have been agreed upon in writing by the Company and the Trustee
from time to time (which compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2)
except as otherwise expressly provided herein, to reimburse the Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense, disbursement or
advance as may be attributable to its negligence, bad faith or willful misconduct; and
(3)
to indemnify the Trustee for, and to defend and hold it harmless against, any loss,
liability or expense arising out of or in connection with the acceptance or administration of this trust or
trusts hereunder, including taxes (other than taxes based upon or determined by the income of the
Trustee) and the costs and expenses of defending itself against any claim (whether asserted by the
Company, a Holder or any other Person) or liability in connection with the exercise or performance of
any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence, bad faith or willful misconduct.
Notwithstanding anything to the contrary herein, under no circumstances will the Trustee or
any Agent be liable to the Company or any other party to this Indenture for any special, indirect, punitive or
consequential loss or damage of any kind whatsoever (inter alia, being loss of business, goodwill, opportunity or
profit); in each case however caused or arising and whether or not foreseeable, even if the Trustee or the Agent
has been advised of the possibility of such loss or damage and regardless of whether the claim for loss or damage
is made in negligence, for breach of contract or otherwise.
The obligations of the Company to the Trustee under the provisions of this Section 5.6 shall
survive the resignation or removal of the Trustee, the termination of this Indenture and the payment in full of the
Notes issued hereunder.
SECTION 5.7. Corporate Trustee Required; Eligibility.
There shall at all times be one (and only one) Trustee hereunder. Each Trustee (including any
successor Trustee appointed pursuant to Section 5.8 below) shall be a Person that has a combined capital and
surplus of at least $50,000,000 and which is eligible for appointment as trustee in accordance with the provisions
of Section 310(a) of the Trust Indenture Act. If any such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this
Section 5.7, the combined capital and surplus of such Person shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 5.7, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
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SECTION 5.8. Resignation and Removal; Appointment of Successor.
No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant
to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance
with the applicable requirements of Section 5.9.
The Trustee may resign at any time by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 5.9 shall not have been delivered to the
Trustee within 30 days after the giving of such notice of resignation (or within 30 days of the Trustee receiving a
notice of removal pursuant to the provisions below), the resigning (or removed) Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect to the Notes.
The Trustee may be removed at any time by Act of the Holders of a majority in principal
amount of the Outstanding Notes, delivered to the Trustee and to the Company.
If at any time:
(1)
the Trustee shall fail to comply with the provisions Section 310(b) of the Trust
Indenture Act and shall fail to resign after written request therefor by the Company or any Holder,
(2)
the Trustee shall cease to be eligible in accordance with the provisions of
Section 310(a) of the Trust Indenture Act and shall fail to resign after written request therefor by the
Company or by any Holder, or
(3)
the Trustee shall become incapable of acting or shall be adjudged bankrupt or insolvent
or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (A) the Company may remove the Trustee or (B) subject to Section 315(e) of the Trust
Indenture Act, any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the
Trustee with respect to all Notes and the appointment of a successor Trustee.
If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall
occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee with respect to the Notes and shall comply with the applicable requirements of Section 5.7. If a
successor Trustee with respect to the Notes shall be appointed by Act of the Holders of a majority in principal
amount of the Outstanding Notes delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment
in accordance with the applicable
requirements of Section 5.9, become the successor Trustee with respect to the Notes and supersede the successor
Trustee appointed by the Company. If no successor Trustee with respect to the Notes shall have been so
appointed by the Company or the Holders and accepted appointment in the manner required by Section 5.9
within one year after such resignation, removal or incapability, or the occurrence of such vacancy, any Holder
who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee.
The Company shall give notice, or shall cause the Notes Registrar to give notice, of each
resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders of Notes
in the manner provided in Section 1.6. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
SECTION 5.9. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument
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accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all
the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring
to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer
and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.
Upon request of any such successor Trustee,
the Company 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 first or second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time of such acceptance such
successor Trustee shall be qualified and eligible under this Article.
SECTION 5.10. Merger, Conversion, Consolidation or Succession to
Business.
Any bank or trust company into which the Trustee may be merged or converted or with which
it may be consolidated, or any bank or trust company resulting from any merger, conversion or consolidation to
which the Trustee shall be a party, or any bank or trust company succeeding to all or substantially all the
corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such bank or
trust company shall be otherwise qualified and eligible under this Article, without the execution or filing of any
paper or any further act on the part of any of the parties hereto. In case any Notes shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger, conversion, consolidation or sale to
such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same
effect as if such successor Trustee had itself authenticated such Notes.
SECTION 5.11. Conflicting Interest.
The Trustee for the Notes shall be subject to the provisions of Section 310(b) of the Trust
Indenture Act during the period of time required thereby. Nothing herein shall prevent the Trustee from filing
with the Commission the application referred to in the penultimate paragraph of Section 310(b) of the Trust
Indenture Act. In determining whether the Trustee has a conflicting interest as defined in Section 310(b) of the
Trust Indenture Act with respect to the Notes of any series, there shall be excluded Notes of any particular series
of Notes other than that series.
ARTICLE VI
HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 6.1. Company to Furnish Trustee Names and Addresses of
Holders.
The Company will furnish or cause the Notes Registrar to furnish to the Trustee
(1)
not later than 15 days after each Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders of Outstanding Notes as of such Record
Date, and
(2)
at such other times as the Trustee may reasonably request in writing, within 30 days
after the receipt by the Company of any such request, a list of similar form and content as of a date not
more than 15 days prior to the time such list is furnished;
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provided, however, that if and so long as the Trustee shall be Notes Registrar, no such list need be furnished.
SECTION 6.2. Preservation of Information; Communications to Holders.
The Trustee shall preserve, in as current a form as is reasonably practicable, the names and
addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 6.1 and the
names and addresses of Holders received by the Trustee in its capacity as Notes Registrar. The Trustee may
destroy any list furnished to it as provided in Section 6.1 upon receipt of a new list so furnished.
Every Holder of Notes, by receiving and holding the same, agrees with the Company and the
Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by
reason of any disclosure of information as to names and addresses of Holders made pursuant to applicable law.
ARTICLE VII
MERGER, CONSOLIDATION, SALE OR DISPOSITION
SECTION 7.1. Company May Consolidate, Etc., Only on Certain Terms.
The Company may not merge or consolidate into any other Person (the Company not being the
continuing entity) or sell, lease or dispose of its properties and assets substantially as an entirety (including by
way of a corporate split (kaisha bunkatsu)), whether as a single transaction or a number of transactions, related or
not, to any Person unless (a) such Person assumes or succeeds the obligations of the Company under the all series
of Notes and this Indenture (and, if such Person is organized in a jurisdiction other than Japan, agrees to pay
additional amounts in respect of any taxes, duties, assessments or governmental charges of whatever nature
imposed or levied by or on behalf of the jurisdiction of such Person, or any authority therein or thereof having
power to tax, corresponding to the obligation to pay Additional Amounts pursuant to Section 9.5, substituting
such jurisdiction for references to “Japan”) and (b) after giving effect thereto, no Event of Default shall have
occurred and be continuing (such permitted transaction, a “Succession Event”).
In connection with any such Succession Event, the Company shall deliver to the Trustee an
Officer’s Certificate and an Opinion of Counsel, each stating that such Succession Event and, if a supplemental
indenture is required in connection with such transaction, such supplemental indenture, comply with this
Section 7.1 and that all conditions precedent in this Indenture provided for or relating to such transaction have
been complied with, and that this Indenture and the Notes are the legal, valid and binding obligation of such
succeeding Person, enforceable against such Person in accordance with their terms (subject to customary
exceptions).
SECTION 7.2.
Successor Substituted.
Upon any Succession Event in accordance with Section 7.1, such succeeding entity (the
“Successor Person”) formed by such Succession Event 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, and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the Notes.
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ARTICLE VIII
SUPPLEMENTAL INDENTURES
SECTION 8.1.
Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company and the Trustee, at any time and from time
to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:
(1)
to evidence the succession of another Person to the Company and the assumption by
any such successor of the covenants of the Company herein and in the Notes; or
(2)
to add to the covenants of the Company or to surrender any right or power herein
conferred upon the Company for the benefit of the Holders; or
(3)
Trustee; or
to evidence and provide for the acceptance of appointment hereunder by a successor
(4)
to cure any ambiguity, to correct or supplement any provision herein which may be
defective or inconsistent with any other provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture, provided that such action pursuant to this Clause
(4) shall not adversely affect the interests of the Holders of Notes in any material respect;
(5)
to make any other change that does not adversely affect the interests of the Holders of
the Notes in any material respect; or
(6)
to comply with requirements of the Commission in order to effect or maintain the
qualification hereof under the Trust Indenture Act.
SECTION 8.2.
Supplemental Indentures With Consent of Holders.
Modification and amendment of this Indenture and the Notes of any series may be made by the
Company and the Trustee with the written consent of the Holders of at least 66% in aggregate principal amount
of the Outstanding Notes of each affected series; provided, however, that no such modification or amendment
may, without the consent of the Holder of each Outstanding Note affected thereby:
(i)
change the maturity date of the principal or payment date of any interest or change any
obligation of the Company to pay any Additional Amounts,
(ii)
(iii)
reduce the principal amount of, or rate of interest on, any Note,
change the redemption date or price at which Notes are redeemed, including the
special mandatory redemption,
(iv)
(v)
affect the rights of Holders of less than all the Outstanding Notes,
change the place of payment where, or the coin or currency in which, any Note or
interest thereon is payable, or
(vi)
impair the right of a Holder to institute suit for the enforcement of any payment on or
with respect to any Note on or after the date when due;
provided, further, that no such modification may, without the consent of the Holders of all Notes of the affected
series Outstanding at the time, alter the respective percentages of Outstanding Notes necessary, pursuant to this
Indenture, to modify the terms of the Notes, waive past defaults or accelerate the payment of the principal
amount of the Notes.
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It shall not be necessary for any Act of Holders under this Section 8.2 to approve the particular
form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
SECTION 8.3. Execution of Supplemental Indentures.
In executing, or accepting the additional
indenture
permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall
receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated
to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or immunities under
this Indenture or otherwise.
trusts created by, any supplemental
SECTION 8.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all
purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be
bound thereby.
SECTION 8.5. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any supplemental indenture pursuant
to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company shall so determine, new Notes so modified
as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be
prepared and executed by the Company and such Notes may be authenticated and delivered by the Trustee in
exchange for Outstanding Notes.
SECTION 8.6. Conformity with the Trust Indenture Act.
Every supplemental
requirements of the Trust Indenture Act as then in effect.
indenture executed pursuant
to this Article 8 shall conform to the
ARTICLE IX
COVENANTS
SECTION 9.1. Payment of Principal, Interest and Additional Amounts.
The Company covenants and agrees that (a) it will duly and punctually pay the principal of and
interest on the Notes (and Additional Amounts, if any) in accordance with the terms of the Notes and this
Indenture and (b) it will pay all additional interest, if any, in the same manner on the dates and in the amounts set
forth in the Registration Rights Agreement. In the event the Company is required to pay additional interest
pursuant to the Registration Rights Agreement, the Company will provide written notice to the Trustee of the
Company’s obligation to pay additional interest promptly prior to the next interest payment date, which notice
shall set forth the amount of additional interest to be paid by the Company. The Trustee shall not at any time be
under any duty or responsibility to the Company or any Holders to determine whether any additional interest is
payable or the amount thereof.
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SECTION 9.2. Maintenance of Office or Agency.
So long as any of the Notes remain Outstanding, the Company will maintain in The City of
New York an office or agency where Notes may be presented or surrendered for payment, where Notes may be
surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company 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 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 Corporate Trust Office of the
Trustee. The Company hereby initially designates the office of the Paying Agent as specified in the Reverse of
Note as the office or agency for each such purpose.
The Company may also from time to time designate one or more other offices or agencies
where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in The City of New York for such purposes. The
Company 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.
With respect to any Global Note, and except as otherwise may be specified for such Global
Note as contemplated by Section 2.5, the Corporate Trust Office of the Trustee shall be the place of payment
where such Global Note may be presented or surrendered for payment or for registration of transfer or exchange,
or where successor Notes may be delivered in exchange therefor, provided, however, that any such payment,
presentation, surrender or delivery effected pursuant to the Applicable Procedures of the Depositary for such
Global Note shall be deemed to have been effected at the place of payment for such Global Note in accordance
with the provisions of this Indenture.
SECTION 9.3. Money for Notes Payments to Be Held in Trust.
Whenever the Company shall have one or more Paying Agents, it shall deposit or cause to be
deposited with a Paying Agent, a sum for value each due date sufficient to pay the principal of or interest (or
Additional Amounts, if any) on the Notes, such sum to be held in trust for the benefit of the Persons entitled to
such principal or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee in writing of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this
Section 9.3, that such Paying Agent will (1) hold all sums held by it for the payment of the principal of or interest
on Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, (2) give the Trustee prompt written notice of any default by the
Company (or any other obligor upon the Notes) in the making of any payment of principal or interest on the
Notes and (3) during the continuance of any default by the Company (or any other obligor upon the Notes) in the
making of any payment in respect of the Notes, upon the written request of the Trustee, forthwith pay to the
Trustee all sums held in trust by such Paying Agent for payment in respect of the Notes.
The Company may at any time, for the purpose of obtaining the satisfaction and discharge of
this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee
all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those
upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent in trust for the payment of the
principal of or interest or Additional Amounts (if applicable) on any Note and remaining unclaimed for two years
after such principal, interest or Additional Amounts have become due and payable and paid to the Trustee shall,
37
upon receipt of a Company Request, be paid by the Trustee or such Paying Agent to the Company and, to the
extent permitted by law, the Holder of such Note shall thereafter, as an unsecured general creditor, look only to
the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust
money shall thereupon cease.
SECTION 9.4.
Statement by Officers as to Default.
The Company shall deliver to the Trustee, reasonably promptly after the Company becomes
aware of the occurrence of (i) any Event of Default or an event which, with notice or the lapse or time or both,
would constitute an Event of Default or (ii) any default in the performance by the Company of any obligation
under the Notes or this Indenture, an Officer’s Certificate setting forth the details of such Event of Default or
default and the action which the Company proposes to take with respect thereto.
The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of
the Company ending after the date hereof or within 10 Business Days of any request by the Trustee, an Officer’s
Certificate of the Company, in substantially the form set forth in Exhibit D hereto, stating whether or not to the
knowledge of the signer thereof the Company is in default in the performance and observance of any of the
terms, provisions and conditions under this Indenture (without regard to any period of grace or requirement of
notice provided hereunder) and if the Company shall be in default specifying all such defaults and the nature and
status thereof of which the signer may have knowledge. As of the date hereof, the fiscal year of the Company
ends on March 31 of each calendar year.
SECTION 9.5. Additional Amounts.
All payments of principal and interest
in respect of the Notes shall be made without
withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied by or on behalf of Japan, or any authority thereof or therein having
power to tax (“Taxes”), unless such withholding or deduction is required by law or by the authority. In such
event, the Company shall pay such additional amounts (“Additional Amounts”) as will result in the receipt by
the Holders of such amounts as would have been received by them had no such withholding or deduction been
required, except that no such Additional Amounts shall be payable with respect to any Notes under any of the
following circumstances:
(i)
the Holder or beneficial owner of the Notes is an individual non-resident of Japan or a
non-Japanese corporation and is liable for such Taxes in respect of such Notes by reason of its
(A) having some present or former connection with Japan other than the mere holding of such Notes or
(B) being a person having a special relationship with the Company (a “specially-related person of the
Company”) as described in Article 6, paragraph (4) of the Act on Special Measures Concerning
Taxation of Japan (Act No. 26 of 1957, as amended) (together with the cabinet order thereunder
(Cabinet Order No. 43 of 1957, as amended), the “Act on Special Taxation Measures”);
(ii)
the Holder or beneficial owner of the Notes would otherwise be exempt from any such
withholding or deduction but fails to comply with any applicable requirement to provide Interest
Recipient Information (as defined below) or to submit a Written Application for Tax Exemption (as
defined below) to the relevant Paying Agent
to whom the relevant Notes are presented (where
presentation is required), or whose Interest Recipient Information is not duly communicated through the
relevant Participant (as defined below) and the relevant international clearing organization to such
Paying Agent;
(iii)
the Holder or beneficial owner of the Notes is for Japanese tax purposes treated as an
individual resident of Japan or a Japanese corporation (except for (A) a Designated Financial Institution
(as defined below) that complies with the requirement to provide Interest Recipient Information or to
38
submit a Written Application for Tax Exemption and (B) an individual resident of Japan or a Japanese
corporation that duly notifies (directly, through the Participant or otherwise) the relevant Paying Agent
of its status as not being subject to Taxes to be withheld or deducted by the Company by reason of
receipt by such individual resident of Japan or Japanese corporation of interest on such Notes through a
payment handling agent in Japan appointed by it);
(iv)
the Note is presented for payment (where presentation is required) more than 30 days
after the day on which such payment on the Notes became due or after the full payment was provided
for, whichever occurs later, except to the extent the Holder thereof would have been entitled to
Additional Amounts on presenting the same for payment on the last day of such period of 30 days;
(v)
the withholding or deduction is imposed on a Holder or beneficial owner that could
have avoided such withholding or deduction by presenting its Notes (where presentation is required) to
another Paying Agent maintained by the Company;
(vi)
the Holder is a fiduciary or partnership or is not the solebeneficial owner of the
payment of the principal of, or any interest on, any Note, and Japanese law requires the payment to be
included for tax purposes in the income of a beneficiary or settlor with respect to such fiduciary or a
member of such partnership or a beneficial owner, in each case, who would not have been entitled to
such Additional Amounts had it been the Holder of such Note; or
(vii)
any combination of (i) through (vi) above.
For the avoidance of doubt, none of the Company, the Trustee, any Paying Agent or any other
person shall be required to pay any Additional Amounts with respect to any withholding or deduction imposed on
or in respect of any Note pursuant to Sections 1471 to 1474 of the Internal Revenue Code of 1986, as amended,
commonly referred to as FATCA, any treaty, law, regulation or other official guidance implementing FATCA, or
any agreement between the Company, the Trustee, a Paying Agent or any other Person and the United States, any
other jurisdiction, or any authority of any of the foregoing implementing FATCA.
Where the Notes are held through a participant of an international clearing organization or a
financial intermediary (each, within this Section 9.5, referred to as a “Participant”), in order to receive payments
free of withholding or deduction by the Company for or on account of Taxes, if the relevant beneficial owner of
the Notes is (a) an individual non-resident of Japan or a non-Japanese corporation (other than a specially-related
person of the Company) or (b) a Japanese financial institution (each, a “Designated Financial Institution”)
falling under certain categories prescribed by the Act on Special Taxation Measures, all in accordance with the
Act on Special Taxation Measures, such beneficial owner of the Notes must, at the time of entrusting a
Participant with the custody of the relevant Notes, provide certain information prescribed by the Act on Special
Taxation Measures (“Interest Recipient Information”) to enable the Participant to establish that such beneficial
owner is exempted from the requirement for Taxes to be withheld or deducted, and advise the Participant if the
beneficial owner of the Notes ceases to be so exempted (including the case where a beneficial owner of the Notes
that is an individual non-resident of Japan or a non-Japanese corporation becomes a specially-related person of
the Company).
Where Notes are not held by a Participant, in order to receive payments free of withholding or
deduction by the Company for or on account of Taxes, if the relevant beneficial owner of the Notes is (a) an
individual non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the
Company) or (b) a Designated Financial Institution, all in accordance with the Act on Special Taxation
Measures, such beneficial owner must, prior to each time at which it receives interest, submit to the relevant
Paying Agent a written application for tax exemption (hikazei tekiyo shinkokusho) (“Written Application for
Tax Exemption”) in a form obtainable from the Paying Agent stating, inter alia, the name and address of the
beneficial owner, the title of the Notes, the relevant Interest Payment Date, the amount of interest and the fact
39
that the beneficial owner is qualified to submit the Written Application for Tax Exemption, together with
documentary evidence regarding its identity and residence.
The Company shall make any required withholding or deduction and remit the full amount
withheld or deducted to the Japanese taxing authority in accordance with applicable law. The Company shall use
reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any tax, duty, assessment,
fee or other governmental charge so withheld or deducted from the Japanese taxing authority imposing such tax,
duty, assessment, fee or other governmental charge, and if certified copies are not available, the Company shall
use reasonable efforts to obtain other evidence satisfactory to the Trustee, and the Trustee shall make such
certified copies or other evidence available to the Holders or beneficial owners of the Notes upon reasonable
request to the Trustee.
The obligation to pay Additional Amounts with respect to any taxes, duties, assessments and
other governmental charges shall not apply to (A) any estate, inheritance, gift, sales, transfer, personal property
or any similar tax, duty, assessment, fee or other governmental charge or (B) any tax, duty, assessment, fee or
other governmental charge which is payable otherwise than by withholding or deduction from payments of
principal or interest on the Notes; provided that, except as otherwise set forth in the Notes and in this Indenture,
the Company will pay all stamp, court or documentary taxes or any excise or property taxes, charges or similar
levies and other duties, if any, which may be imposed by Japan, the United States or any political subdivision or
any taxing authority thereof or therein, with respect to this Indenture or as a consequence of the initial issuance,
execution, delivery, registration or enforcement of the Notes.
References to principal or interest in respect of the Notes shall be deemed to include any
Additional Amounts due which may be payable as set forth in the Notes and this Indenture.
SECTION 9.6. Appointment to Fill a Vacancy in Office of Trustee.
The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will
appoint, in the manner provided in Section 5.8, a Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 9.7.
Indemnification of Judgment Currency.
The Company agrees to indemnify each Holder to the full extent permitted by applicable law
against any loss incurred by such Holder as a result of any judgment or order being given or made for any
amount due under such Note and such judgment or order being expressed and paid in a currency (the “Judgment
Currency”) other than U.S. dollars (the “Required Currency”) and as a result of any variation as between
(a) the rate of exchange at which the Required Currency is converted into the Judgment Currency for the purpose
of such judgment or order and (b) the spot rate of exchange in The City of New York at which the Holder on the
date that payment is made pursuant to such judgment or order is able to purchase the Required Currency with the
amount of the Judgment Currency actually received by the Holder. The Company’s 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, 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.
SECTION 9.8. Rule 144A Information.
At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act and
is not exempt from reporting requirements under the Exchange Act pursuant to Rule 12g3-2(b) under the
40
Exchange Act, upon the request of a Holder of, or owner of a beneficial interest in, a Note, the Company shall
promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder or beneficial
owner or to a prospective purchaser of such Note designated by such Holder or beneficial owner or to the Trustee
for delivery to such Holder or beneficial owner or prospective purchaser, as the case may be, in order to permit
compliance by such Holder or beneficial owner with Rule 144A under the Securities Act in connection with the
resale of such Note or any interest therein by such Holder or beneficial owner. “Rule 144A Information” shall
be such information as is at the time of such proposed purchase specified pursuant to Rule 144A(d)(4) under the
Securities Act, as amended (or any successor provision thereto).
SECTION 9.9. Reports by the Company.
For as long as any Notes are Outstanding, the Company will promptly furnish to the Trustee
(A) such other documents, reports and information as shall be furnished by the Company to its security holders
generally; (B) within six months after the end of each fiscal year, an annual report in English including a
consolidated balance sheet and consolidated statements of operations, surplus and cash flows of the Company
audited by independent public accountants and prepared in conformity with International Financial Reporting
Standards; and (C) as soon as practicable after the end of each interim period (other than the last interim period
of a fiscal year) an interim report in English including financial statements of the Company (or, if consolidated
financial statements are prepared, its consolidated financial statements).
SECTION 9.10. Reports by the Trustee.
Any Trustee’s report required under Section 313(a) of the Trust Indenture Act shall be
transmitted on or before April 1 in each year following the date hereof, so long as any Notes are Outstanding, and
shall be dated as of a date convenient to the Trustee no more than 60 nor less than 45 days prior thereto.
SECTION 9.11. Annual Compliance Certificate.
So long as any Notes are Outstanding under this Indenture, the Company will furnish to the
Trustee within 180 days of the end of the Company’s fiscal year each year (beginning with the year following the
first issuance of the Notes pursuant to this Indenture) a brief certificate (which need not comply with Section 1.2)
from the principal executive, financial or accounting officer of the Company as to his or her knowledge of the
Company’s compliance 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 the Indenture), which
certificate shall comply with the requirements of the Trust Indenture Act
SECTION 9.12. Negative Pledge.
So long as any Note remains outstanding, the Company shall not, and shall procure that none of
its Principal Subsidiaries shall, create or permit to subsist any Lien on any of its, or, as the case may be, such
Principal Subsidiary’s, property, assets or revenues, present or future, to secure for the benefit of the holders of
Public External Indebtedness payment of any sum owing in respect of any such Public External Indebtedness,
any payment under any guarantee of any such Public External Indebtedness or any payment under any indemnity
or other like obligation relating to any such Public External Indebtedness, unless contemporaneously therewith
effective provision is made to secure the Notes equally and ratably with such Public External Indebtedness with a
similar Lien on the same property, assets or revenues securing such Public External Indebtedness for so long as
such Public External Indebtedness are secured by such Lien.
41
ARTICLE X
REDEMPTION AND PURCHASE OF SECURITIES
SECTION 10.1. Optional Redemption of Notes.
The 2020 Notes, the 2021 Notes, the 2023 Notes and the 2028 Notes may be redeemed at any
time at the option and sole discretion of the Company, in whole or in part, at any time prior to the maturity date
with respect to the 2020 Notes, October 26, 2021 (the “2021 Par Call Date”) with respect to the 2021 Notes,
October 26, 2023 (the “2023 Par Call Date”) with respect to the 2023 Notes and August 26, 2028 (the “2028
Par Call Date”) with respect to the 2028 Notes, in each case, upon giving not less than 30 nor more than 60
days’ notice of redemption to the Trustee and the Holders (which notice shall be irrevocable and shall conform,
as applicable, to the additional notice requirements set forth in Section 10.5), at a redemption price equal to the
greater of:
(a)
100% of the principal amount of the Notes being redeemed; or
(b)
the sum of the present values of the principal and the remaining scheduled payments of
interest on the Notes being redeemed (exclusive of interest accrued to the Redemption Date) that would be due if
such Notes were (a) held to the maturity date with respect to the 2020 Notes or (b) redeemed on the applicable
par call date, in each case discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 17.5 basis points in the case of the 2020 Notes,
20.0 basis points in the case of the 2021 Notes, 25.0 basis points in the case of the 2023 Notes and 30.0 basis
points in the case of the 2028 Notes, plus, in each case, accrued and unpaid interest on the principal amount of
the Notes being redeemed up to, but excluding, the Redemption Date.
The 2021 Notes, the 2023 Notes and the 2028 Notes may be redeemed at any time at the option
and sole discretion of the Company, in whole or in part, at any time on or after the 2021 Par Call Date with
respect to the 2021 Notes, the 2023 Par Call Date with respect to the 2023 Notes and the 2028 Par Call Date with
respect to the 2028 Notes, in each case, upon giving not less than 30 nor more than 60 days’ notice of redemption
to the Trustee and the Holders (which notice shall be irrevocable and shall conform, as applicable, to the
additional notice requirements set forth in Section 10.5), at a redemption price equal to 100% of the principal
amount of the Notes being redeemed plus accrued and unpaid interest on the principal amount of the Notes being
redeemed to, but excluding, the Redemption Date.
If less than all of the Notes are to be redeemed, the Notes shall be redeemed on a pro rata basis
(or, in the case of Notes represented by global notes, in accordance with the procedures of DTC), based on the
then outstanding principal amount of each Note, provided, however, that if any such pro-rated redemption would
result in any Notes having an authorized principal amount of less than the minimum authorized denomination, all
such Notes shall be redeemed in full prior to the redemption of any other Notes, except as may be provided in the
form of Note or in any indenture supplemental hereto. For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of the Notes shall relate, in the case of any Note
redeemed or to be redeemed only in part, to the portion of the principal amount of such Note which has been or is
to be redeemed.
SECTION 10.2. Optional Redemption due to an Additional Amounts Event.
Each series of the Notes may be redeemed at any time at the option and sole discretion of the
Company in whole, but not in part, subject to compliance with applicable regulatory requirements, upon giving
not less than 30 nor more than 60 days’ notice of redemption to the Trustee and the Holders (which notice shall
be irrevocable and shall conform, as applicable, to the additional notice requirements set forth in Section 10.5) at
the principal amount of the Notes together with interest accrued to the date fixed for redemption and any
Additional Amounts thereon, if the Company has been or will be obliged to pay any Additional Amounts with
42
respect to such series as a result of (a) any change in, or amendment to, the laws or regulations of Japan or any
political subdivision or any authority thereof or therein having power to tax, or any change in application or
official interpretation of such laws or regulations, which change or amendment becomes effective on or after the
date of the issuance of the Notes or (b) after the completion of any Succession Event, any change in, or
amendment to, the laws or regulations of the jurisdiction of the Successor Person or any political subdivision or
any authority thereof or therein having power to tax, or any change in application or official interpretation of
such laws or regulations, which change or amendment becomes effective on or after the date of such Succession
Event, and in either case such obligation cannot be avoided by the Company or the Successor Person through the
taking of reasonable measures available to the Company or the Successor Person, as the case may be (an
“Additional Amounts Event”). No notice of redemption for an Additional Amounts Event pursuant to this
Section 10.2 shall be given sooner than 90 days prior to the earliest date on which the Company would actually
be obliged to pay such Additional Amounts on payments with respect to the Notes.
Prior to the publication of any notice of redemption pursuant to this Section 10.2, the Company
shall deliver to the Trustee (i) a certificate signed by an Authorized Officer stating that the conditions precedent
to its right to so redeem have been fulfilled and (ii) an opinion of independent legal advisors of recognized
standing confirming that an Additional Amounts Event has occurred. The Trustee shall accept such opinion as
sufficient evidence of the satisfaction of the conditions precedent described above, in which event it shall be
conclusive and binding on the Holders.
SECTION 10.3.
Special Mandatory Redemption.
If (i) the Shire Acquisition has not been consummated on or prior to the Long Stop Date or
(ii) the Company otherwise publicly announces that the Shire Acquisition will not be consummated, then the
Company will be required to redeem all outstanding Notes on the Special Mandatory Redemption Date at a
special mandatory redemption price equal to 101% of the aggregate principal amount of the Notes plus accrued
and unpaid interest, if any, to, but excluding, the Special Mandatory Redemption Date.
Notwithstanding the foregoing, installments of interest on the Notes that are due and payable
on Interest Payment Dates falling on or prior to the Special Mandatory Redemption Date will be payable on such
Interest Payment Dates to the registered Holders as of the close of business on the relevant Record Dates in
accordance with the terms of the Notes and this Indenture.
The Company will cause the notice of special mandatory redemption to be transmitted, with a
copy to the Trustee, within five Business Days after the occurrence of the event triggering the special mandatory
redemption to each Holder at its registered address. If funds sufficient to pay the special mandatory redemption
price of the outstanding notes to be redeemed on the Special Mandatory Redemption Date (plus accrued and
unpaid interest, if any, to, but excluding, such date) are deposited with the Trustee or a paying agent on or before
such Special Mandatory Redemption Date, and certain other conditions are satisfied, on and after such Special
Mandatory Redemption Date, the outstanding Notes will cease to bear interest.
Upon the consummation of the Shire Acquisition, the foregoing provisions regarding the
special mandatory redemption will cease to apply.
SECTION 10.4. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes shall be evidenced by a Company Order and
an Officer’s Certificate, both given to the Trustee.
SECTION 10.5. Notice of Redemption.
Notice of redemption shall be given transmitted not less than 30 nor more than 60 days prior to
the date for redemption (“Redemption Date”), to the Trustee and to each Holder of Notes to be redeemed at his
address appearing in the Notes Register. If by reason of any cause, it shall be impracticable to give notice to the
43
Holder in the manner prescribed herein, then such notification in lieu thereof as shall be made by the Company or
by the Trustee on behalf of and at the instruction of the Company (as set forth below) shall constitute sufficient
provision of such notice, if such notification shall, so far as may be practicable, approximate the terms and
conditions of the notice in lieu of which it is given. Neither the failure to give notice nor any defect in any notice
of redemption given to the Holder of any other Note shall affect the sufficiency of any notice with respect to this
Note.
All notices of redemption shall state:
(1)
(2)
the Redemption Date,
the redemption price and the amount of any accrued and unpaid interest payable on the
Redemption Date,
(3)
the CUSIP, ISIN and Common Code or other identifying number of the Notes,
(4)
that on the Redemption Date, the redemption price (together with any accrued and
unpaid interest payable on the Redemption Date) will become due and payable upon each such Notes to
be redeemed and that interest thereon will cease to accrue on and after said date, and
(5)
the place or places where such Notes are to be surrendered for payment of the
redemption price, and accrued interest, if any.
Notice of redemption of Notes to be redeemed at the election of the Company shall be given by
the Company or, at the Company’s request by the Trustee in the name and at the expense of the Company
(provided that the Company shall have delivered to the Trustee, at least five Business Days before notice of
redemption is required to be given to Holders (unless a shorter notice shall be agreed to by the Trustee), a
Company Request requesting that the Trustee give such notice and setting forth the information to be stated in
such notice as provided in the preceding paragraph) and shall be irrevocable.
SECTION 10.6. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying
Agent an amount of money sufficient to pay the redemption price of, and (except if the Redemption Date shall be
an Interest Payment Date) accrued interest on, all the Notes which are to be redeemed on that date.
SECTION 10.7. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the
Redemption Date, become due and payable at the redemption price applicable thereto, and from and after such
date (unless the Company shall default in the payment of the redemption price and accrued interest) such Notes
shall cease to bear interest. Upon surrender of any such Note for redemption in accordance with said notice, such
Note shall be paid by the Company at the redemption price, together with accrued interest to the Redemption
Date; provided, however, that installments of interest whose payment date is on or prior to the Redemption Date
will be payable to the Holders of such Notes, registered as such at the close of business on the relevant Record
Date according to their terms.
If any Note called for redemption shall not be so paid upon surrender thereof for redemption,
the principal shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the terms
of the Note.
SECTION 10.8. Repurchase of Notes.
The Company or any subsidiary thereof may, at any time, purchase the Notes for cancellation
in the open market or otherwise at any price.
44
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as
of the day and year first above written.
TAKEDA PHARMACEUTICAL COMPANY
LIMITED
By: /s/ Mitsuhiro Okada
Name: Mitsuhiro Okada
Title: Head of Global Treasury & Finance
Management
MUFG UNION BANK, N.A.,
as Trustee
By: /s/ Marion Zinowski
Name: Marion Zinowski
Title: Vice President
45
FORM OF RULE 144A GLOBAL NOTE
[FORM OF FACE OF NOTE]
EXHIBIT A-1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE HOLDER HEREOF
AGREES FOR THE BENEFIT OF TAKEDA PHARMACEUTICAL COMPANY LIMITED (THE
“COMPANY”) THAT THIS NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1) TO THE COMPANY, (2) TO A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT (“RULE 144A”)) OR A PERSON WHO THE SELLER AND ANY
PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER IN ACCORDANCE WITH RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, (3) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
(4) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT,
PROVIDED THAT, AS A CONDITION TO THE REGISTRATION OF THE TRANSFER THEREOF, THE
COMPANY OR THE TRUSTEE MAY REQUIRE THE DELIVERY OF ANY DOCUMENTS, INCLUDING
AN OPINION OF COUNSEL, THAT IT, IN ITS SOLE DISCRETION, MAY DEEM NECESSARY OR
APPROPRIATE TO EVIDENCE COMPLIANCE WITH SUCH EXEMPTION, OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES AND OTHER JURISDICTIONS. THE HOLDER HEREOF, BY, PURCHASING OR ACCEPTING
THIS NOTE, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL
NOTIFY ANY PURCHASER OF THIS NOTE FROM THE HOLDER OF THE RESALE RESTRICTIONS
REFERRED TO ABOVE.
TRANSFERS AND EXCHANGES OF THIS NOTE, IN WHOLE OR IN PART, AND OF
BENEFICIAL INTERESTS IN THIS NOTE ARE SUBJECT TO RESTRICTIONS AS PROVIDED IN THE
INDENTURE, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE CORPORATE TRUST
OFFICE OF THE TRUSTEE.
IS
THIS
UNLESS
PRESENTED
CERTIFICATE
AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
(“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
AN
BY
INTEREST PAYMENTS ON THIS NOTE GENERALLY WILL BE SUBJECT TO
JAPANESE WITHHOLDING TAX UNLESS IT IS ESTABLISHED THAT THIS NOTE IS HELD BY OR
FOR THE ACCOUNT OF A BENEFICIAL OWNER THAT IS (I) FOR JAPANESE TAX PURPOSES,
NEITHER AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION, NOR AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A PERSON HAVING A SPECIAL RELATIONSHIP WITH THE COMPANY AS DESCRIBED IN
ARTICLE 6, PARAGRAPH (4) OF THE ACT ON SPECIAL MEASURES CONCERNING TAXATION OF
JAPAN (ACT NO. 26 OF 1957, AS AMENDED) (THE “ACT ON SPECIAL TAXATION MEASURES”) (A
“SPECIALLY-RELATED PERSON OF THE COMPANY”),
(II) A JAPANESE FINANCIAL
A-1-1
INSTITUTION OR A JAPANESE FINANCIAL INSTRUMENTS BUSINESS OPERATOR DESIGNATED IN
ARTICLE 3-2-2, PARAGRAPH (28) OF THE CABINET ORDER (CABINET ORDER NO. 43 OF 1957, AS
AMENDED) RELATING TO THE ACT ON SPECIAL TAXATION MEASURES WHICH COMPLIES WITH
THE REQUIREMENT FOR TAX EXEMPTION UNDER ARTICLE 6, PARAGRAPH (9) OF THE ACT ON
SPECIAL TAXATION MEASURES OR (III) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION
OR A FINANCIAL INSTRUMENTS BUSINESS OPERATOR, ETC. DESCRIBED IN ARTICLE 3-3,
PARAGRAPH (6) OF THE ACT ON SPECIAL TAXATION MEASURES WHICH HAS RECEIVED SUCH
PAYMENTS THROUGH A PAYMENT HANDLING AGENT IN JAPAN AS DESCRIBED IN PARAGRAPH
(1) OF SAID ARTICLE AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER
THAT PARAGRAPH.
INTEREST PAYMENTS ON THIS NOTE TO AN INDIVIDUAL RESIDENT OF JAPAN,
TO A JAPANESE CORPORATION NOT DESCRIBED IN THE PRECEDING PARAGRAPH, OR TO AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A SPECIALLY-RELATED PERSON OF THE COMPANY WILL BE SUBJECT TO JAPANESE
INCOME TAX AT THE TIME OF SUCH INTEREST PAYMENTS.
A-1-2
TAKEDA PHARMACEUTICAL COMPANY LIMITED
[3.800% Senior Notes due 2020]
[4.000% Senior Notes due 2021]
[4.400% Senior Notes due 2023]
[5.000% Senior Notes due 2028]
Principal Amount $Š
No. 144A-1
CUSIP No. Š1
ISIN Š2
Common Code Š3
Takeda Pharmaceutical Company Limited (the “Company”), for value received, hereby
promises to pay to Cede & Co., or registered assigns, the principal amount set forth above on November 26, Š4,
and to pay interest thereon from November 26, 2018 or from the most recent Interest Payment Date to which
interest has been paid or made available for payment, semi-annually in arrears on each Interest Payment Date
commencing on May 26, 2019, at the rate of Š5% per annum, together with such Additional Amounts (if any) as
may be payable under this Note, until the principal hereof is paid or made available for payment. Interest on this
Note will accrue from the date of original issuance or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. This
Note will be the Company’s direct, unsecured and unsubordinated general obligation and will have the same rank
in liquidation as all of the Company’s other unsecured and unsubordinated debt.
In any case in which any date for payment of principal or interest (or Additional Amounts, if
any) falls on a day that is not a Business Day, then payment of principal or interest (or Additional Amounts, if
any) need not be made on such date but may be made on the next succeeding Business Day. Any payment made
pursuant to the preceding sentence on such next succeeding Business Day shall have the same force and effect as
if made on the due date, and no interest shall accrue with respect to such payment for the period after such date.
“Interest Payment Date” means each May 26 and November 26 during the term of this Note.
“Business Day” means a day, other than a Saturday or Sunday, that is neither a legal holiday
nor a day on which commercial banking institutions are authorized or required by law, regulation or executive
order to be closed in The City of New York, London or Tokyo.
Reference is hereby made to the further provisions of this Note set forth on the reverse hereof,
and such provisions shall for all purposes have the same effect as though fully set forth in this place.
This Note shall not be valid or obligatory for any purpose until it shall have been manually
signed by the Trustee for authentication.
1
2
3
4
5
874060AK2 for the 2020 Notes, 874060AN6 for the 2021 Notes; 874060AR7 for the 2023 Notes; and
874060AU0 for the 2028 Notes.
US874060AK27 for the 2020 Notes, US874060AN65 for the 2021 Notes; US874060AR79 for the 2023
Notes; and US874060AU09 for the 2028 Notes.
190258220 for the 2020 Notes, 190257363 for the 2021 Notes; 190258181 for the 2023 Notes; and
190256758 for the 2028 Notes.
2020 for the 2020 Notes; 2021 for the 2021 Notes; 2023 for the 2023 Notes; and 2028 for the 2028 Notes.
3.800 for the 2020 Notes; 4.000 for the 2021 Notes; 4.400 for the 2023 Notes; and 5.000 for the 2028 Notes.
A-1-3
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
PHARMACEUTICAL
COMPANY
TAKEDA
LIMITED
By
Name: [name]
Title:
[title]
This is one of the Notes referred to
in the within-mentioned Indenture:
Dated:
, 20
MUFG UNION BANK, N.A.,
as Trustee
By
Authorized Signatory
A-1-4
[FORM OF REVERSE OF NOTE]
1.
The principal amount of this Note shall be paid on any redemption date, in immediately
available funds in The City of New York upon surrender of the Note at the office designated herein or pursuant
hereto of MUFG Union Bank, N.A., as trustee (MUFG Union Bank, N.A. or any duly appointed successor trustee
acting in such capacity herein referred to as the “Trustee”), pursuant to an Indenture (such agreement, as it may
the “Indenture”), dated as of November 26, 2018, between Takeda
be amended from time to time,
Pharmaceutical Company Limited (the “Company”) and the Trustee. The office of the Trustee at which such
payment shall be made is the corporate trust office located at 1251 Avenue of the Americas, 19th Floor, New
York, New York 10020 or at such other address in The City of New York as the Trustee shall specify (the
“Corporate Trust Office”) by notice to the Holder (as defined in the Indenture). Terms used herein not
otherwise defined shall have the meaning ascribed to such term in the Indenture.
Payment of the principal of, and interest (including Additional Amounts, if applicable) on, this
Note shall be made by wire transfer in immediately available funds to a bank account in the United States
designated by the Holder in a written notice received by the Trustee (a) in the case of a payment of interest, prior
to the Record Date (as defined below) immediately preceding the date on which such payment is due and (b) in
the case of payment of principal on any redemption date, no less than 30 days and no more than 60 days prior to
such redemption date, provided that in the case of such payment of principal, this Note shall have been
surrendered to the Trustee for payment together with such notice. No interest shall accrue on this Note after
redemption; provided, however, that, to the extent permitted by applicable law, interest shall accrue, at the rate at
which interest accrues on the principal of this Note, on any amount of principal not paid when due upon
surrender of this Note to the Trustee. “Record Date” means, with respect to an Interest Payment Date, the day
five Business Days preceding such Interest Payment Date.
2.
Payments of principal of and interest (including Additional Amounts, if applicable) on
this Note shall be made in United States dollars or in such other coin or currency of the United States of America
as at the time of payment is legal tender for the payment of public and private debts. Until the date on which the
Notes shall have been delivered to the Trustee for cancellation, or become due and payable and a sum sufficient
to pay the principal of and interest (including Additional Amounts, if applicable) on all of the Notes shall have
been made available for payment and either paid or returned to the Company as provided herein and in the
Indenture (such date being referred to herein as the “Termination Date”), the Company will at all times
maintain an office or agency in the Borough of Manhattan, The City of New York, where Notes may be
presented or surrendered for payment.
3.
This Note is transferable in whole or in part and may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations by the Holder in person, or by his attorney duly
authorized in writing, at the Corporate Trust Office in The City of New York, where the Trustee shall maintain a
register providing for the registration of the Notes and any exchange or transfer thereof (the “Note Register”).
Upon surrender of this Note for exchange or registration of transfer, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a Note or Notes, each in a denomination of $200,000 or an
integral multiple of $1,000 in excess thereof, which has or have an aggregate denomination equal to the
denomination of this Note and is or are registered in such name or names requested by the Holder. Any Note
presented for exchange or registration of transfer shall be accompanied by a written instrument of transfer in
form and with guarantee of signature and evidence of authority satisfactory to the Trustee and with payment by
the transferor of any stamp or other tax or governmental charge payable in connection with such transfer (or
evidence that such tax or charge has been paid) and with such tax identification number or other information for
each person in whose name a new Note is to be issued as the Trustee may request to comply with applicable law.
No exchange or registration of transfer of this Note shall be made on or after the date upon which a notice of
redemption of this Note is transmitted to the Holder.
Notwithstanding any other provision of this Note or the Indenture to the contrary, this Note, if
in global form (a Note in such form being referred to herein as a “Global Note”), shall be exchangeable pursuant
A-1-5
to this Note and the Indenture only if: (i) the Depositary (as defined in the Indenture) notifies the Company that it
is unwilling or unable to continue as depositary for a Global Note or has ceased to be qualified to act as such as
required by the Indenture or (ii) there shall have occurred and be continuing an Event of Default (as defined in
the Indenture) with respect to the Notes. Upon the occurrence of any such event, this Note shall be exchangeable
for definitive Notes, as provided in the Indenture. Notwithstanding any other provision of this Note, a Global
Note may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC. In the event and for so long as definitive Notes are not issued to any owner of a
beneficial interest in this Global Note after the occurrence of one of the events set forth above, the Company
expressly acknowledges, with respect to the right of a Holder to pursue a remedy pursuant to Section 4.7 or
Section 4.8 of the Indenture, the right of such owner to pursue such remedy with respect to the portion of this
Global Note that represents such owner’s Notes as if such definitive Notes had been issued.
No service charge shall be made for any such exchange or registration of transfer, but the
Company may charge the party requesting any such exchange or registration of transfer a sum sufficient to
reimburse it for any tax or other governmental charge required to be paid in connection with such exchange or
registration.
All Notes issued upon any exchange or registration of transfer of this Note shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same benefits, as this Note.
Except in the circumstances referred to in the second paragraph of this Section 3, the Company
and the Trustee may treat the Holder as the absolute owner of this Note for the purpose of receiving payments of
principal of and interest (including, Additional Amounts, as defined in Section 5 of this Note) on this Note and
for all other purposes whatsoever, and the Company and the Trustee shall not be affected by any notice to the
contrary.
subject to payment at the option of the Company prior to November 26, Š6.
4.
Except as provided in Sections 6, 7, 8 and 9 of this Note, this Note is not redeemable or
5.
All payments of principal and interest in respect of this Note shall be made without
withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied by or on behalf of Japan, or any authority thereof or therein having
power to tax (“Taxes”), unless such withholding or deduction is required by law or by the authority. In such
event, the Company shall pay such additional amounts (“Additional Amounts”) as will result in the receipt by
the Holder of such amounts as would have been received by it had no such withholding or deduction been
required, except that no such Additional Amounts shall be payable with respect to this Note under any of the
following circumstances:
the Holder or beneficial owner of this Note is an individual non-resident of Japan or a
(i)
non-Japanese corporation and is liable for such Taxes in respect of this Note by reason of its
(A) having some present or former connection with Japan other than the mere holding of this
Note or (B) being a person having a special relationship with the Company (a “specially-
related person of the Company”) as described in Article 6, paragraph (4) of the Act on
Special Measures Concerning Taxation of Japan (Act No. 26 of 1957, as amended) (together
with the cabinet order thereunder (Cabinet Order No. 43 of 1957, as amended), the “Act on
Special Taxation Measures”);
(ii)
the Holder or beneficial owner of this Note would otherwise be exempt from any such
withholding or deduction but fails to comply with any applicable requirement to provide
Interest Recipient Information (as defined below) or to submit a Written Application for Tax
6
2020 for the 2020 Notes; 2021 for the 2021 Notes; 2023 for the 2023 Notes; and 2028 for the 2028 Notes.
A-1-6
Exemption (as defined below) to the relevant Paying Agent to whom this Note is presented
(where presentation is required), or whose Interest Recipient Information is not duly
communicated through the relevant Participant
(as defined below) and the relevant
international clearing organization to such Paying Agent;
(iii)
the Holder or beneficial owner of this Note is for Japanese tax purposes treated as an
individual resident of Japan or a Japanese corporation (except for (A) a Designated Financial
Institution (as defined below) that complies with the requirement to provide Interest Recipient
Information or to submit a Written Application for Tax Exemption and (B) an individual
resident of Japan or a Japanese corporation that duly notifies (directly, through the Participant
or otherwise) the relevant Paying Agent of its status as not being subject to Taxes to be
withheld or deducted by the Company by reason of receipt by such individual resident of
Japan or Japanese corporation of interest on this Note through a payment handling agent in
Japan appointed by it);
(iv)
this Note is presented for payment (where presentation is required) more than 30 days
after the day on which such payment on this Note became due or after the full payment was
provided for, whichever occurs later, except to the extent the Holder hereof would have been
entitled to Additional Amounts on presenting the same for payment on the last day of such
period of 30 days;
the withholding or deduction is imposed on a Holder or beneficial owner that could
(v)
have avoided such withholding or deduction by presenting this Note (where presentation is
required) to another Paying Agent maintained by the Company;
(vi)
the Holder is a fiduciary or partnership or is not the sole beneficial owner of the
payment of the principal of, or any interest on, this Note, and Japanese law requires the
payment to be included for tax purposes in the income of a beneficiary or settlor with respect
to such fiduciary or a member of such partnership or a beneficial owner, in each case, who
would not have been entitled to such Additional Amounts had it been the Holder of this Note;
or
(vii)
any combination of (i) through (vi) above.
For the avoidance of doubt, none of the Company, the Trustee, any Paying Agent or any other
person shall be required to pay any Additional Amounts with respect to any withholding or deduction imposed on
or in respect of any Note pursuant to Sections 1471 to 1474 of the Internal Revenue Code of 1986, as amended,
commonly referred to as FATCA, any treaty, law, regulation or other official guidance implementing FATCA, or
any agreement between the Company, the Trustee, a Paying Agent or any other Person and the United States, any
other jurisdiction, or any authority of any of the foregoing implementing FATCA.
Where this Note is held through a participant of an international clearing organization or a
financial intermediary (each, a “Participant”), in order to receive payments free of withholding or deduction by
the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an individual
non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the Company) or
(b) a Japanese financial institution (each, a “Designated Financial Institution”) falling under certain categories
prescribed by the Act on Special Taxation Measures, all in accordance with the Act on Special Taxation
Measures, such beneficial owner of this Note must, at the time of entrusting a Participant with the custody of this
Note, provide certain information prescribed by the Act on Special Taxation Measures (“Interest Recipient
Information”) to enable the Participant to establish that such beneficial owner is exempted from the requirement
for Taxes to be withheld or deducted, and advise the Participant if the beneficial owner of this Note ceases to be
so exempted (including the case where a beneficial owner of this Note that is an individual non-resident of Japan
or a non-Japanese corporation becomes a specially-related person of the Company).
A-1-7
Where this Note is not held by a Participant, in order to receive payments free of withholding
or deduction by the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an
individual non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the
Company) or (b) a Designated Financial Institution, all in accordance with the Act on Special Taxation
Measures, such beneficial owner must, prior to each time at which it receives interest, submit to the relevant
Paying Agent a written application for tax exemption (hikazei tekiyo shinkokusho) (“Written Application for
Tax Exemption”) in a form obtainable from the Paying Agent stating, inter alia, the name and address of the
beneficial owner, the title of this Note, the relevant Interest Payment Date, the amount of interest and the fact that
together with
the beneficial owner is qualified to submit
documentary evidence regarding its identity and residence.
the Written Application for Tax Exemption,
The Company shall make any required withholding or deduction and remit the full amount
withheld or deducted to the Japanese taxing authority in accordance with applicable law. The Company shall use
reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any tax, duty, assessment,
fee or other governmental charge so withheld or deducted from the Japanese taxing authority imposing such tax,
duty, assessment, fee or other governmental charge, and if certified copies are not available, the Company shall
use reasonable efforts to obtain other evidence satisfactory to the Trustee, and the Trustee shall make such
certified copies or other evidence available to the Holders or beneficial owners of the Notes upon reasonable
request to the Trustee.
The obligation to pay Additional Amounts with respect to any taxes, duties, assessments and
other governmental charges shall not apply to (A) any estate, inheritance, gift, sales, transfer, personal property
or any similar tax, duty, assessment, fee or other governmental charge or (B) any tax, duty, assessment, fee or
other governmental charge which is payable otherwise than by withholding or deduction from payments of
principal or interest on this Note; provided that, except as otherwise set forth in this Note and in the Indenture,
the Company will pay all stamp, court or documentary taxes or any excise or property taxes, charges or similar
levies and other duties, if any, which may be imposed by Japan, the United States or any political subdivision or
any taxing authority thereof or therein, with respect to the Indenture or as a consequence of the initial issuance,
execution, delivery, registration or enforcement of the Notes.
References to principal or interest in respect of this Note shall be deemed to include any
Additional Amounts due which may be payable as set forth in this Note and the Indenture.
6.
This Note may be redeemed at any time at the option and sole discretion of the
Company, in whole or in part, at any time prior to Š7 [(the “Par Call Date”)]8, upon giving not less than 30 nor
more than 60 days’ notice of redemption to the Trustee and the Holders, at a redemption price equal to the
greater of (a) 100% of the principal amount of this Note being redeemed or (b) the sum of the present values of
the principal and the remaining scheduled payments of interest on this Note being redeemed (exclusive of interest
accrued to the Redemption Date (as defined in the Indenture)), that would be due if this Note were [held to the
maturity date]9[redeemed on the Par Call Date]10, discounted to the Redemption Date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined in the Indenture)
plus Š11 basis points, plus, in each case, accrued and unpaid interest on the principal amount of this Note being
redeemed to, but excluding, the Redemption Date.
7
8
9
November 26, 2020 for the 2020 Notes; October 26, 2021 for the 2021 Notes; October 26, 2023 for the 2023
Notes; and August 26, 2028 for the 2028 Notes.
Remove for 2020 Notes.
Only for the 2020 Notes
10 Only for the 2021 Notes, 2023 Notes and 2028 Notes
11
17.5 for the 2020 Notes; 20.0 for the 2021 Notes; 25.0 for the 2023 Notes; and 30.0 for the 2028 Notes.
A-1-8
[This Note may be redeemed at any time at the option and sole discretion of the Company, in
whole or in part, at any time on or after the Par Call Date, upon giving not less than 30 nor more than 60 days’
notice of redemption to the Trustee and the Holders, at a redemption price equal to 100% of the principal amount
of this Note being redeemed plus accrued and unpaid interest on the principal amount of this Note being
redeemed to, but excluding, the Redemption Date.]12
7.
This Note may be redeemed at any time at the option and sole discretion of the
Company in whole, but not in part, subject to compliance with applicable regulatory requirements, and upon
giving not less than 30 nor more than 60 days’ notice of redemption to the Trustee and the Holders (which notice
shall be irrevocable) at the principal amount of this Note together with interest accrued to the date fixed for
redemption and any Additional Amounts hereon, if the Company has been or will be obliged to pay any
Additional Amounts as a result of (a) any change in, or amendment to, the laws or regulations of Japan or any
political subdivision or any authority thereof or therein having power to tax, or any change in application or
official interpretation of such laws or regulations, which change or amendment becomes effective on or after the
date of the issuance of this Note or (b) after the completion of any Succession Event, any change in, or
amendment to, the laws or regulations of the jurisdiction of the Successor Person or any political subdivision or
any authority thereof or therein having power to tax, or any change in application or official interpretation of
such laws or regulations, which change or amendment becomes effective on or after the date of such Succession
Event, and in either case such obligation cannot be avoided by the Company or the Successor Person through the
taking of reasonable measures available to the Company or the Successor Person, as the case may be (an
“Additional Amounts Event”). No notice of redemption for an Additional Amounts Event pursuant to this
Section 7 shall be given sooner than 90 days prior to the earliest date on which the Company would actually be
obliged to pay such Additional Amounts on payments with respect to this Note.
Prior to the publication of any notice of redemption pursuant to this Section 7, the Company
shall deliver to the Trustee (i) a certificate signed by an Authorized Officer stating that the conditions precedent
to its right to so redeem have been fulfilled and (ii) an opinion of independent legal advisors of recognized
standing confirming that an Additional Amounts Event has occurred. The Trustee shall accept such opinion as
sufficient evidence of the satisfaction of the conditions precedent described above, in which event it shall be
conclusive and binding on the Holders.
8.
If (i) the Shire Acquisition (as defined in the Indenture) has not been consummated on or
prior to the Long Stop Date (as defined in the Indenture) or (ii) the Company otherwise publicly announces that
the Shire Acquisition will not be consummated, then the Company will be required to redeem all outstanding
Notes on the Special Mandatory Redemption Date at a special mandatory redemption price equal to 101% of the
aggregate principal amount of the Notes plus accrued and unpaid interest, if any, to, but excluding, the Special
Mandatory Redemption Date.
Notwithstanding the foregoing, installments of interest on the Notes that are due and payable
on Interest Payment Dates falling on or prior to the Special Mandatory Redemption Date will be payable on such
Interest Payment Dates to the registered Holders as of the close of business on the relevant Record Dates in
accordance with the terms of the Notes and this Indenture.
The Company will cause the notice of special mandatory redemption to be transmitted, with a
copy to the Trustee, within five Business Days after the occurrence of the event triggering the special mandatory
redemption to each Holder at its registered address. If funds sufficient to pay the special mandatory redemption
price of the outstanding notes to be redeemed on the Special Mandatory Redemption Date (plus accrued and
unpaid interest, if any, to, but excluding, such date) are deposited with the Trustee or a paying agent on or before
such Special Mandatory Redemption Date, and certain other conditions are satisfied, on and after such Special
Mandatory Redemption Date, the outstanding Notes will cease to bear interest.
12 Only for the 2021 Notes, 2023 Notes and 2028 Notes.
A-1-9
Upon the consummation of the Shire Acquisition, the foregoing provisions regarding the
special mandatory redemption will cease to apply.
9.
In the case of any redemption of this Note as provided in Section 6, 7 or 8 of this Note,
notice of redemption of this Note shall be transmitted to the Holder at its address as it shall then appear in the
Note Register. If by reason of any cause, it shall be impracticable to give notice to the Holder in the manner
prescribed herein, then such notification in lieu thereof as shall be made by the Company or by the Trustee on
behalf of and at the instruction of the Company shall constitute sufficient provision of such notice, if such
notification shall, so far as may be practicable, approximate the terms and conditions of the notice in lieu of
which it is given. Neither the failure to give notice nor any defect in any notice of redemption given to the Holder
of any other Note shall affect the sufficiency of any notice with respect to this Note. Notice of redemption of this
Note having been so given, this Note shall become due and payable on the redemption date so specified and such
dates shall be deemed the maturity date of this Note.
10.
The Company shall, on or before each due date of the principal of or interest on this
Note, pay to the Trustee, who shall hold the same in trust for the benefit of the person entitled thereto, a sum
sufficient to pay the principal or interest so becoming due until such sum shall be paid to such person or
otherwise disposed of as herein provided. Any money held by the Trustee in trust for the payment of the principal
of or interest on this Note and remaining unclaimed for two years after such principal or interest has become due
and payable and paid to the Trustee shall be discharged from such trust, and repaid to the Company, and all
liability of the Trustee with respect to such money shall cease.
11.
If this Note shall at any time become mutilated, destroyed, stolen or lost, then,
provided that this Note, or evidence of the destruction, theft or loss hereof (together with the indemnity
hereinafter referred to and such other documents or proof as may be required hereunder) shall be delivered to the
Trustee, a replacement Note of like tenor and principal amount shall be authenticated and delivered by the
Trustee, in exchange for this Note, in the case of mutilation, or in lieu of this Note, in the case of destruction, loss
or theft, and provided further that, if this Note is destroyed, stolen or lost, (i) neither the Company nor the Trustee
shall have received notice that this Note has been acquired by a bona fide purchaser, and (ii) the Trustee shall
have received (a) satisfactory evidence (as so deemed by the Trustee in its absolute discretion) that this Note was
destroyed, stolen or lost, and (b) an indemnity for the benefit of the Company and the Trustee satisfactory to each
of them. All expenses and charges associated with procuring such indemnity shall be borne by the Holder of this
Note.
As provided in the Indenture, every new Note issued in exchange for or in lieu of any
mutilated, destroyed, stolen or lost Note shall constitute an original additional contractual obligation of the
Company, whether or not the mutilated, destroyed, stolen or lost Note shall be at any time enforceable by
anyone, and shall be entitled to the benefits of the Indenture equally and proportionately with any and all other
Notes duly issued thereunder. Any such new Note shall be so dated that neither gain nor loss of interest shall
result from such replacement. Upon the issuance of any such new Note, the Company may require the payment
of a sum sufficient to cover any stamp or other tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
12.
All notices to the Company under this Note shall be in writing and addressed to the
Company at Takeda Pharmaceutical Company Limited, 1-1, Nihonbashi-Honcho 2-Chome, Chuo-ku, Tokyo
103-8668, Japan Attention: Global Treasury & Finance Management, Group Finance & Controlling, Global
Finance, or to such other address as the Company may notify to the Holder. All notices to the Holder shall be in
writing and sent by mail or emailed, in PDF format to the Holder at his or its address as set forth in the Note
Register.
A-1-10
13.
This Note is one of the Š13% Senior Notes due Š14 (collectively, the “Notes” and,
individually, a “Note”) issued by the Company in accordance with the Indenture, copies of which are on file and
available for inspection at the Corporate Trust Office. Under the terms of the Indenture, the Company may
remove any Trustee and appoint a new Trustee. The Company shall notify, or cause the Trustee to notify, the
Holders of Notes of the appointment of any Trustee.
The Notes are issuable only as fully registered Notes without coupons in denominations of
$200,000 or integral multiples of $1,000 in excess thereof.
Notes, is hereby incorporated mutatis mutandis by reference herein.
14.
Article VIII of the Indenture, which provides for amendments to the Indenture and the
15.
Subject to the authentication of this Note by the Trustee, the Company hereby certifies
and declares that all acts, conditions and things required to be done and performed and to have happened
precedent to the creation and issuance of this Note, and to constitute the same a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, have been done and performed and have
happened in due and strict compliance with all applicable law.
16.
Claims for payment of principal in respect of this Note shall be prescribed upon the
expiry of 6 years from any redemption date and claims for payment of interest (if any) in respect of this Note
shall be prescribed upon the expiry of 5 years from the due date hereof.
This Note shall be governed by and construed in accordance with the laws of the State of
New York.
13
14
3.800 for the 2020 Notes; 4.000 for the 2021 Notes; 4.400 for the 2023 Notes; and 5.000 for the 2028 Notes.
2020 for the 2020 Notes; 2021 for the 2021 Notes; 2023 for the 2023 Notes; and 2028 for the 2028 Notes.
A-1-11
FORM OF REGULATION S GLOBAL NOTE
[FORM OF FACE OF NOTE]
EXHIBIT A-2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR WITH ANY SECURITIES
REGULATORY AUTHORITY OF ANY JURISDICTION AND MAY NOT BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO A U.S. PERSON
(AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) EXCEPT PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT TO AN
EFFECTIVE
TAKEDA
PHARMACEUTICAL COMPANY LIMITED (THE “COMPANY”) HAS AGREED THAT THIS LEGEND
SHALL BE DEEMED TO HAVE BEEN REMOVED ON THE 41ST DAY FOLLOWING THE LATER OF
THE COMMENCEMENT OF THE OFFERING OF THE NOTES AND THE FINAL DELIVERY DATE
WITH RESPECT THERETO.
REGISTRATION STATEMENT UNDER
SECURITIES ACT.
THE
IS
THIS
UNLESS
PRESENTED
CERTIFICATE
AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
(“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
AN
BY
INTEREST PAYMENTS ON THIS NOTE GENERALLY WILL BE SUBJECT TO
JAPANESE WITHHOLDING TAX UNLESS IT IS ESTABLISHED THAT THIS NOTE IS HELD BY OR
FOR THE ACCOUNT OF A BENEFICIAL OWNER THAT IS (I) FOR JAPANESE TAX PURPOSES,
NEITHER AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION, NOR AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A PERSON HAVING A SPECIAL RELATIONSHIP WITH THE COMPANY AS DESCRIBED IN
ARTICLE 6, PARAGRAPH (4) OF THE ACT ON SPECIAL MEASURES CONCERNING TAXATION OF
JAPAN (ACT NO. 26 OF 1957, AS AMENDED) (THE “ACT ON SPECIAL TAXATION MEASURES”) (A
“SPECIALLY-RELATED PERSON OF THE COMPANY”),
(II) A JAPANESE FINANCIAL
INSTITUTION OR A JAPANESE FINANCIAL INSTRUMENTS BUSINESS OPERATOR DESIGNATED IN
ARTICLE 3-2-2, PARAGRAPH (28) OF THE CABINET ORDER (CABINET ORDER NO. 43 OF 1957, AS
AMENDED) RELATING TO THE ACT ON SPECIAL TAXATION MEASURES WHICH COMPLIES WITH
THE REQUIREMENT FOR TAX EXEMPTION UNDER ARTICLE 6, PARAGRAPH (9) OF THE ACT ON
SPECIAL TAXATION MEASURES OR (III) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION
OR A FINANCIAL INSTRUMENTS BUSINESS OPERATOR, ETC. DESCRIBED IN ARTICLE 3-3,
PARAGRAPH (6) OF THE ACT ON SPECIAL TAXATION MEASURES WHICH HAS RECEIVED SUCH
PAYMENTS THROUGH A PAYMENT HANDLING AGENT IN JAPAN AS DESCRIBED IN PARAGRAPH
(1) OF SAID ARTICLE AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER
THAT PARAGRAPH.
INTEREST PAYMENTS ON THIS NOTE TO AN INDIVIDUAL RESIDENT OF JAPAN,
TO A JAPANESE CORPORATION NOT DESCRIBED IN THE PRECEDING PARAGRAPH, OR TO AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A SPECIALLY-RELATED PERSON OF THE COMPANY WILL BE SUBJECT TO JAPANESE
INCOME TAX AT THE TIME OF SUCH INTEREST PAYMENTS.
A-2-1
TAKEDA PHARMACEUTICAL COMPANY LIMITED
[3.800% Senior Notes due 2020]
[4.000% Senior Notes due 2021]
[4.400% Senior Notes due 2023]
[5.000% Senior Notes due 2028]
Principal Amount $Š
No. Reg S-1
CUSIP No. Š15
ISIN Š16
Common Code Š17
Takeda Pharmaceutical Company Limited (the “Company”), for value received, hereby
promises to pay to Cede & Co., or registered assigns, the principal amount set forth above on November 26, Š18,
and to pay interest thereon from November 26, 2018 or from the most recent Interest Payment Date to which
interest has been paid or made available for payment, semi-annually in arrears on each Interest Payment Date
commencing on May 26, 2019, at the rate of Š19% per annum, together with such Additional Amounts (if any) as
may be payable under this Note, until the principal hereof is paid or made available for payment. Interest on this
Note will accrue from the date of original issuance or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. This
Note will be the Company’s direct, unsecured and unsubordinated general obligation and will have the same rank
in liquidation as all of the Company’s other unsecured and unsubordinated debt.
In any case in which any date for payment of principal or interest (or Additional Amounts, if
any) falls on a day that is not a Business Day, then payment of principal or interest (or Additional Amounts, if
any) need not be made on such date but may be made on the next succeeding Business Day. Any payment made
pursuant to the preceding sentence on such next succeeding Business Day shall have the same force and effect as
if made on the due date, and no interest shall accrue with respect to such payment for the period after such date.
“Interest Payment Date” means each May 26 and November 26 during the term of this Note.
“Business Day” means a day, other than a Saturday or Sunday, that is neither a legal holiday
nor a day on which commercial banking institutions are authorized or required by law, regulation or executive
order to be closed in The City of New York, London or Tokyo.
Reference is hereby made to the further provisions of this Note set forth on the reverse hereof,
and such provisions shall for all purposes have the same effect as though fully set forth in this place.
This Note shall not be valid or obligatory for any purpose until it shall have been manually
signed by the Trustee for authentication.
15
J8129EAV0 for the 2020 Notes; J8129EAW8 for the 2021 Notes; J8129EAX6 for the 2023 Notes; and
J8129EAY4 for the 2028 Notes.
16 USJ8129EAV05 for the 2020 Notes; USJ8129EAW87 for the 2021 Notes; USJ8129EAX60 for the 2023
Notes; and USJ8129EAY44 for the 2028 Notes.
190257380 for the 2020 Notes; 190256782 for the 2021 Notes; 190257347 for the 2023 Notes; and
190258165 for the 2028 Notes.
2020 for the 2020 Notes; 2021 for the 2021 Notes; 2023 for the 2023 Notes; and 2028 for the 2028 Notes.
3.800 for the 2020 Notes; 4.000 for the 2021 Notes; 4.400 for the 2023 Notes; and 5.000 for the 2028 Notes.
17
18
19
A-2-2
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
PHARMACEUTICAL
COMPANY
TAKEDA
LIMITED
By
Name: [name]
Title: [title]
This is one of the Notes referred to
in the within-mentioned Indenture:
Dated:
, 20
MUFG UNION BANK, N.A.,
as Trustee
By
Authorized Signatory
A-2-3
[FORM OF REVERSE OF NOTE]
1.
The principal amount of this Note shall be paid on any redemption date, in immediately
available funds in The City of New York upon surrender of the Note at the office designated herein or pursuant
hereto of MUFG Union Bank, N.A., as trustee (MUFG Union Bank, N.A. or any duly appointed successor trustee
acting in such capacity herein referred to as the “Trustee”), pursuant to an Indenture (such agreement, as it may
the “Indenture”), dated as of November 26, 2018, between Takeda
be amended from time to time,
Pharmaceutical Company Limited (the “Company”) and the Trustee. The office of the Trustee at which such
payment shall be made is the corporate trust office located at 1251 Avenue of the Americas, 19th Floor, New
York, New York 10020 or at such other address in The City of New York as the Trustee shall specify (the
“Corporate Trust Office”) by notice to the Holder (as defined in the Indenture). Terms used herein not
otherwise defined shall have the meaning ascribed to such term in the Indenture.
Payment of the principal of, and interest (including Additional Amounts, if applicable) on, this
Note shall be made by wire transfer in immediately available funds to a bank account in the United States
designated by the Holder in a written notice received by the Trustee (a) in the case of a payment of interest, prior
to the Record Date (as defined below) immediately preceding the date on which such payment is due and (b) in
the case of payment of principal on any redemption date, no less than 30 days and no more than 60 days prior to
such redemption date, provided that in the case of such payment of principal, this Note shall have been
surrendered to the Trustee for payment together with such notice. No interest shall accrue on this Note after
redemption; provided, however, that, to the extent permitted by applicable law, interest shall accrue, at the rate at
which interest accrues on the principal of this Note, on any amount of principal not paid when due upon
surrender of this Note to the Trustee. “Record Date” means, with respect to an Interest Payment Date, the day
five Business Days preceding such Interest Payment Date.
2.
Payments of principal of and interest (including Additional Amounts, if applicable) on
this Note shall be made in United States dollars or in such other coin or currency of the United States of America
as at the time of payment is legal tender for the payment of public and private debts. Until the date on which the
Notes shall have been delivered to the Trustee for cancellation, or become due and payable and a sum sufficient
to pay the principal of and interest (including Additional Amounts, if applicable) on all of the Notes shall have
been made available for payment and either paid or returned to the Company as provided herein and in the
Indenture (such date being referred to herein as the “Termination Date”), the Company will at all times
maintain an office or agency in the Borough of Manhattan, The City of New York, where Notes may be
presented or surrendered for payment.
3.
This Note is transferable in whole or in part and may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations by the Holder in person, or by his attorney duly
authorized in writing, at the Corporate Trust Office in The City of New York, where the Trustee shall maintain a
register providing for the registration of the Notes and any exchange or transfer thereof (the “Note Register”).
Upon surrender of this Note for exchange or registration of transfer, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a Note or Notes, each in a denomination of $200,000 or an
integral multiple of $1,000 in excess thereof, which has or have an aggregate denomination equal to the
denomination of this Note and is or are registered in such name or names requested by the Holder. Any Note
presented for exchange or registration of transfer shall be accompanied by a written instrument of transfer in
form and with guarantee of signature and evidence of authority satisfactory to the Trustee and with payment by
the transferor of any stamp or other tax or governmental charge payable in connection with such transfer (or
evidence that such tax or charge has been paid) and with such tax identification number or other information for
each person in whose name a new Note is to be issued as the Trustee may request to comply with applicable law.
No exchange or registration of transfer of this Note shall be made on or after the date upon which a notice of
redemption of this Note is transmitted to the Holder.
Notwithstanding any other provision of this Note or the Indenture to the contrary, this Note, if
in global form (a Note in such form being referred to herein as a “Global Note”), shall be exchangeable pursuant
A-2-4
to this Note and the Indenture only if: (i) the Depositary (as defined in the Indenture) notifies the Company that it
is unwilling or unable to continue as depositary for a Global Note or has ceased to be qualified to act as such as
required by the Indenture or (ii) there shall have occurred and be continuing an Event of Default (as defined in
the Indenture) with respect to the Notes. Upon the occurrence of any such event, this Note shall be exchangeable
for definitive Notes, as provided in the Indenture. Notwithstanding any other provision of this Note, a Global
Note may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC. In the event and for so long as definitive Notes are not issued to any owner of a
beneficial interest in this Global Note after the occurrence of one of the events set forth above, the Company
expressly acknowledges, with respect to the right of a Holder to pursue a remedy pursuant to Section 4.7 or
Section 4.8 of the Indenture, the right of such owner to pursue such remedy with respect to the portion of this
Global Note that represents such owner’s Notes as if such definitive Notes had been issued.
No service charge shall be made for any such exchange or registration of transfer, but the
Company may charge the party requesting any such exchange or registration of transfer a sum sufficient to
reimburse it for any tax or other governmental charge required to be paid in connection with such exchange or
registration.
All Notes issued upon any exchange or registration of transfer of this Note shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same benefits, as this Note.
Except in the circumstances referred to in the second paragraph of this Section 3, the Company
and the Trustee may treat the Holder as the absolute owner of this Note for the purpose of receiving payments of
principal of and interest (including, Additional Amounts, as defined in Section 5 of this Note) on this Note and
for all other purposes whatsoever, and the Company and the Trustee shall not be affected by any notice to the
contrary.
subject to payment at the option of the Company prior to November 26, Š20.
4.
Except as provided in Sections 6, 7, 8 and 9 of this Note, this Note is not redeemable or
5.
All payments of principal and interest in respect of this Note shall be made without
withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied by or on behalf of Japan, or any authority thereof or therein having
power to tax (“Taxes”), unless such withholding or deduction is required by law or by the authority. In such
event, the Company shall pay such additional amounts (“Additional Amounts”) as will result in the receipt by
the Holder of such amounts as would have been received by it had no such withholding or deduction been
required, except that no such Additional Amounts shall be payable with respect to this Note under any of the
following circumstances:
the Holder or beneficial owner of this Note is an individual non-resident of Japan or a
(i)
non-Japanese corporation and is liable for such Taxes in respect of this Note by reason of its
(A) having some present or former connection with Japan other than the mere holding of this
Note or (B) being a person having a special relationship with the Company (a “specially-
related person of the Company”) as described in Article 6, paragraph (4) of the Act on
Special Measures Concerning Taxation of Japan (Act No. 26 of 1957, as amended) (together
with the cabinet order thereunder (Cabinet Order No. 43 of 1957, as amended), the “Act on
Special Taxation Measures”);
(ii)
the Holder or beneficial owner of this Note would otherwise be exempt from any such
withholding or deduction but fails to comply with any applicable requirement to provide
Interest Recipient Information (as defined below) or to submit a Written Application for Tax
Exemption (as defined below) to the relevant Paying Agent to whom this Note is presented
20
2020 for the 2020 Notes; 2021 for the 2021 Notes; 2023 for the 2023 Notes; and 2028 for the 2028 Notes.
A-2-5
(where presentation is required), or whose Interest Recipient Information is not duly
communicated through the relevant Participant
(as defined below) and the relevant
international clearing organization to such Paying Agent;
the Holder or beneficial owner of this Note is for Japanese tax purposes treated as an
(iii)
individual resident of Japan or a Japanese corporation (except for (A) a Designated Financial
Institution (as defined below) that complies with the requirement to provide Interest Recipient
Information or to submit a Written Application for Tax Exemption and (B) an individual
resident of Japan or a Japanese corporation that duly notifies (directly, through the Participant
or otherwise) the relevant Paying Agent of its status as not being subject to Taxes to be
withheld or deducted by the Company by reason of receipt by such individual resident of
Japan or Japanese corporation of interest on this Note through a payment handling agent in
Japan appointed by it);
(iv)
this Note is presented for payment (where presentation is required) more than 30 days
after the day on which such payment on this Note became due or after the full payment was
provided for, whichever occurs later, except to the extent the Holder hereof would have been
entitled to Additional Amounts on presenting the same for payment on the last day of such
period of 30 days;
(v)
the withholding or deduction is imposed on a Holder or beneficial owner that could
have avoided such withholding or deduction by presenting this Note (where presentation is
required) to another Paying Agent maintained by the Company;
(vi)
the Holder is a fiduciary or partnership or is not the sole beneficial owner of the
payment of the principal of, or any interest on, this Note, and Japanese law requires the
payment to be included for tax purposes in the income of a beneficiary or settlor with respect
to such fiduciary or a member of such partnership or a beneficial owner, in each case, who
would not have been entitled to such Additional Amounts had it been the Holder of this Note;
or
(vii)
any combination of (i) through (vi) above.
For the avoidance of doubt, none of the Company, the Trustee, any Paying Agent or any other
person shall be required to pay any Additional Amounts with respect to any withholding or deduction imposed on
or in respect of any Note pursuant to Sections 1471 to 1474 of the Internal Revenue Code of 1986, as amended,
commonly referred to as FATCA, any treaty, law, regulation or other official guidance implementing FATCA, or
any agreement between the Company, the Trustee, a Paying Agent or any other Person and the United States, any
other jurisdiction, or any authority of any of the foregoing implementing FATCA.
Where this Note is held through a participant of an international clearing organization or a
financial intermediary (each, a “Participant”), in order to receive payments free of withholding or deduction by
the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an individual
non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the Company) or
(b) a Japanese financial institution (each, a “Designated Financial Institution”) falling under certain categories
prescribed by the Act on Special Taxation Measures, all in accordance with the Act on Special Taxation
Measures, such beneficial owner of this Note must, at the time of entrusting a Participant with the custody of this
Note, provide certain information prescribed by the Act on Special Taxation Measures (“Interest Recipient
Information”) to enable the Participant to establish that such beneficial owner is exempted from the requirement
for Taxes to be withheld or deducted, and advise the Participant if the beneficial owner of this Note ceases to be
so exempted (including the case where a beneficial owner of this Note that is an individual non-resident of Japan
or a non-Japanese corporation becomes a specially-related person of the Company).
A-2-6
Where this Note is not held by a Participant, in order to receive payments free of withholding
or deduction by the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an
individual non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the
Company) or (b) a Designated Financial Institution, all in accordance with the Act on Special Taxation
Measures, such beneficial owner must, prior to each time at which it receives interest, submit to the relevant
Paying Agent a written application for tax exemption (hikazei tekiyo shinkokusho) (“Written Application for
Tax Exemption”) in a form obtainable from the Paying Agent stating, inter alia, the name and address of the
beneficial owner, the title of this Note, the relevant Interest Payment Date, the amount of interest and the fact that
together with
the beneficial owner is qualified to submit
documentary evidence regarding its identity and residence.
the Written Application for Tax Exemption,
The Company shall make any required withholding or deduction and remit the full amount
withheld or deducted to the Japanese taxing authority in accordance with applicable law. The Company shall use
reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any tax, duty, assessment,
fee or other governmental charge so withheld or deducted from the Japanese taxing authority imposing such tax,
duty, assessment, fee or other governmental charge, and if certified copies are not available, the Company shall
use reasonable efforts to obtain other evidence satisfactory to the Trustee, and the Trustee shall make such
certified copies or other evidence available to the Holders or beneficial owners of the Notes upon reasonable
request to the Trustee.
The obligation to pay Additional Amounts with respect to any taxes, duties, assessments and
other governmental charges shall not apply to (A) any estate, inheritance, gift, sales, transfer, personal property
or any similar tax, duty, assessment, fee or other governmental charge or (B) any tax, duty, assessment, fee or
other governmental charge which is payable otherwise than by withholding or deduction from payments of
principal or interest on this Note; provided that, except as otherwise set forth in this Note and in the Indenture,
the Company will pay all stamp, court or documentary taxes or any excise or property taxes, charges or similar
levies and other duties, if any, which may be imposed by Japan, the United States or any political subdivision or
any taxing authority thereof or therein, with respect to the Indenture or as a consequence of the initial issuance,
execution, delivery, registration or enforcement of the Notes.
References to principal or interest in respect of this Note shall be deemed to include any
Additional Amounts due which may be payable as set forth in this Note and the Indenture.
6.
This Note may be redeemed at any time at the option and sole discretion of the
Company, in whole or in part, at any time prior to Š21 [(the “Par Call Date”)]22, upon giving not less than 30 nor
more than 60 days’ notice of redemption to the Trustee and the Holders, at a redemption price equal to the
greater of (a) 100% of the principal amount of this Note being redeemed or (b) the sum of the present values of
the principal and the remaining scheduled payments of interest on this Note being redeemed (exclusive of interest
accrued to the Redemption Date (as defined in the Indenture)), that would be due if this Note were [held to the
maturity date]23[redeemed on the Par Call Date]24, discounted to the Redemption Date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined in the Indenture)
plus Š25 basis points, plus, in each case, accrued and unpaid interest on the principal amount of this Note being
redeemed to, but excluding, the Redemption Date.
[This Note may be redeemed at any time at the option and sole discretion of the Company, in
whole or in part, at any time on or after the Par Call Date, upon giving not less than 30 nor more than 60 days’
21 November 26, 2020 for the 2020 Notes; October 26, 2021 for the 2021 Notes; October 26, 2023 for the 2023
22
Notes; and August 26, 2028 for the 2028 Notes.
Remove for 2020 Notes.
23 Only for the 2020 Notes
24 Only for the 2021 Notes, 2023 Notes and 2028 Notes
25
17.5 for the 2020 Notes; 20.0 for the 2021 Notes; 25.0 for the 2023 Notes; and 30.0 for the 2028 Notes.
A-2-7
notice of redemption to the Trustee and the Holders, at a redemption price equal to 100% of the principal amount
of this Note being redeemed plus accrued and unpaid interest on the principal amount of this Note being
redeemed to, but excluding, the Redemption Date.]26
7.
This Note may be redeemed at any time at the option and sole discretion of the
Company in whole, but not in part, subject to compliance with applicable regulatory requirements, and upon
giving not less than 30 nor more than 60 days’ notice of redemption to the Trustee and the Holders (which notice
shall be irrevocable) at the principal amount of this Note together with interest accrued to the date fixed for
redemption and any Additional Amounts hereon, if the Company has been or will be obliged to pay any
Additional Amounts as a result of (a) any change in, or amendment to, the laws or regulations of Japan or any
political subdivision or any authority thereof or therein having power to tax, or any change in application or
official interpretation of such laws or regulations, which change or amendment becomes effective on or after the
date of the issuance of this Note or (b) after the completion of any Succession Event, any change in, or
amendment to, the laws or regulations of the jurisdiction of the Successor Person or any political subdivision or
any authority thereof or therein having power to tax, or any change in application or official interpretation of
such laws or regulations, which change or amendment becomes effective on or after the date of such Succession
Event, and in either case such obligation cannot be avoided by the Company or the Successor Person through the
taking of reasonable measures available to the Company or the Successor Person, as the case may be (an
“Additional Amounts Event”). No notice of redemption for an Additional Amounts Event pursuant to this
Section 7 shall be given sooner than 90 days prior to the earliest date on which the Company would actually be
obliged to pay such Additional Amounts on payments with respect to this Note.
Prior to the publication of any notice of redemption pursuant to this Section 7, the Company
shall deliver to the Trustee (i) a certificate signed by an Authorized Officer stating that the conditions precedent
to its right to so redeem have been fulfilled and (ii) an opinion of independent legal advisors of recognized
standing confirming that an Additional Amounts Event has occurred. The Trustee shall accept such opinion as
sufficient evidence of the satisfaction of the conditions precedent described above, in which event it shall be
conclusive and binding on the Holders.
8.
If (i) the Shire Acquisition (as defined in the Indenture) has not been consummated on or
prior to the Long Stop Date (as defined in the Indenture) or (ii) the Company otherwise publicly announces that
the Shire Acquisition will not be consummated, then the Company will be required to redeem all outstanding
Notes on the Special Mandatory Redemption Date at a special mandatory redemption price equal to 101% of the
aggregate principal amount of the Notes plus accrued and unpaid interest, if any, to, but excluding, the Special
Mandatory Redemption Date.
Notwithstanding the foregoing, installments of interest on the Notes that are due and payable
on Interest Payment Dates falling on or prior to the Special Mandatory Redemption Date will be payable on such
Interest Payment Dates to the registered Holders as of the close of business on the relevant Record Dates in
accordance with the terms of the Notes and this Indenture.
The Company will cause the notice of special mandatory redemption to be transmitted, with a
copy to the Trustee, within five Business Days after the occurrence of the event triggering the special mandatory
redemption to each Holder at its registered address. If funds sufficient to pay the special mandatory redemption
price of the outstanding notes to be redeemed on the Special Mandatory Redemption Date (plus accrued and
unpaid interest, if any, to, but excluding, such date) are deposited with the Trustee or a paying agent on or before
such Special Mandatory Redemption Date, and certain other conditions are satisfied, on and after such Special
Mandatory Redemption Date, the outstanding Notes will cease to bear interest.
Upon the consummation of the Shire Acquisition, the foregoing provisions regarding the
special mandatory redemption will cease to apply.
26 Only for the 2021 Notes, 2023 Notes and 2028 Notes.
A-2-8
9.
In the case of any redemption of this Note as provided in Section 6, 7 or 8 of this Note,
notice of redemption of this Note shall be transmitted to the Holder at its address as it shall then appear in the
Note Register. If by reason of any cause, it shall be impracticable to give notice to the Holder in the manner
prescribed herein, then such notification in lieu thereof as shall be made by the Company or by the Trustee on
behalf of and at the instruction of the Company shall constitute sufficient provision of such notice, if such
notification shall, so far as may be practicable, approximate the terms and conditions of the notice in lieu of
which it is given. Neither the failure to give notice nor any defect in any notice of redemption given to the Holder
of any other Note shall affect the sufficiency of any notice with respect to this Note. Notice of redemption of this
Note having been so given, this Note shall become due and payable on the redemption date so specified and such
dates shall be deemed the maturity date of this Note.
10.
The Company shall, on or before each due date of the principal of or interest on this
Note, pay to the Trustee, who shall hold the same in trust for the benefit of the person entitled thereto, a sum
sufficient to pay the principal or interest so becoming due until such sum shall be paid to such person or
otherwise disposed of as herein provided. Any money held by the Trustee in trust for the payment of the principal
of or interest on this Note and remaining unclaimed for two years after such principal or interest has become due
and payable and paid to the Trustee shall be discharged from such trust, and repaid to the Company, and all
liability of the Trustee with respect to such money shall cease.
11.
If this Note shall at any time become mutilated, destroyed, stolen or lost, then,
provided that this Note, or evidence of the destruction, theft or loss hereof (together with the indemnity
hereinafter referred to and such other documents or proof as may be required hereunder) shall be delivered to the
Trustee, a replacement Note of like tenor and principal amount shall be authenticated and delivered by the
Trustee, in exchange for this Note, in the case of mutilation, or in lieu of this Note, in the case of destruction, loss
or theft, and provided further that, if this Note is destroyed, stolen or lost, (i) neither the Company nor the Trustee
shall have received notice that this Note has been acquired by a bona fide purchaser, and (ii) the Trustee shall
have received (a) satisfactory evidence (as so deemed by the Trustee in its absolute discretion) that this Note was
destroyed, stolen or lost, and (b) an indemnity for the benefit of the Company and the Trustee satisfactory to each
of them. All expenses and charges associated with procuring such indemnity shall be borne by the Holder of this
Note.
As provided in the Indenture, every new Note issued in exchange for or in lieu of any
mutilated, destroyed, stolen or lost Note shall constitute an original additional contractual obligation of the
Company, whether or not the mutilated, destroyed, stolen or lost Note shall be at any time enforceable by
anyone, and shall be entitled to the benefits of the Indenture equally and proportionately with any and all other
Notes duly issued thereunder. Any such new Note shall be so dated that neither gain nor loss of interest shall
result from such replacement. Upon the issuance of any such new Note, the Company may require the payment
of a sum sufficient to cover any stamp or other tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
12.
All notices to the Company under this Note shall be in writing and addressed to the
Company at Takeda Pharmaceutical Company Limited, 1-1, Nihonbashi-Honcho 2-Chome, Chuo-ku, Tokyo
103-8668, Japan Attention: Global Treasury & Finance Management, Group Finance & Controlling, Global
Finance, or to such other address as the Company may notify to the Holder. All notices to the Holder shall be in
writing and sent by mail or emailed, in PDF format to the Holder at his or its address as set forth in the Note
Register.
This Note is one of the Š27% Senior Notes due Š28 (collectively, the “Notes” and,
individually, a “Note”) issued by the Company in accordance with the Indenture, copies of which are on file and
13.
27
28
3.800 for the 2020 Notes; 4.000 for the 2021 Notes; 4.400 for the 2023 Notes; and 5.000 for the 2028 Notes.
2020 for the 2020 Notes; 2021 for the 2021 Notes; 2023 for the 2023 Notes; and 2028 for the 2028 Notes.
A-2-9
available for inspection at the Corporate Trust Office. Under the terms of the Indenture, the Company may
remove any Trustee and appoint a new Trustee. The Company shall notify, or cause the Trustee to notify, the
Holders of Notes of the appointment of any Trustee.
The Notes are issuable only as fully registered Notes without coupons in denominations of
$200,000 or integral multiples of $1,000 in excess thereof.
Notes, is hereby incorporated mutatis mutandis by reference herein.
14.
Article VIII of the Indenture, which provides for amendments to the Indenture and the
15.
Subject to the authentication of this Note by the Trustee, the Company hereby certifies
and declares that all acts, conditions and things required to be done and performed and to have happened
precedent to the creation and issuance of this Note, and to constitute the same a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, have been done and performed and have
happened in due and strict compliance with all applicable law.
16.
Claims for payment of principal in respect of this Note shall be prescribed upon the
expiry of 6 years from any redemption date and claims for payment of interest (if any) in respect of this Note
shall be prescribed upon the expiry of 5 years from the due date hereof.
This Note shall be governed by and construed in accordance with the laws of the State of
New York.
A-2-10
FORM OF UNRESTRICTED GLOBAL NOTE
[FORM OF FACE OF NOTE]
EXHIBIT A-3
IS
THIS
UNLESS
PRESENTED
CERTIFICATE
AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
(“DTC”), TO TAKEDA PHARMACEUTICAL COMPANY LIMITED (THE “COMPANY”) OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
AN
BY
INTEREST PAYMENTS ON THIS NOTE GENERALLY WILL BE SUBJECT TO
JAPANESE WITHHOLDING TAX UNLESS IT IS ESTABLISHED THAT THIS NOTE IS HELD BY OR
FOR THE ACCOUNT OF A BENEFICIAL OWNER THAT IS (I) FOR JAPANESE TAX PURPOSES,
NEITHER AN INDIVIDUAL RESIDENT OF JAPAN OR A JAPANESE CORPORATION, NOR AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A PERSON HAVING A SPECIAL RELATIONSHIP WITH THE COMPANY AS DESCRIBED IN
ARTICLE 6, PARAGRAPH (4) OF THE ACT ON SPECIAL MEASURES CONCERNING TAXATION OF
JAPAN (ACT NO. 26 OF 1957, AS AMENDED) (THE “ACT ON SPECIAL TAXATION MEASURES”) (A
“SPECIALLY-RELATED PERSON OF THE COMPANY”),
(II) A JAPANESE FINANCIAL
INSTITUTION OR A JAPANESE FINANCIAL INSTRUMENTS BUSINESS OPERATOR DESIGNATED IN
ARTICLE 3-2-2, PARAGRAPH (28) OF THE CABINET ORDER (CABINET ORDER NO. 43 OF 1957, AS
AMENDED) RELATING TO THE ACT ON SPECIAL TAXATION MEASURES WHICH COMPLIES WITH
THE REQUIREMENT FOR TAX EXEMPTION UNDER ARTICLE 6, PARAGRAPH (9) OF THE ACT ON
SPECIAL TAXATION MEASURES OR (III) A PUBLIC CORPORATION, A FINANCIAL INSTITUTION
OR A FINANCIAL INSTRUMENTS BUSINESS OPERATOR, ETC. DESCRIBED IN ARTICLE 3-3,
PARAGRAPH (6) OF THE ACT ON SPECIAL TAXATION MEASURES WHICH HAS RECEIVED SUCH
PAYMENTS THROUGH A PAYMENT HANDLING AGENT IN JAPAN AS DESCRIBED IN PARAGRAPH
(1) OF SAID ARTICLE AND COMPLIES WITH THE REQUIREMENT FOR TAX EXEMPTION UNDER
THAT PARAGRAPH.
INTEREST PAYMENTS ON THIS NOTE TO AN INDIVIDUAL RESIDENT OF JAPAN,
TO A JAPANESE CORPORATION NOT DESCRIBED IN THE PRECEDING PARAGRAPH, OR TO AN
INDIVIDUAL NON-RESIDENT OF JAPAN OR A NON-JAPANESE CORPORATION THAT IN EITHER
CASE IS A SPECIALLY-RELATED PERSON OF THE COMPANY WILL BE SUBJECT TO JAPANESE
INCOME TAX AT THE TIME OF SUCH INTEREST PAYMENTS.
A-3-1
TAKEDA PHARMACEUTICAL COMPANY LIMITED
[3.800% Senior Notes due 2020]
[4.000% Senior Notes due 2021]
[4.400% Senior Notes due 2023]
[5.000% Senior Notes due 2028]
No. 1
CUSIP No. Š
ISIN Š
Common Code Š
Principal Amount $Š
Takeda Pharmaceutical Company Limited (the “Company”), for value received, hereby
promises to pay to Cede & Co., or registered assigns, the principal amount set forth above on November 26, Š29,
and to pay interest thereon from November 26, 2018 or from the most recent Interest Payment Date to which
interest has been paid or made available for payment, semi-annually in arrears on each Interest Payment Date
commencing on May 26, 2019, at the rate of Š30% per annum, together with such Additional Amounts (if any) as
may be payable under this Note, until the principal hereof is paid or made available for payment. Interest on this
Note will accrue from the date of original issuance or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. This
Note will be the Company’s direct, unsecured and unsubordinated general obligation and will have the same rank
in liquidation as all of the Company’s other unsecured and unsubordinated debt.
In any case in which any date for payment of principal or interest (or Additional Amounts, if
any) falls on a day that is not a Business Day, then payment of principal or interest (or Additional Amounts, if
any) need not be made on such date but may be made on the next succeeding Business Day. Any payment made
pursuant to the preceding sentence on such next succeeding Business Day shall have the same force and effect as
if made on the due date, and no interest shall accrue with respect to such payment for the period after such date.
“Interest Payment Date” means each May 26 and November 26 during the term of this Note.
“Business Day” means a day, other than a Saturday or Sunday, that is neither a legal holiday
nor a day on which commercial banking institutions are authorized or required by law, regulation or executive
order to be closed in The City of New York, London or Tokyo.
Reference is hereby made to the further provisions of this Note set forth on the reverse hereof,
and such provisions shall for all purposes have the same effect as though fully set forth in this place.
This Note shall not be valid or obligatory for any purpose until it shall have been manually
signed by the Trustee for authentication.
29
30
2020 for the 2020 Notes; 2021 for the 2021 Notes; 2023 for the 2023 Notes; and 2028 for the 2028 Notes.
3.800 for the 2020 Notes; 4.000 for the 2021 Notes; 4.400 for the 2023 Notes; and 5.000 for the 2028 Notes.
A-3-2
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
PHARMACEUTICAL
COMPANY
TAKEDA
LIMITED
By
Name: [name]
Title: [title]
This is one of the Notes referred to
in the within-mentioned Indenture:
Dated:
, 20
MUFG UNION BANK, N.A.,
as Trustee
By
Authorized Signatory
A-3-3
[FORM OF REVERSE OF NOTE]
1.
The principal amount of this Note shall be paid on any redemption date, in immediately
available funds in The City of New York upon surrender of the Note at the office designated herein or pursuant
hereto of MUFG Union Bank, N.A., as trustee (MUFG Union Bank, N.A. or any duly appointed successor trustee
acting in such capacity herein referred to as the “Trustee”), pursuant to an Indenture (such agreement, as it may
the “Indenture”), dated as of November 26, 2018, between Takeda
be amended from time to time,
Pharmaceutical Company Limited (the “Company”) and the Trustee. The office of the Trustee at which such
payment shall be made is the corporate trust office located at 1251 Avenue of the Americas, 19th Floor, New
York, New York 10020 or at such other address in The City of New York as the Trustee shall specify (the
“Corporate Trust Office”) by notice to the Holder (as defined in the Indenture). Terms used herein not
otherwise defined shall have the meaning ascribed to such term in the Indenture.
Payment of the principal of, and interest (including Additional Amounts, if applicable) on, this
Note shall be made by wire transfer in immediately available funds to a bank account in the United States
designated by the Holder in a written notice received by the Trustee (a) in the case of a payment of interest, prior
to the Record Date (as defined below) immediately preceding the date on which such payment is due and (b) in
the case of payment of principal on any redemption date, no less than 30 days and no more than 60 days prior to
such redemption date, provided that in the case of such payment of principal, this Note shall have been
surrendered to the Trustee for payment together with such notice. No interest shall accrue on this Note after
redemption; provided, however, that, to the extent permitted by applicable law, interest shall accrue, at the rate at
which interest accrues on the principal of this Note, on any amount of principal not paid when due upon
surrender of this Note to the Trustee. “Record Date” means, with respect to an Interest Payment Date, the day
five Business Days preceding such Interest Payment Date.
2.
Payments of principal of and interest (including Additional Amounts, if applicable) on
this Note shall be made in United States dollars or in such other coin or currency of the United States of America
as at the time of payment is legal tender for the payment of public and private debts. Until the date on which the
Notes shall have been delivered to the Trustee for cancellation, or become due and payable and a sum sufficient
to pay the principal of and interest (including Additional Amounts, if applicable) on all of the Notes shall have
been made available for payment and either paid or returned to the Company as provided herein and in the
Indenture (such date being referred to herein as the “Termination Date”), the Company will at all times
maintain an office or agency in the Borough of Manhattan, The City of New York, where Notes may be
presented or surrendered for payment.
3.
This Note is transferable in whole or in part and may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations by the Holder in person, or by his attorney duly
authorized in writing, at the Corporate Trust Office in The City of New York, where the Trustee shall maintain a
register providing for the registration of the Notes and any exchange or transfer thereof (the “Note Register”).
Upon surrender of this Note for exchange or registration of transfer, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a Note or Notes, each in a denomination of $200,000 or an
integral multiple of $1,000 in excess thereof, which has or have an aggregate denomination equal to the
denomination of this Note and is or are registered in such name or names requested by the Holder. Any Note
presented for exchange or registration of transfer shall be accompanied by a written instrument of transfer in
form and with guarantee of signature and evidence of authority satisfactory to the Trustee and with payment by
the transferor of any stamp or other tax or governmental charge payable in connection with such transfer (or
evidence that such tax or charge has been paid) and with such tax identification number or other information for
each person in whose name a new Note is to be issued as the Trustee may request to comply with applicable law.
No exchange or registration of transfer of this Note shall be made on or after the date upon which a notice of
redemption of this Note is transmitted to the Holder.
Notwithstanding any other provision of this Note or the Indenture to the contrary, this Note, if
in global form (a Note in such form being referred to herein as a “Global Note”), shall be exchangeable pursuant
A-3-4
to this Note and the Indenture only if: (i) the Depositary (as defined in the Indenture) notifies the Company that it
is unwilling or unable to continue as depositary for a Global Note or has ceased to be qualified to act as such as
required by the Indenture or (ii) there shall have occurred and be continuing an Event of Default (as defined in
the Indenture) with respect to the Notes. Upon the occurrence of any such event, this Note shall be exchangeable
for definitive Notes, as provided in the Indenture. Notwithstanding any other provision of this Note, a Global
Note may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC. In the event and for so long as definitive Notes are not issued to any owner of a
beneficial interest in this Global Note after the occurrence of one of the events set forth above, the Company
expressly acknowledges, with respect to the right of a Holder to pursue a remedy pursuant to Section 4.7 or
Section 4.8 of the Indenture, the right of such owner to pursue such remedy with respect to the portion of this
Global Note that represents such owner’s Notes as if such definitive Notes had been issued.
No service charge shall be made for any such exchange or registration of transfer, but the
Company may charge the party requesting any such exchange or registration of transfer a sum sufficient to
reimburse it for any tax or other governmental charge required to be paid in connection with such exchange or
registration.
All Notes issued upon any exchange or registration of transfer of this Note shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same benefits, as this Note.
Except in the circumstances referred to in the second paragraph of this Section 3, the Company
and the Trustee may treat the Holder as the absolute owner of this Note for the purpose of receiving payments of
principal of and interest (including, Additional Amounts, as defined in Section 5 of this Note) on this Note and
for all other purposes whatsoever, and the Company and the Trustee shall not be affected by any notice to the
contrary.
subject to payment at the option of the Company prior to November 26, Š31.
4.
Except as provided in Sections 6, 7, 8 and 9 of this Note, this Note is not redeemable or
5.
All payments of principal and interest in respect of this Note shall be made without
withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied by or on behalf of Japan, or any authority thereof or therein having
power to tax (“Taxes”), unless such withholding or deduction is required by law or by the authority. In such
event, the Company shall pay such additional amounts (“Additional Amounts”) as will result in the receipt by
the Holder of such amounts as would have been received by it had no such withholding or deduction been
required, except that no such Additional Amounts shall be payable with respect to this Note under any of the
following circumstances:
the Holder or beneficial owner of this Note is an individual non-resident of Japan or a
(i)
non-Japanese corporation and is liable for such Taxes in respect of this Note by reason of its
(A) having some present or former connection with Japan other than the mere holding of this
Note or (B) being a person having a special relationship with the Company (a “specially-
related person of the Company”) as described in Article 6, paragraph (4) of the Act on
Special Measures Concerning Taxation of Japan (Act No. 26 of 1957, as amended) (together
with the cabinet order thereunder (Cabinet Order No. 43 of 1957, as amended), the “Act on
Special Taxation Measures”);
(ii)
the Holder or beneficial owner of this Note would otherwise be exempt from any such
withholding or deduction but fails to comply with any applicable requirement to provide
Interest Recipient Information (as defined below) or to submit a Written Application for Tax
Exemption (as defined below) to the relevant Paying Agent to whom this Note is presented
31
2020 for the 2020 Notes; 2021 for the 2021 Notes; 2023 for the 2023 Notes; and 2028 for the 2028 Notes.
A-3-5
(where presentation is required), or whose Interest Recipient Information is not duly
communicated through the relevant Participant
(as defined below) and the relevant
international clearing organization to such Paying Agent;
the Holder or beneficial owner of this Note is for Japanese tax purposes treated as an
(iii)
individual resident of Japan or a Japanese corporation (except for (A) a Designated Financial
Institution (as defined below) that complies with the requirement to provide Interest Recipient
Information or to submit a Written Application for Tax Exemption and (B) an individual
resident of Japan or a Japanese corporation that duly notifies (directly, through the Participant
or otherwise) the relevant Paying Agent of its status as not being subject to Taxes to be
withheld or deducted by the Company by reason of receipt by such individual resident of
Japan or Japanese corporation of interest on this Note through a payment handling agent in
Japan appointed by it);
(iv)
this Note is presented for payment (where presentation is required) more than 30 days
after the day on which such payment on this Note became due or after the full payment was
provided for, whichever occurs later, except to the extent the Holder hereof would have been
entitled to Additional Amounts on presenting the same for payment on the last day of such
period of 30 days;
(v)
the withholding or deduction is imposed on a Holder or beneficial owner that could
have avoided such withholding or deduction by presenting this Note (where presentation is
required) to another Paying Agent maintained by the Company;
(vi)
the Holder is a fiduciary or partnership or is not the sole beneficial owner of the
payment of the principal of, or any interest on, this Note, and Japanese law requires the
payment to be included for tax purposes in the income of a beneficiary or settlor with respect
to such fiduciary or a member of such partnership or a beneficial owner, in each case, who
would not have been entitled to such Additional Amounts had it been the Holder of this Note;
or
(vii)
any combination of (i) through (vi) above.
For the avoidance of doubt, none of the Company, the Trustee, any Paying Agent or any other
person shall be required to pay any Additional Amounts with respect to any withholding or deduction imposed on
or in respect of any Note pursuant to Sections 1471 to 1474 of the Internal Revenue Code of 1986, as amended,
commonly referred to as FATCA, any treaty, law, regulation or other official guidance implementing FATCA, or
any agreement between the Company, the Trustee, a Paying Agent or any other Person and the United States, any
other jurisdiction, or any authority of any of the foregoing implementing FATCA.
Where this Note is held through a participant of an international clearing organization or a
financial intermediary (each, a “Participant”), in order to receive payments free of withholding or deduction by
the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an individual
non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the Company) or
(b) a Japanese financial institution (each, a “Designated Financial Institution”) falling under certain categories
prescribed by the Act on Special Taxation Measures, all in accordance with the Act on Special Taxation
Measures, such beneficial owner of this Note must, at the time of entrusting a Participant with the custody of this
Note, provide certain information prescribed by the Act on Special Taxation Measures (“Interest Recipient
Information”) to enable the Participant to establish that such beneficial owner is exempted from the requirement
for Taxes to be withheld or deducted, and advise the Participant if the beneficial owner of this Note ceases to be
so exempted (including the case where a beneficial owner of this Note that is an individual non-resident of Japan
or a non-Japanese corporation becomes a specially-related person of the Company).
A-3-6
Where this Note is not held by a Participant, in order to receive payments free of withholding
or deduction by the Company for or on account of Taxes, if the relevant beneficial owner of this Note is (a) an
individual non-resident of Japan or a non-Japanese corporation (other than a specially-related person of the
Company) or (b) a Designated Financial Institution, all in accordance with the Act on Special Taxation
Measures, such beneficial owner must, prior to each time at which it receives interest, submit to the relevant
Paying Agent a written application for tax exemption (hikazei tekiyo shinkokusho) (“Written Application for
Tax Exemption”) in a form obtainable from the Paying Agent stating, inter alia, the name and address of the
beneficial owner, the title of this Note, the relevant Interest Payment Date, the amount of interest and the fact that
together with
the beneficial owner is qualified to submit
documentary evidence regarding its identity and residence.
the Written Application for Tax Exemption,
The Company shall make any required withholding or deduction and remit the full amount
withheld or deducted to the Japanese taxing authority in accordance with applicable law. The Company shall use
reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any tax, duty, assessment,
fee or other governmental charge so withheld or deducted from the Japanese taxing authority imposing such tax,
duty, assessment, fee or other governmental charge, and if certified copies are not available, the Company shall
use reasonable efforts to obtain other evidence satisfactory to the Trustee, and the Trustee shall make such
certified copies or other evidence available to the Holders or beneficial owners of the Notes upon reasonable
request to the Trustee.
The obligation to pay Additional Amounts with respect to any taxes, duties, assessments and
other governmental charges shall not apply to (A) any estate, inheritance, gift, sales, transfer, personal property
or any similar tax, duty, assessment, fee or other governmental charge or (B) any tax, duty, assessment, fee or
other governmental charge which is payable otherwise than by withholding or deduction from payments of
principal or interest on this Note; provided that, except as otherwise set forth in this Note and in the Indenture,
the Company will pay all stamp, court or documentary taxes or any excise or property taxes, charges or similar
levies and other duties, if any, which may be imposed by Japan, the United States or any political subdivision or
any taxing authority thereof or therein, with respect to the Indenture or as a consequence of the initial issuance,
execution, delivery, registration or enforcement of the Notes.
References to principal or interest in respect of this Note shall be deemed to include any
Additional Amounts due which may be payable as set forth in this Note and the Indenture.
6.
This Note may be redeemed at any time at the option and sole discretion of the
Company, in whole or in part, at any time prior to Š32 [(the “Par Call Date”)]33, upon giving not less than 30 nor
more than 60 days’ notice of redemption to the Trustee and the Holders, at a redemption price equal to the
greater of (a) 100% of the principal amount of this Note being redeemed or (b) the sum of the present values of
the principal and the remaining scheduled payments of interest on this Note being redeemed (exclusive of interest
accrued to the Redemption Date (as defined in the Indenture)), that would be due if this Note were [held to the
maturity date]34[redeemed on the Par Call Date]35, discounted to the Redemption Date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined in the Indenture)
plus Š36 basis points, plus, in each case, accrued and unpaid interest on the principal amount of this Note being
redeemed to, but excluding, the Redemption Date.
32 November 26, 2020 for the 2020 Notes; October 26, 2021 for the 2021 Notes; October 26, 2023 for the 2023
33
Notes; and August 26, 2028 for the 2028 Notes.
Remove for 2020 Notes.
34 Only for the 2020 Notes
35 Only for the 2021 Notes, 2023 Notes and 2028 Notes
36
17.5 for the 2020 Notes; 20.0 for the 2021 Notes; 25.0 for the 2023 Notes; and 30.0 for the 2028 Notes.
A-3-7
[This Note may be redeemed at any time at the option and sole discretion of the Company, in
whole or in part, at any time on or after the Par Call Date, upon giving not less than 30 nor more than 60 days’
notice of redemption to the Trustee and the Holders, at a redemption price equal to 100% of the principal amount
of this Note being redeemed plus accrued and unpaid interest on the principal amount of this Note being
redeemed to, but excluding, the Redemption Date.]37
7.
This Note may be redeemed at any time at the option and sole discretion of the
Company in whole, but not in part, subject to compliance with applicable regulatory requirements, and upon
giving not less than 30 nor more than 60 days’ notice of redemption to the Trustee and the Holders (which notice
shall be irrevocable) at the principal amount of this Note together with interest accrued to the date fixed for
redemption and any Additional Amounts hereon, if the Company has been or will be obliged to pay any
Additional Amounts as a result of (a) any change in, or amendment to, the laws or regulations of Japan or any
political subdivision or any authority thereof or therein having power to tax, or any change in application or
official interpretation of such laws or regulations, which change or amendment becomes effective on or after the
date of the issuance of this Note or (b) after the completion of any Succession Event, any change in, or
amendment to, the laws or regulations of the jurisdiction of the Successor Person or any political subdivision or
any authority thereof or therein having power to tax, or any change in application or official interpretation of
such laws or regulations, which change or amendment becomes effective on or after the date of such Succession
Event, and in either case such obligation cannot be avoided by the Company or the Successor Person through the
taking of reasonable measures available to the Company or the Successor Person, as the case may be (an
“Additional Amounts Event”). No notice of redemption for an Additional Amounts Event pursuant to this
Section 7 shall be given sooner than 90 days prior to the earliest date on which the Company would actually be
obliged to pay such Additional Amounts on payments with respect to this Note.
Prior to the publication of any notice of redemption pursuant to this Section 7, the Company
shall deliver to the Trustee (i) a certificate signed by an Authorized Officer stating that the conditions precedent
to its right to so redeem have been fulfilled and (ii) an opinion of independent legal advisors of recognized
standing confirming that an Additional Amounts Event has occurred. The Trustee shall accept such opinion as
sufficient evidence of the satisfaction of the conditions precedent described above, in which event it shall be
conclusive and binding on the Holders.
8.
If (i) the Shire Acquisition (as defined in the Indenture) has not been consummated on or
prior to the Long Stop Date (as defined in the Indenture) or (ii) the Company otherwise publicly announces that
the Shire Acquisition will not be consummated, then the Company will be required to redeem all outstanding
Notes on the Special Mandatory Redemption Date at a special mandatory redemption price equal to 101% of the
aggregate principal amount of the Notes plus accrued and unpaid interest, if any, to, but excluding, the Special
Mandatory Redemption Date.
Notwithstanding the foregoing, installments of interest on the Notes that are due and payable
on Interest Payment Dates falling on or prior to the Special Mandatory Redemption Date will be payable on such
Interest Payment Dates to the registered Holders as of the close of business on the relevant Record Dates in
accordance with the terms of the Notes and this Indenture.
The Company will cause the notice of special mandatory redemption to be transmitted, with a
copy to the Trustee, within five Business Days after the occurrence of the event triggering the special mandatory
redemption to each Holder at its registered address. If funds sufficient to pay the special mandatory redemption
price of the outstanding notes to be redeemed on the Special Mandatory Redemption Date (plus accrued and
unpaid interest, if any, to, but excluding, such date) are deposited with the Trustee or a paying agent on or before
such Special Mandatory Redemption Date, and certain other conditions are satisfied, on and after such Special
Mandatory Redemption Date, the outstanding Notes will cease to bear interest.
37 Only for the 2021 Notes, 2023 Notes and 2028 Notes.
A-3-8
Upon the consummation of the Shire Acquisition, the foregoing provisions regarding the
special mandatory redemption will cease to apply.
9.
In the case of any redemption of this Note as provided in Section 6, 7 or 8 of this Note,
notice of redemption of this Note shall be transmitted to the Holder at its address as it shall then appear in the
Note Register. If by reason of any cause, it shall be impracticable to give notice to the Holder in the manner
prescribed herein, then such notification in lieu thereof as shall be made by the Company or by the Trustee on
behalf of and at the instruction of the Company shall constitute sufficient provision of such notice, if such
notification shall, so far as may be practicable, approximate the terms and conditions of the notice in lieu of
which it is given. Neither the failure to give notice nor any defect in any notice of redemption given to the Holder
of any other Note shall affect the sufficiency of any notice with respect to this Note. Notice of redemption of this
Note having been so given, this Note shall become due and payable on the redemption date so specified and such
dates shall be deemed the maturity date of this Note.
10.
The Company shall, on or before each due date of the principal of or interest on this
Note, pay to the Trustee, who shall hold the same in trust for the benefit of the person entitled thereto, a sum
sufficient to pay the principal or interest so becoming due until such sum shall be paid to such person or
otherwise disposed of as herein provided. Any money held by the Trustee in trust for the payment of the principal
of or interest on this Note and remaining unclaimed for two years after such principal or interest has become due
and payable and paid to the Trustee shall be discharged from such trust, and repaid to the Company, and all
liability of the Trustee with respect to such money shall cease.
11.
If this Note shall at any time become mutilated, destroyed, stolen or lost, then,
provided that this Note, or evidence of the destruction, theft or loss hereof (together with the indemnity
hereinafter referred to and such other documents or proof as may be required hereunder) shall be delivered to the
Trustee, a replacement Note of like tenor and principal amount shall be authenticated and delivered by the
Trustee, in exchange for this Note, in the case of mutilation, or in lieu of this Note, in the case of destruction, loss
or theft, and provided further that, if this Note is destroyed, stolen or lost, (i) neither the Company nor the Trustee
shall have received notice that this Note has been acquired by a bona fide purchaser, and (ii) the Trustee shall
have received (a) satisfactory evidence (as so deemed by the Trustee in its absolute discretion) that this Note was
destroyed, stolen or lost, and (b) an indemnity for the benefit of the Company and the Trustee satisfactory to each
of them. All expenses and charges associated with procuring such indemnity shall be borne by the Holder of this
Note.
As provided in the Indenture, every new Note issued in exchange for or in lieu of any
mutilated, destroyed, stolen or lost Note shall constitute an original additional contractual obligation of the
Company, whether or not the mutilated, destroyed, stolen or lost Note shall be at any time enforceable by
anyone, and shall be entitled to the benefits of the Indenture equally and proportionately with any and all other
Notes duly issued thereunder. Any such new Note shall be so dated that neither gain nor loss of interest shall
result from such replacement. Upon the issuance of any such new Note, the Company may require the payment
of a sum sufficient to cover any stamp or other tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
12.
All notices to the Company under this Note shall be in writing and addressed to the
Company at Takeda Pharmaceutical Company Limited, 1-1, Nihonbashi-Honcho 2-Chome, Chuo-ku, Tokyo
103-8668, Japan Attention: Global Treasury & Finance Management, Group Finance & Controlling, Global
Finance, or to such other address as the Company may notify to the Holder. All notices to the Holder shall be in
writing and sent by mail or emailed, in PDF format to the Holder at his or its address as set forth in the Note
Register.
A-3-9
13.
This Note is one of the Š38% Senior Notes due Š39 (collectively, the “Notes” and,
individually, a “Note”) issued by the Company in accordance with the Indenture, copies of which are on file and
available for inspection at the Corporate Trust Office. Under the terms of the Indenture, the Company may
remove any Trustee and appoint a new Trustee. The Company shall notify, or cause the Trustee to notify, the
Holders of Notes of the appointment of any Trustee.
The Notes are issuable only as fully registered Notes without coupons in denominations of
$200,000 or integral multiples of $1,000 in excess thereof.
Notes, is hereby incorporated mutatis mutandis by reference herein.
14.
Article VIII of the Indenture, which provides for amendments to the Indenture and the
15.
Subject to the authentication of this Note by the Trustee, the Company hereby certifies
and declares that all acts, conditions and things required to be done and performed and to have happened
precedent to the creation and issuance of this Note, and to constitute the same a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, have been done and performed and have
happened in due and strict compliance with all applicable law.
16.
Claims for payment of principal in respect of this Note shall be prescribed upon the
expiry of 6 years from any redemption date and claims for payment of interest (if any) in respect of this Note
shall be prescribed upon the expiry of 5 years from the due date hereof.
This Note shall be governed by and construed in accordance with the laws of the State of
New York.
38
39
3.800 for the 2020 Notes; 4.000 for the 2021 Notes; 4.400 for the 2023 Notes; and 5.000 for the 2028 Notes.
2020 for the 2020 Notes; 2021 for the 2021 Notes; 2023 for the 2023 Notes; and 2028 for the 2028 Notes.
A-3-10
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM RULE 144A GLOBAL
NOTE TO REGULATION S GLOBAL NOTE
(Transfers Pursuant to Section 2.6(e) of the Indenture)
EXHIBIT B
MUFG Union Bank, N.A.
as Trustee
1251 Avenue of the Americas, 19th Floor
New York, New York 10020
Re:
Takeda Pharmaceutical Company Limited
Š% Senior Notes due Š
Reference is hereby made to the Indenture dated as of November 26, 2018 (the “Indenture”) between
Takeda Pharmaceutical Company Limited (the “Company”) and MUFG Union Bank, N.A., as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $Š principal amount of Š% Senior Notes due Š which are evidenced by one or more
Rule 144A Global Notes (CUSIP No. Š40; ISIN Š41; Common Code Š42) and held with DTC in the name of
[insert name of transferor] (the “Transferor”). The Transferor has requested a transfer of such beneficial interest
in the Notes to a person that will take delivery thereof in the form of an equal principal amount of Notes
evidenced by one or more Regulation S Global Notes (CUSIP No. Š43; ISIN Š44; Common Code Š45).
In connection with such request and in respect of such Notes, the Transferor hereby certifies that such
exchange or transfer has been effected in accordance with the transfer restrictions set forth in the Notes and
(i) that, with respect to transfer made in reliance on Regulation S (“Regulation S”) under the U. S. Securities Act
of 1933, as amended (the “Securities Act”):
(a)
the offer of the Notes was made to a person other than a “U.S. Person” (as defined in
Regulation S);
(b)
either:
(1) at the time the buy order was originated, the transferee was outside the
United States or the Transferor and any person acting on its behalf reasonably believed
that the transferee was outside the United States, or
40
874060AK2 for the 2020 Notes, 874060AN6 for the 2021 Notes; 874060AR7 for the 2023 Notes; and
874060AU0 for the 2028 Notes.
41 US874060AK27 for the 2020 Notes, US874060AN65 for the 2021 Notes; US874060AR79 for the 2023
42
43
Notes; and US874060AU09 for the 2028 Notes.
190258220 for the 2020 Notes, 190257363 for the 2021 Notes; 190258181 for the 2023 Notes; and
190256758 for the 2028 Notes.
J8129EAV0 for the 2020 Notes; J8129EAW8 for the 2021 Notes; J8129EAX6 for the 2023 Notes; and
J8129EAY4 for the 2028 Notes.
44 USJ8129EAV05 for the 2020 Notes; USJ8129EAW87 for the 2021 Notes; USJ8129EAX60 for the 2023
45
Notes; and USJ8129EAY44 for the 2028 Notes.
190257380 for the 2020 Notes; 190256782 for the 2021 Notes; 190257347 for the 2023 Notes; and
190258165 for the 2028 Notes.
B-1
(2) the transaction was executed in, on or through the facilities of a designated
offshore securities market described in paragraph (b) of Rule 902 of Regulation S and
neither the Transferor nor any person acting on its behalf knows that the transaction was
pre-arranged with a buyer in the United States;
(c)
(d)
(e)
(f)
no directed selling efforts have been made in contravention of the requirements of Rule
903 or 904 of Regulation S, as applicable;
the transaction is not part of a plan or scheme to evade the registration requirements of
the Securities Act;
the Transferor has advised the transferee of the transfer restrictions applicable in the
Notes;
if the Transferor is a dealer in securities or has received a selling concession, fee or
other remuneration in respect of the Notes and the transfer is to occur prior to the
expiration of the restricted period then the requirements of Rule 904(b)(1) of
Regulation S have been satisfied;
AND (II) THAT, WITH RESPECT TO TRANSFERS MADE IN RELIANCE OF RULE 144 UNDER THE
SECURITIES ACT, THE TRANSFEROR HAS HELD THE INTEREST IN RULE 144A GLOBAL NOTES TO
BE EXCHANGED BEYOND THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD SET FORTH
IN RULE 144(D)(1) AND THE TRANSFEROR IS NOT AND HAS NOT BEEN AN AFFILIATE (AS
DEFINED IN RULE 144) OF THE COMPANY DURING THE PRECEDING THREE MONTHS.
We understand that this certificate is required in connection with certain securities laws of the United
States. In connection therewith,
if administrative or legal proceedings are commenced or threatened in
connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this
certificate to any interested party in such proceeding. This certificate and the statements contained herein are
made for your benefit and the benefit of the Company and the initial purchasers.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:
,
cc:
Takeda Pharmaceutical Company Limited
B-2
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM REGULATION S GLOBAL
NOTE TO RULE 144A GLOBAL NOTE
(Transfers Pursuant to Section 2.6(f) of the Indenture)
EXHIBIT C
MUFG Union Bank, N.A.
as Trustee
1251 Avenue of the Americas, 19th Floor
New York, New York 10020
Re:
Takeda Pharmaceutical Company Limited
Š% Senior Notes due Š
Reference is hereby made to the Indenture dated as of November 26, 2018 (the “Indenture”) between
Takeda Pharmaceutical Company Limited (the “Company”) and MUFG Union Bank, N.A., as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $Š principal amount of Š% Senior Notes due Š which are evidenced by one or more
Regulation S Global Notes (CUSIP No. Š46; ISIN Š47; Common Code Š48) and held with DTC in the name of
[insert name of transferor] (the “Transferor”). The Transferor has requested a transfer of such beneficial interest
in Notes to a person that will take delivery thereof in the form of an equal principal amount of Notes evidenced
by one or more Rule 144A Global Notes (CUSIP No. Š49; ISIN Š50; Common Code Š51).
In connection with such request and in respect of such Notes, the Transferor hereby certifies that
(i) such Notes are being transferred to a transferee that the Transferor reasonably believes is a “qualified
institutional buyer” within the meaning of Rule 144A under the U. S. Securities Act of 1933, as amended,
purchasing the Notes for its own account (or for the account of one or more qualified institutional buyers over
which account the transferee exercises sole investment discretion), (ii) it has notified the transferee of the transfer
restrictions applicable to the Notes and (iii) the transfer is in accordance with any applicable securities laws of
any State of the United States or any other applicable jurisdiction.
46
J8129EAV0 for the 2020 Notes; J8129EAW8 for the 2021 Notes; J8129EAX6 for the 2023 Notes; and
J8129EAY4 for the 2028 Notes.
47 USJ8129EAV05 for the 2020 Notes; USJ8129EAW87 for the 2021 Notes; USJ8129EAX60 for the 2023
48
49
Notes; and USJ8129EAY44 for the 2028 Notes.
190257380 for the 2020 Notes; 190256782 for the 2021 Notes; 190257347 for the 2023 Notes; and
190258165 for the 2028 Notes.
874060AK2 for the 2020 Notes, 874060AN6 for the 2021 Notes; 874060AR7 for the 2023 Notes; and
874060AU0 for the 2028 Notes.
50 US874060AK27 for the 2020 Notes, US874060AN65 for the 2021 Notes; US874060AR79 for the 2023
51
Notes; and US874060AU09 for the 2028 Notes.
190258220 for the 2020 Notes, 190257363 for the 2021 Notes; 190258181 for the 2023 Notes; and
190256758 for the 2028 Notes.
This certificate and the statements contained herein are made for your benefit and the benefit of the
Company and the initial purchasers, if any, of the Notes being transferred.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:
,
cc:
Takeda Pharmaceutical Company Limited
FORM OF OFFICER’S CERTIFICATE AS TO DEFAULT
(Pursuant to Section 9.4 of the Indenture)
EXHIBIT D
[Date]
MUFG Union Bank, N.A.
as Trustee
1251 Avenue of the Americas, 19th Floor
New York, New York 10020
Re: Takeda Pharmaceutical Company Limited
3.800% Senior Notes due 2020
4.000% Senior Notes due 2021
4.400% Senior Notes due 2023
5.000% Senior Notes due 2028
(collectively, the “Notes”)
Reference is hereby made to the Indenture dated as of November 26, 2018 (the “Indenture”)
between Takeda Pharmaceutical Company Limited (the “Company”) and MUFG Union Bank, N.A., as Trustee
relating to the issuance of the Notes. Capitalized terms used but not defined herein shall have the meanings given
to them in the Indenture.
I, [name], [title] of the Company, in such capacity, do hereby certify, pursuant to Section 9.4 of
the Indenture, that to my knowledge as at [Š], [the Company is in compliance with all conditions and covenants
under the Indenture / the Company has not complied with its following obligation[s] under the Indenture]:
[insert details]
IN WITNESS WHEREOF, I have hereunto signed my name as of [Š].
Takeda Pharmaceutical Company Limited
By:
Name:
Title:
REGISTRATION RIGHTS AGREEMENT
Exhibit 10.13
This REGISTRATION RIGHTS AGREEMENT dated November 26, 2018 (this “Agreement”) is
entered into by and among Takeda Pharmaceutical Company Limited, a joint stock corporation organized under
the laws of Japan (the “Company”), and J.P. Morgan Securities LLC (“J.P. Morgan”), SMBC Nikko Securities
America, Inc., Morgan Stanley MUFG Securities Co., Ltd., Mizuho Securities USA LLC and Merrill Lynch,
Pierce, Fenner & Smith Incorporated as representatives of the several initial purchasers named in Schedule A to
the Purchase Agreement (as defined below) (the “Initial Purchasers”).
The Company and the Initial Purchasers are parties to the purchase agreement dated November 19, 2018
(the “Purchase Agreement”), which provides for the sale by the Company to the Initial Purchasers of the
Company’s $1,000,000,000 3.800% Senior Notes due 2020, $1,250,000,000 4.000% Senior Notes due 2021,
$1,500,000,000 4.400% Senior Notes due 2023 and $1,750,000,000 5.000% Senior Notes due 2028 (collectively,
the “Securities”). As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Company
has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the
Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1.
Definitions. As used in this Agreement, the following terms shall have the following meanings:
“Business Day” shall mean any day that is not a Saturday, Sunday or other day on which commercial
banks in New York City, London or Tokyo are authorized or required by law to remain closed.
“Company” shall have the meaning set forth in the preamble and shall also include the Company’s
successors.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.
“Exchange Dates” shall have the meaning set forth in Section 2(a)(ii) hereof.
“Exchange Offer” shall mean the exchange offer by the Company of Exchange Securities for
Registrable Securities pursuant to Section 2(a) hereof.
“Exchange Offer Registration” shall mean a registration under the Securities Act effected pursuant to
Section 2(a) hereof.
“Exchange Offer Registration Statement” shall mean an exchange offer registration statement on
Form F-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such
registration statement, in each case including the Prospectus contained therein or deemed a part thereof, all
exhibits thereto and any document incorporated by reference therein.
“Exchange Securities” shall mean senior notes issued by the Company under the Indenture containing
terms identical to the Securities (except that the Exchange Securities will not be subject to restrictions on transfer
or to any increase in annual interest rate for failure to comply with this Agreement) and to be offered to Holders
of Securities in exchange for Securities pursuant to the Exchange Offer.
“FINRA” means the Financial Industry Regulatory Authority, Inc.
“Free Writing Prospectus” means each free writing prospectus (as defined in Rule 405 under the
Securities Act) prepared by or on behalf of the Company or used or referred to by the Company in connection
with the sale of the Securities or the Exchange Securities.
“Holders” shall mean the Initial Purchasers, for so long as they own any Registrable Securities, and each
of their successors, assigns and direct and indirect transferees who become owners of Registrable Securities
under the Indenture, in each case for so long as such person owns Registrable Securities; provided that, for
purposes of Section 4 and Section 5 hereof, the term “Holders” shall include Participating Broker-Dealers.
“Indemnified Person” shall have the meaning set forth in Section 5(c) hereof.
“Indemnifying Person” shall have the meaning set forth in Section 5(c) hereof.
“Indenture” shall mean the Indenture relating to the Securities dated as of November 26, 2018 between
the Company and MUFG Union Bank, N.A., as trustee, and as the same may be amended from time to time in
accordance with the terms thereof.
“Initial Purchasers” shall have the meaning set forth in the preamble.
“Inspector” shall have the meaning set forth in Section 3(a)(xiv) hereof.
“Issuer Information” shall have the meaning set forth in Section 5(a) hereof.
“J.P. Morgan” shall have the meaning set forth in the preamble.
“Majority Holders” shall mean the Holders of a majority of the aggregate principal amount of the
outstanding Registrable Securities; provided that whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, any Registrable Securities owned directly or indirectly
by the Company or any of its affiliates shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage or amount; and provided, further, that if the Company shall
if
issue any additional Securities under the Indenture prior to consummation of the Exchange Offer or,
applicable, the effectiveness of any Shelf Registration Statement, such additional Securities and the Registrable
Securities to which this Agreement relates shall be treated together as one class for purposes of determining
whether the consent or approval of Holders of a specified percentage of Registrable Securities has been obtained.
“Notice and Questionnaire” shall mean a notice of registration statement and selling security holder
questionnaire distributed to a Holder by the Company upon receipt of a Shelf Request from such Holder.
“Participating Broker-Dealers” shall have the meaning set forth in Section 4(a) hereof.
“Participating Holder” shall mean any Holder of Registrable Securities that has returned a completed
and signed Notice and Questionnaire to the Company in accordance with Section 2(b) hereof.
“Person” shall mean an individual, partnership,
limited liability company, corporation,
trust or
unincorporated organization, or a government or agency or political subdivision thereof.
“Prospectus” shall mean the prospectus included in, or, pursuant to the rules and regulations of the
Securities Act, deemed a part of, a Registration Statement, including any preliminary prospectus, and any such
prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with
respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration
Statement, and by all other amendments and supplements to such prospectus, and in each case including any
document incorporated by reference therein.
“Purchase Agreement” shall have the meaning set forth in the preamble.
“Registrable Securities” shall mean the Securities; provided that the Securities shall cease to be
Registrable Securities (i) when a Registration Statement with respect to such Securities has become effective
2
under the Securities Act and such Securities have been exchanged or disposed of pursuant to such Registration
Statement, (ii) when such Securities cease to be outstanding or (iii) except in the case of Securities that otherwise
remain Registrable Securities and that are held by an Initial Purchaser and that are ineligible to be exchanged in
the Exchange Offer, when the Exchange Offer is consummated.
“Registration Default” shall mean the occurrence of any of the following: (i) the Company has not filed
the Exchange Offer Registration Statement on or before the Target Registration Date, (ii) the Shelf Registration
Statement, if required pursuant to Section 2(b)(i) or Section 2(b)(ii) hereof, has not become effective on or prior
to 90 days after such Shelf Registration Statement filing obligation arises pursuant to Section 2(b)(i) or 2(b)(ii),
(iii) if the Company receives a Shelf Request pursuant to Section 2(b)(iii), the Shelf Registration Statement
required to be filed thereby has not become effective by the later of (a) the 60th day following the Target
Registration Date and (b) 90 days after delivery of such Shelf Request, (iv) the Shelf Registration Statement, if
required by this Agreement, has become effective and thereafter ceases to be effective or the Prospectus
contained therein ceases to be usable, in each case whether or not permitted by this Agreement, at any time
during the Shelf Effectiveness Period, and such failure to remain effective or usable exists for more than 45 days
(whether or not consecutive) in any 12-month period or (v) the Shelf Registration Statement, if required by this
Agreement, has become effective and thereafter, on more than two occasions in any 12-month period during the
Shelf Effectiveness Period, the Shelf Registration Statement ceases to be effective or the Prospectus contained
therein ceases to be usable, in each case whether or not permitted by this Agreement.
including without
“Registration Expenses” shall mean any and all expenses incident to performance of or compliance by
limitation: (i) all SEC, stock exchange or FINRA
the Company with this Agreement,
registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities
or blue sky laws (including reasonable fees and disbursements of counsel for any Underwriters or Holders in
connection with blue sky qualification of any Exchange Securities or Registrable Securities), (iii) all expenses of
any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, any Free Writing Prospectus and any amendments or supplements thereto, any
underwriting agreements, securities sales agreements or other similar agreements and any other documents
relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and
disbursements relating to the qualification of the Indenture under applicable securities laws and (vi) the fees and
disbursements of the Trustee and its counsel, (vii) the fees and disbursements of counsel for the Company.
“Registration Statement” shall mean any registration statement of the Company that covers any of the
Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement and all amendments
and supplements to any such registration statement, including post-effective amendments, in each case including
the Prospectus contained therein or deemed a part thereof, all exhibits thereto and any document incorporated by
reference therein.
“SEC” shall mean the United States Securities and Exchange Commission.
“Securities” shall have the meaning set forth in the preamble.
“Securities Act” shall mean the Securities Act of 1933, as amended from time to time.
“Shelf Effectiveness Period” shall have the meaning set forth in Section 2(b) hereof.
“Shelf Registration” shall mean a registration effected pursuant to Section 2(b) hereof.
“Shelf Registration Statement” shall mean a “shelf” registration statement of the Company that covers
all or a portion of the Registrable Securities (but no other securities unless approved by a majority in aggregate
principal amount of the Securities held by the Participating Holders) on an appropriate form under Rule 415
under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and
3
supplements to such registration statement, including post-effective amendments, in each case including the
Prospectus contained therein or deemed a part thereof, all exhibits thereto and any document incorporated by
reference therein.
“Shelf Request” shall have the meaning set forth in Section 2(b) hereof.
“Staff” shall mean the staff of the SEC.
“Target Registration Date” shall mean August 23, 2019.
“Trust Indenture Act” shall mean the Trust Indenture Act of 1939, as amended from time to time.
“Trustee” shall mean the trustee with respect to the Securities under the Indenture.
“Underwriter” shall have the meaning set forth in Section 3(e) hereof.
“Underwritten Offering” shall mean an offering in which Registrable Securities are sold to an
Underwriter for reoffering to the public.
2.
Registration Under the Securities Act. (a) To the extent not prohibited by any applicable law,
regulation or applicable interpretations of the Staff, the Company shall use its reasonable best efforts to (x) cause
to be filed an Exchange Offer Registration Statement covering an offer to the Holders to exchange all the
Registrable Securities for Exchange Securities and (y) have such Registration Statement become and remain
effective until 180 days after the last Exchange Date for use by one or more Participating Broker-Dealers. The
Company shall commence the Exchange Offer promptly after the Exchange Offer Registration Statement is
declared effective by the SEC and use its reasonable best efforts to complete the Exchange Offer not later than 60
days after such effective date.
The Company shall commence the Exchange Offer by mailing the related Prospectus, appropriate letters
of transmittal and other accompanying documents to each Holder stating, in addition to such disclosures as are
required by applicable law (including the Companies Act of Japan, the Financial Instruments and Exchange Act
of Japan) or necessary for the Exchange Securities to qualify for an exemption from Japanese withholding tax,
substantially the following:
(i)
(ii)
(iii)
(iv)
(v)
that the Exchange Offer is being made pursuant to this Agreement and that all Registrable Securities
validly tendered and not properly withdrawn will be accepted for exchange;
the dates of acceptance for exchange (which shall be a period of at least 20 Business Days from the date
such notice is mailed) (the “Exchange Dates”);
that any Registrable Security not tendered will remain outstanding and continue to accrue interest but
will not retain any rights under this Agreement, except as otherwise specified herein;
that any Holder electing to have a Registrable Security exchanged pursuant to the Exchange Offer will
be required to (A) surrender such Registrable Security,
together with the appropriate letters of
transmittal, to the institution and at the address and in the manner specified in the notice, or (B) effect
such exchange otherwise in compliance with the applicable procedures of the depositary for such
Registrable Security, in each case prior to the close of business on the last Exchange Date; and
that any Holder will be entitled to withdraw its election, not later than the close of business on the last
Exchange Date, by (A) sending to the institution and at the address specified in the notice, a facsimile
transmission or letter setting forth the name of such Holder, the principal amount of Registrable
4
Securities delivered for exchange and a statement that such Holder is withdrawing its election to have
such Securities exchanged or (B) effecting such withdrawal
in compliance with the applicable
procedures of the depositary for the Registrable Securities.
As a condition to participating in the Exchange Offer, a Holder will be required to represent to the
Company that (1) any Exchange Securities to be received by it will be acquired in the ordinary course of its
business, (2) at the time of the commencement of the Exchange Offer it has no arrangement or understanding
with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange
Securities in violation of the provisions of the Securities Act, (3) it is not an “affiliate” (within the meaning of
Rule 405 under the Securities Act) of the Company and (4) if such Holder is a broker-dealer that will receive
Exchange Securities for its own account in exchange for Registrable Securities that were acquired as a result of
market-making or other trading activities, then such Holder will deliver a Prospectus (or, to the extent permitted
by law, make available a Prospectus to purchasers) in connection with any resale of such Exchange Securities. A
Holder will also be required to make any representations to the Company that are necessary for the Company to
comply with applicable laws and regulations,
including the Companies Act of Japan and the Financial
Instruments and Exchange Act of Japan, or that are necessary for the Exchange Securities to qualify for an
exemption from Japanese withholding tax.
As soon as practicable after the last Exchange Date, the Company shall:
(I)
(II)
accept for exchange Registrable Securities or portions thereof validly tendered and not properly
withdrawn pursuant to the Exchange Offer; and
deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions
thereof so accepted for exchange by the Company and issue, and cause the Trustee to authenticate and
deliver to each Holder, Exchange Securities equal in principal amount to the principal amount of the
Registrable Securities tendered by such Holder.
The Company shall use its reasonable best efforts to complete the Exchange Offer as provided above
and shall comply with the applicable requirements of the Securities Act, the Exchange Act, the Companies Act of
Japan, the Financial Instruments and Exchange Act of Japan and other applicable laws and regulations in
connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than those
necessary for the Exchange Offer or the Company to comply with any applicable laws and regulations, including
the Companies Act of Japan and the Financial Instruments and Exchange Act of Japan, or applicable
interpretations of the Staff and those necessary for the Exchange Securities to qualify for an exemption from
Japanese withholding tax.
(b)
In the event that (i) the Company determines that the Exchange Offer Registration provided for in
Section 2(a) hereof is not available or the Exchange Offer may not be completed as soon as practicable after the
last Exchange Date because it would violate any applicable law or applicable interpretations of the Staff or
because it would not be possible to conduct the Exchange Offer in a manner in which the Exchange Securities
would qualify for an exemption from Japanese withholding tax, (ii) the Exchange Offer Registration Statement is
not for any other reason filed by the Target Registration Date or (iii) upon receipt of a written request (a “Shelf
Request”) from any Initial Purchaser representing that it holds Registrable Securities that are or were ineligible to
be exchanged in the Exchange Offer, the Company shall use its reasonable best efforts to cause to be filed as
soon as practicable after such determination, date or Shelf Request, as the case may be, a Shelf Registration
Statement providing for the sale of all the Registrable Securities by the Holders thereof and to have such Shelf
Registration Statement become effective; provided that no Holder will be entitled to have any Registrable
Securities included in any Shelf Registration Statement, or entitled to use the prospectus forming a part of such
Shelf Registration Statement, until such Holder shall have delivered a completed and signed Notice and
Questionnaire and provided such other information regarding such Holder to the Company as is contemplated by
Section 3(b) hereof.
5
In the event that the Company is required to file a Shelf Registration Statement pursuant to clause
(iii) of the preceding sentence, the Company shall use its reasonable best efforts to file and have become
effective both an Exchange Offer Registration Statement pursuant to Section 2(a) hereof with respect to all
Registrable Securities and a Shelf Registration Statement (which may be a combined Registration Statement with
the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Securities held by the
Initial Purchasers after completion of the Exchange Offer.
The Company agrees to use its reasonable best efforts to keep the Shelf Registration Statement
continuously effective until the Securities cease to be Registrable Securities (the “Shelf Effectiveness Period”).
The Company further agrees to supplement or amend the Shelf Registration Statement, the related Prospectus
and any Free Writing Prospectus if required by the rules, regulations or instructions applicable to the registration
form used by the Company for such Shelf Registration Statement or by the Securities Act or by any other rules
and regulations thereunder or if reasonably requested by a Holder of Registrable Securities with respect to
information relating to such Holder, and to use its reasonable best efforts to cause any such amendment to
become effective, if required, and such Shelf Registration Statement, Prospectus or Free Writing Prospectus, as
the case may be, to become usable as soon as thereafter practicable. The Company agrees to furnish to the
Participating Holders copies of any such supplement or amendment promptly after its being used or filed with the
SEC.
(c)
The Company shall pay all Registration Expenses in connection with any registration pursuant to
Section 2(a) or Section 2(b) hereof. Each Holder shall pay all underwriting discounts and commissions,
brokerage commissions and transfer taxes, if any, relating to the sale or disposition of such Holder’s Registrable
Securities pursuant to the Shelf Registration Statement.
(d)
An Exchange Offer Registration Statement pursuant to Section 2(a) hereof will not be deemed to
have become effective unless it has been declared effective by the SEC. A Shelf Registration Statement pursuant
to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the
SEC or is automatically effective upon filing with the SEC as provided by Rule 462 under the Securities Act.
If a Registration Default occurs, the interest rate on the Registrable Securities will be increased by (i)
0.25% per annum for the first 90-day period beginning on the day immediately following such Registration
Default and (ii) an additional 0.25% per annum with respect to each subsequent 90-day period, in each case until
and including the date such Registration Default ends, up to a maximum increase of 1.00% per annum. A
Registration Default ends when the Securities cease to be Registrable Securities or, if earlier, (1) in the case of a
Registration Default under clause (i) of the definition thereof, when the Exchange Offer Registration Statement is
filed with the U.S. Securities and Exchange Commission, (2) in the case of a Registration Default under
clause (ii) or clause (iii) of the definition thereof, when the Shelf Registration Statement becomes effective or
(3) in the case of a Registration Default under clause (iv) or clause (v) of the definition thereof, when the Shelf
Registration Statement again becomes effective or the Prospectus again becomes usable. If at any time more than
one Registration Default has occurred and is continuing, then, until the next date that there is no Registration
Default, the increase in interest rate provided for by this paragraph shall apply as if there occurred a single
Registration Default that begins on the date that the earliest such Registration Default occurred and ends on such
next date that there is no Registration Default.
(e) Without limiting the remedies available to the Initial Purchasers and the Holders, the Company
acknowledges that any failure by the Company to comply with its obligations under Section 2(a) and Section 2(b)
hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no
adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the
event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the Company’s obligations under Section 2(a) and Section 2(b) hereof.
6
3.
Registration Procedures. (a) In connection with its obligations pursuant to Section 2(a) and
Section 2(b) hereof, the Company shall as expeditiously as possible:
(i)
prepare and file with the SEC a Registration Statement on the appropriate form under the
Securities Act, which form (A) shall be selected by the Company, (B) shall, in the case of a Shelf Registration, be
available for the sale of the Registrable Securities by the Holders thereof and (C) shall comply as to form in all
material respects with the requirements of the applicable form and include all financial statements required by the
SEC to be filed therewith; and use its reasonable best efforts to cause such Registration Statement to become
effective and remain effective for the applicable period in accordance with Section 2 hereof;
(ii)
prepare and file with the SEC such amendments and post-effective amendments to each
Registration Statement as may be necessary to keep such Registration Statement effective for the applicable
period in accordance with Section 2 hereof and cause each Prospectus to be supplemented by any required
prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act; and
keep each Prospectus current during the period described in Section 4(3) of and Rule 174 under the Securities
Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities or Exchange
Securities;
(iii)
to the extent any Free Writing Prospectus is used, file with the SEC any Free Writing Prospectus
that is required to be filed by the Company with the SEC in accordance with the Securities Act and to retain any
Free Writing Prospectus not required to be filed;
(iv)
in the case of a Shelf Registration, furnish to each Participating Holder, to counsel for the Initial
Purchasers, to counsel for such Participating Holders and to each Underwriter of an Underwritten Offering of
Registrable Securities, if any, without charge, as many copies of each Prospectus, preliminary prospectus or Free
Writing Prospectus, and any amendment or supplement thereto, as such Participating Holder, counsel or
Underwriter may reasonably request in order to facilitate the sale or other disposition of the Registrable
Securities thereunder; and, subject to Section 3(c) hereof, the Company consents to the use of such Prospectus,
preliminary prospectus or such Free Writing Prospectus and any amendment or supplement thereto in accordance
with applicable law by each of the Participating Holders and any such Underwriters in connection with the
offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus,
preliminary prospectus or such Free Writing Prospectus or any amendment or supplement thereto in accordance
with applicable law;
(v)
use its reasonable best efforts to register or qualify the Registrable Securities under all applicable
state securities or blue sky laws of such jurisdictions as any Participating Holder shall reasonably request in
writing by the time the applicable Registration Statement becomes effective; cooperate with such Participating
Holders in connection with any filings required to be made with FINRA; and do any and all other acts and things
that may be reasonably necessary or advisable to enable each Participating Holder to complete the disposition in
each such jurisdiction of the Registrable Securities owned by such Participating Holder; provided that the
Company shall not be required to (1) qualify as a foreign corporation or other entity or as a dealer in securities in
any such jurisdiction where it would not otherwise be required to so qualify, (2) file any general consent to
service of process in any such jurisdiction or (3) subject itself to taxation in any such jurisdiction if it is not so
subject;
(vi)
notify counsel for the Initial Purchasers and, in the case of a Shelf Registration, notify each
if requested by any such
Participating Holder and counsel for such Participating Holders promptly and,
Participating Holder or counsel, confirm such advice in writing (1) when a Registration Statement has become
effective, when any post-effective amendment thereto has been filed and becomes effective, when any Free
Writing Prospectus has been filed or any amendment or supplement to the Prospectus or any Free Writing
Prospectus has been filed, (2) of any request by the SEC or any state securities authority for amendments and
supplements to a Registration Statement, Prospectus or any Free Writing Prospectus or for additional information
7
after the Registration Statement has become effective, (3) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, including the receipt by the Company of any notice of objection of the SEC to the
use of a Shelf Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(2) under
the Securities Act, (4) if, between the applicable effective date of a Shelf Registration Statement and the closing
of any sale of Registrable Securities covered thereby, the representations and warranties of the Company
contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating
to an offering of such Registrable Securities cease to be true and correct in all material respects or if the
Company receives any notification with respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (5) of the happening of
any event during the period a Registration Statement is effective that makes any statement made in such
Registration Statement or the related Prospectus or any Free Writing Prospectus untrue in any material respect or
that requires the making of any changes in such Registration Statement or Prospectus or any Free Writing
Prospectus in order to make the statements therein not misleading and (6) of any determination by the Company
that a post-effective amendment to a Registration Statement or any amendment or supplement to the Prospectus
or any Free Writing Prospectus would be appropriate;
(vii)
use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness
of a Registration Statement or, in the case of a Shelf Registration, the resolution of any objection of the SEC
pursuant to Rule 401(g)(2) under the Securities Act, including by filing an amendment to such Registration
Statement on the proper form, at the earliest possible moment and provide immediate notice to each Holder or
Participating Holder of the withdrawal of any such order or such resolution;
(viii)
in the case of a Shelf Registration, furnish to each Participating Holder, without charge, at least
one conformed copy of each Registration Statement and any post-effective amendment thereto (without any
documents incorporated therein by reference or exhibits thereto, unless requested);
(ix)
in the case of a Shelf Registration, cooperate with the Participating Holders to facilitate the
timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any
restrictive legends and enable such Registrable Securities to be issued in such denominations and registered in
such names (consistent with the provisions of the Indenture) as such Participating Holders may reasonably
request at least one Business Day prior to the closing of any sale of Registrable Securities;
(x)
upon the occurrence of any event contemplated by Section 3(a)(vi)(5) hereof, use its reasonable
best efforts to prepare and file with the SEC a supplement or post-effective amendment to the applicable
Exchange Offer Registration Statement or Shelf Registration Statement or the related Prospectus or any Free
Writing Prospectus or any document incorporated therein by reference or file any other required document so
that, as thereafter delivered (or, to the extent permitted by law, made available) to purchasers of the Registrable
Securities, such Prospectus or Free Writing Prospectus, as the case may be, will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the Company shall notify the Participating
Holders (in the case of a Shelf Registration Statement) and the Initial Purchasers and any Participating Broker-
Dealers known to the Company (in the case of an Exchange Offer Registration Statement) to suspend use of the
Prospectus or any Free Writing Prospectus as promptly as practicable after the occurrence of such an event, and
such Participating Holders, such Participating Broker-Dealers and the Initial Purchasers, as applicable, hereby
agree to suspend use of the Prospectus or any Free Writing Prospectus, as the case may be, until the Company
has amended or supplemented the Prospectus or the Free Writing Prospectus, as the case may be, to correct such
misstatement or omission;
(xi)
a reasonable time prior to the filing of any Registration Statement, any Prospectus, any Free
Writing Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or
a Free Writing Prospectus or of any document that is to be incorporated by reference into a Registration
8
Statement, a Prospectus or a Free Writing Prospectus after initial filing of a Registration Statement, provide
copies of such document to the Initial Purchasers and their counsel (and, in the case of a Shelf Registration
Statement, to the Participating Holders and their counsel) and make such of the representatives of the Company
as shall be reasonably requested by the Initial Purchasers or their counsel (and, in the case of a Shelf Registration
Statement, the Participating Holders or their counsel) available for discussion of such document; and the
Company shall not, at any time after initial filing of a Registration Statement, use or file any Prospectus, any Free
Writing Prospectus, any amendment of or supplement to a Registration Statement or a Prospectus or a Free
Writing Prospectus, or any document that is to be incorporated by reference into a Registration Statement, a
Prospectus or a Free Writing Prospectus, of which the Initial Purchasers and their counsel (and, in the case of a
Shelf Registration Statement, the Participating Holders and their counsel) shall not have previously been advised
and furnished a copy or to which the Initial Purchasers or their counsel (and, in the case of a Shelf Registration
Statement, the Participating Holders or their counsel) shall reasonably object;
(xii)
obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be,
not later than the initial effective date of a Registration Statement;
(xiii) cause the Indenture to be qualified under the Trust Indenture Act in connection with the
registration of the Exchange Securities or Registrable Securities, as the case may be; cooperate with the Trustee
and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in
accordance with the terms of the Trust Indenture Act; and execute, and use its reasonable best efforts to cause the
Trustee to execute, all documents as may be required to effect such changes and all other forms and documents
required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner;
(xiv)
in the case of a Shelf Registration, make available for inspection by a representative of the
Participating Holders (an “Inspector”), any Underwriter participating in any disposition pursuant to such Shelf
Registration Statement, any attorneys and accountants designated by a majority in aggregate principal amount of
the Securities held by the Participating Holders and any attorneys and accountants designated by such
Underwriter, at reasonable times and in a reasonable manner, all pertinent financial and other records, documents
and properties of the Company and its subsidiaries, and cause the respective officers, directors and employees of
the Company to supply all information reasonably requested by any such Inspector, Underwriter, attorney or
accountant in connection with a Shelf Registration Statement; provided that if any such information is identified
by the Company as being confidential or proprietary, each Person receiving such information shall take such
actions as are reasonably necessary to protect the confidentiality of such information to the extent such action is
otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of any Inspector,
Holder or Underwriter);
(xv)
in the case of a Shelf Registration, use its reasonable best efforts to cause all Registrable
Securities to be listed on any securities exchange or any automated quotation system on which similar securities
issued by the Company are then listed if requested by the Majority Holders, to the extent such Registrable
Securities satisfy applicable listing requirements;
(xvi)
if reasonably requested by any Participating Holder, promptly include in a Prospectus supplement
or post-effective amendment such information with respect to such Participating Holder as such Participating
Holder reasonably requests to be included therein and make all required filings of such Prospectus supplement or
such post-effective amendment as soon as the Company has received notification of the matters to be so included
in such filing;
(xvii) in the case of a Shelf Registration, enter into such customary agreements and take all such other
actions in connection therewith (including those requested by the Holders of a majority in principal amount of
the Registrable Securities covered by the Shelf Registration Statement) in order to expedite or facilitate the
disposition of such Registrable Securities including, but not limited to, an Underwritten Offering and in such
connection, (1) to the extent possible, make such representations and warranties to the Participating Holders and
9
any Underwriters of such Registrable Securities with respect to the business of the Company and its subsidiaries
and the Registration Statement, Prospectus, any Free Writing Prospectus and documents incorporated by
reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when
requested, (2) obtain opinions of counsel to the Company (which counsel and opinions, in form, scope and
substance, shall be reasonably satisfactory to the Participating Holders and such Underwriters and their
respective counsel) addressed to each Participating Holder and Underwriter of Registrable Securities, covering
the matters customarily covered in opinions requested in underwritten offerings, (3) obtain “comfort” letters from
the independent registered public accountants of the Company (and, if necessary, any other registered public
accountant of any subsidiary of the Company, or of any business acquired by the Company for which financial
statements and financial data are or are required to be included in the Registration Statement) addressed to each
Participating Holder (to the extent permitted by applicable professional standards) and Underwriter of
Registrable Securities, such letters to be in customary form and covering matters of the type customarily covered
in “comfort” letters in connection with underwritten offerings, including but not limited to financial information
contained in any preliminary prospectus, Prospectus or Free Writing Prospectus and (4) deliver such documents
and certificates as may be reasonably requested by the Holders of a majority in principal amount of the
Registrable Securities being sold or the Underwriters, and which are customarily delivered in underwritten
offerings, to evidence the continued validity of the representations and warranties of the Company made pursuant
to clause (1) above and to evidence compliance with any customary conditions contained in an underwriting
agreement; and
(b)
In the case of a Shelf Registration Statement,
the Company may require each Holder of
Registrable Securities to furnish to the Company a Notice and Questionnaire and such other information
regarding such Holder and the proposed disposition by such Holder of such Registrable Securities as the
Company may from time to time reasonably request in writing.
(c)
Each Participating Holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(a)(vi)(3) or Section 3(a)(vi)(5) hereof, such
Participating Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Shelf
Registration Statement until such Participating Holder’s receipt of the copies of the supplemented or amended
Prospectus and any Free Writing Prospectus contemplated by Section 3(a)(x) hereof and, if so directed by the
Company, such Participating Holder will deliver to the Company all copies in its possession, other than
permanent file copies then in such Participating Holder’s possession, of the Prospectus and any Free Writing
Prospectus covering such Registrable Securities that is current at the time of receipt of such notice.
(d)
If the Company shall give any notice to suspend the disposition of Registrable Securities pursuant
to a Registration Statement, the Company shall extend the period during which such Registration Statement shall
be maintained effective pursuant to this Agreement by the number of days during the period from and including
the date of the giving of such notice to and including the date when the Holders of such Registrable Securities
shall have received copies of the supplemented or amended Prospectus or any Free Writing Prospectus necessary
to resume such dispositions. The Company may give any such notice only twice during any 365-day period and
any such suspensions shall not exceed 30 days for each suspension and there shall not be more than two
suspensions in effect during any 365-day period.
(e)
The Participating Holders who desire to do so may sell such Registrable Securities in an
Underwritten Offering. In any such Underwritten Offering, the investment bank or investment banks and
manager or managers (each an “Underwriter”) that will administer the offering will be selected by the Holders of
a majority in principal amount of the Registrable Securities included in such offering.
4.
Participation of Broker-Dealers in Exchange Offer. (a) The Staff has taken the position that any
broker-dealer that receives Exchange Securities for its own account in the Exchange Offer in exchange for
Securities that were acquired by such broker-dealer as a result of market-making or other trading activities (a
10
“Participating Broker-Dealer”) may be deemed to be an “underwriter” within the meaning of the Securities Act
and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of
such Exchange Securities.
The Company understands that it is the Staff’s position that if the Prospectus contained in the Exchange
Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the
means by which Participating Broker-Dealers may resell
the Exchange Securities, without naming the
Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them, such Prospectus
may be delivered by Participating Broker-Dealers (or, to the extent permitted by law, made available to
purchasers) to satisfy their prospectus delivery obligation under the Securities Act in connection with resales of
Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the
Securities Act.
(b)
In light of the above, and notwithstanding the other provisions of this Agreement, the Company
agrees to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement for a
period of up to 180 days after the last Exchange Date (as such period may be extended pursuant to Section 3(d)
hereof), in order to expedite or facilitate the disposition of any Exchange Securities by Participating Broker-
Dealers consistent with the positions of the Staff recited in Section 4(a) above. The Company further agrees that
Participating Broker-Dealers shall be authorized to deliver such Prospectus (or, to the extent permitted by law,
make available) during such period in connection with the resales contemplated by this Section 4.
(c)
The Initial Purchasers shall have no liability to the Company or any Holder with respect to any
request that they may make pursuant to Section 4(b) hereof.
5.
Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each
Initial Purchaser and each Holder, their respective affiliates, directors and officers and each Person, if any, who
controls any Initial Purchaser or any Holder within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without
limitation, legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim
asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, (1) any
untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any
omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to
make the statements therein not misleading, or (2) any untrue statement or alleged untrue statement of a material
fact contained in any Prospectus, any Free Writing Prospectus or any “issuer information” (“Issuer Information”)
filed or required to be filed pursuant to Rule 433(d) under the Securities Act, or any omission or alleged omission
to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case except insofar as such losses, claims, damages or
liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with any information relating to any Initial Purchaser or
information relating to any Holder furnished to the Company in writing through J.P. Morgan, SMBC Nikko
Securities America, Inc. or Morgan Stanley MUFG Securities Co., Ltd., as representatives of the Initial
Purchasers, or any selling Holder, respectively, expressly for use therein. In connection with any Underwritten
Offering permitted by Section 3, the Company will also indemnify the Underwriters, if any, selling brokers,
dealers and similar securities industry professionals participating in the distribution, their respective affiliates and
each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the
same extent as provided above with respect to the indemnification of the Holders, if requested in connection with
any Registration Statement, any Prospectus, any Free Writing Prospectus or any Issuer Information.
(b)
Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the
Initial Purchasers and the other selling Holders, the directors of the Company, each officer of the Company who
signed the Registration Statement and each Person, if any, who controls the Company, any Initial Purchaser and
any other selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
11
Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses,
claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with any information relating to such
Holder furnished to the Company in writing by such Holder expressly for use in any Registration Statement, any
Prospectus and any Free Writing Prospectus.
(c)
If any suit, action, proceeding (including any governmental or regulatory investigation), claim or
demand shall be brought or asserted against any Person in respect of which indemnification may be sought
pursuant to either paragraph (a) or (b) above, such Person (the “Indemnified Person”) shall promptly notify the
Person against whom such indemnification may be sought (the “Indemnifying Person”) in writing; provided that
the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under
paragraph (a) or (b) above except to the extent that it has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; and provided, further, that the failure to notify the Indemnifying
Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under
paragraph (a) or (b) above. If any such proceeding shall be brought or asserted against an Indemnified Person and
it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably
satisfactory to the Indemnified Person to represent
the Indemnified Person and any others entitled to
indemnification pursuant to this Section 5 that the Indemnifying Person may designate in such proceeding and
shall pay the fees and expenses of such proceeding and shall pay the fees and expenses of such counsel related to
such proceeding, as incurred. In any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless
(i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the
Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal
defenses available to it that are different from or in addition to those available to the Indemnifying Person; or
(iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying
Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood and agreed that the Indemnifying
Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for
the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm
(x) for any Initial Purchaser, its affiliates, directors and officers and any control Persons of such Initial Purchaser
shall be designated in writing by J.P. Morgan, (y) for any Holder, its directors and officers and any control
Persons of such Holder shall be designated in writing by the Majority Holders and (z) in all other cases shall be
designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an
Indemnified Person shall have requested that an Indemnifying Person reimburse the Indemnified Person for fees
and expenses of counsel as contemplated by this paragraph, the Indemnifying Person shall be liable for any
settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than
30 days after receipt by the Indemnifying Person of such request and (ii) the Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement. No
Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and
indemnification could have been sought hereunder by such Indemnified Person, unless such settlement
(A) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory
to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and
(B) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf
of any Indemnified Person.
12
(d)
If the indemnification provided for in paragraphs (a) and (b) above is unavailable to an
Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then
each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder,
shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the
Company from the offering of the Securities and the Exchange Securities, on the one hand, and by the Holders
from receiving Securities or Exchange Securities registered under the Securities Act, on the other hand, or (ii) if
the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Company on the one
hand and the Holders on the other in connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the
Company on the one hand and the Holders on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the Holders and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such statement or omission.
(e)
The Company and the Holders agree that it would not be just and equitable if contribution
pursuant to this Section 5 were determined by pro rata allocation (even if the Holders were treated as one entity
for such purpose) or by any other method of allocation that does not take account of the equitable considerations
referred to in paragraph (d) above. The amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with
any such action or claim. Notwithstanding the provisions of this Section 5, in no event shall a Holder be required
to contribute any amount in excess of the amount by which the total price at which the Securities or Exchange
Securities sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent misrepresentation. The Holders’ obligations
to contribute pursuant to this Section 5 are several and not joint.
(f)
The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or
remedies that may otherwise be available to any Indemnified Person at law or in equity.
(g)
The indemnity and contribution provisions contained in this Section 5 shall remain operative and
in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on
behalf of the Initial Purchasers or any Holder or any Person controlling any Initial Purchaser or any Holder, or by
or on behalf of the Company or the officers or directors of or any Person controlling the Company,
(iii) acceptance of any of the Exchange Securities and (iv) any sale of Registrable Securities pursuant to a Shelf
Registration Statement.
(h)
For the avoidance of doubt, the Company and each Holder agrees that references to “affiliates” of
Morgan Stanley MUFG Securities Co., Ltd. that appears in this Agreement shall be understood to include
Morgan Stanley & Co. LLC, Morgan Stanley & Co. International plc and Mitsubishi UFJ Morgan Stanley
Securities Co., Ltd. and their respective affiliates.
6.
General.
(a)
No Inconsistent Agreements. The Company represents, warrants and agrees that (i) the rights
granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted
to the holders of any other outstanding securities issued or guaranteed by the Company under any other
agreement and (ii) the Company has not entered into, or on or after the date of this Agreement will enter into, any
agreement that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement
or otherwise conflicts with the provisions hereof.
13
(b)
Amendments and Waivers. The provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written consent of Holders of at least a
majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment,
modification, supplement, waiver or consent; provided that no amendment, modification, supplement, waiver or
consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of
Registrable Securities unless consented to in writing by such Holder. Any amendments, modifications,
supplements, waivers or consents pursuant to this Section 6(b) shall be by a writing executed by each of the
parties hereto.
(c)
Notices. All notices and other communications provided for or permitted hereunder shall be made
in writing by hand-delivery, registered first-class mail, telecopier, or any courier guaranteeing overnight delivery
(i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in
accordance with the provisions of this Section 6(c), which address initially is, with respect to the Initial
Purchasers, the address set forth in the Purchase Agreement; (ii) if to the Company, initially at the Company’s
address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c); and (iii) to such other persons at their respective addresses as
provided in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance
with the provisions of this Section 6(c). All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt is acknowledged, if telecopied; and on the next Business Day if timely
delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other
communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address
specified in the Indenture.
(d)
Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the
successors, assigns and transferees of each of the parties, including, without limitation and without the need for
an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase
Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Securities in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be held subject to all the terms of this
Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person
shall be entitled to receive the benefits hereof. The Initial Purchasers (in their capacity as Initial Purchasers) shall
have no liability or obligation to the Company with respect to any failure by a Holder to comply with, or any
breach by any Holder of, any of the obligations of such Holder under this Agreement.
(e)
Third Party Beneficiaries. Each Holder shall be a third party beneficiary to the agreements made
hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have
the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to
protect its rights or the rights of other Holders hereunder.
(f)
Counterparts. This Agreement may be executed in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
(g)
Headings. The headings in this Agreement are for convenience of reference only, are not a part of
this Agreement and shall not limit or otherwise affect the meaning hereof.
(h)
Governing Law. This Agreement, and any claim, controversy or dispute arising under or related
to this Agreement, shall be governed by and construed in accordance with the laws of the State of New York.
14
(i)
Consent to Jurisdiction. The Company irrevocably consents and agrees for the benefit of the
holders of the Securities and the Initial Purchasers that any legal action, suit or proceeding against it with respect
to its obligations, liabilities or any other matter arising out of or in connection with this Agreement or the
Securities may be brought in the courts of the State of New York or the courts of the United States of America
located in the Borough of Manhattan, The City of New York and, until all amounts due and to become due in
respect of all the Securities have been paid, or until any such legal action, suit or proceeding commenced prior to
such payment has been concluded, hereby irrevocably consents and irrevocably submits to the non-exclusive
jurisdiction of each such court in person and, generally and unconditionally with respect to any action, suit or
proceeding for themselves and in respect of their properties, assets and revenues.
(j)
Appointment of Agent for Service of Process. The Company hereby irrevocably designates,
appoints and empowers Cogency Global Inc. with offices currently at 10 E. 40th Street, 10th Floor, New York,
NY 10016 as their designee, appointee and agent to receive, accept and acknowledge for and on their behalf, and
their properties, assets and revenues, service of any and all legal process, summons, notices and documents that
may be served in any action, suit or proceeding brought against them in any such United States or state court
located in the Borough of Manhattan, The City of New York with respect to their obligations, liabilities or any
other matter arising out of or in connection with this Agreement or any additional agreement and that may be
made on such designee, appointee and agent in accordance with legal procedures prescribed for such courts. If
for any reason such designee, appointee and agent hereunder shall cease to be available to act as such, the
Company agrees to designate a new designee, appointee and agent in the Borough of Manhattan, The City of
New York on the terms and for the purposes of this Section. The Company further hereby irrevocably consents
and agrees to the service of any and all legal process, summons, notices and documents in any such action, suit or
proceeding against them by serving a copy thereof upon the relevant agent for service of process referred to in
this Section (whether or not the appointment of such agent shall for any reason prove to be ineffective or such
agent shall accept or acknowledge such service) or by mailing copies thereof by registered or certified air mail,
postage prepaid, to the Company, at its address specified in or designated pursuant to this Agreement. The
Company agrees that the failure of any such designee, appointee and agent to give any notice of such service to it
shall not impair or affect in any way the validity of such service or any judgment rendered in any action or
proceeding based thereon. Nothing herein shall in any way be deemed to limit the ability of the Initial Purchasers
to service any such legal process, summons, notices and documents in any other manner permitted by applicable
law or to obtain jurisdiction over the Company or bring actions, suits or proceedings against it in such other
jurisdictions, and in such manner, as may be permitted by applicable law. The Company hereby irrevocably and
unconditionally waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to
the laying of venue of any of the aforesaid actions, suits or proceedings arising out of or in connection with this
Agreement or the Securities brought in the United States federal courts located in the Borough of Manhattan, The
City of New York or the courts of the State of New York located in the Borough of Manhattan, The City of New
York and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient
forum.
The provisions of this clause shall survive any termination of this Agreement, in whole or in part.
(k)
Entire Agreement; Severability. This Agreement contains the entire agreement between the
parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect
thereto. If any term, provision, covenant or restriction contained in this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable or against public policy, the remainder of the terms,
provisions, covenants and restrictions contained herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated. The Company and the Initial Purchasers shall endeavor in good faith
negotiations to replace the invalid, void or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, void or unenforceable provisions.
[Signature page follows]
15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
TAKEDA PHARMACEUTICAL COMPANY
LIMITED
By
/s/ Mitsuhiro Okada
Name: Mitsuhiro Okada
Title: Head of Global Treasury & Finance
Management
Confirmed and accepted as of the date first above written:
J.P. MORGAN SECURITIES LLC
For itself and on behalf of the
several Initial Purchasers
By /s/ Robert Bottamedi
Authorized Signatory
SMBC NIKKO SECURITIES AMERICA, INC.
For itself and on behalf of the
several Initial Purchasers
By /s/ Yoshihiro Satake
Authorized Signatory
MORGAN STANLEY MUFG SECURITIES CO., LTD.
For itself and on behalf of the
several Initial Purchasers
By /s/ Masanori Ogiwara
Authorized Signatory
MIZUHO SECURITIES USA LLC
For itself and on behalf of the
several Initial Purchasers
By /s/ Joseph Santaniello
Authorized Signatory
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
For itself and on behalf of the
several Initial Purchasers
By /s/ Andrew Karp
Authorized Signatory
Exhibit 10.14
CONFORMED COPY
Loan Agreement
Dated December 3, 2018
between
TAKEDA PHARMACEUTICAL COMPANY LIMITED
and
JAPAN BANK FOR INTERNATIONAL COOPERATION
Table of Contents
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility and Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conditions Precedent and Disbursement
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and Overdue Payment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manner of Payment and Other Payment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General Undertakings and Environmental and Social Considerations . . . . . . . . . . . . . . . . . . . . . . . . .
Particular Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Events of Default
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Governing Law and Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attachment 1 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attachment 2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attachment 3 Conditions Precedent
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part 1
Part 2
Conditions Precedent Documents to the Disbursement
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Further Conditions Precedent
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attachment 4 Disbursement Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attachment 5 Planned Amortization Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attachment 6 Form of Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ANNEX I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ANNEX II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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1
1
2
3
3
5
6
7
12
13
21
24
25
31
36
48
48
48
51
54
55
56
57
THIS AGREEMENT is dated the 3rd day of December, 2018
BETWEEN
TAKEDA PHARMACEUTICAL COMPANY LIMITED, a corporation duly incorporated and existing under
the Laws of the Borrower’s Country having its principal office at 1-1, Doshomachi 4-chome, Chuo-ku, Osaka,
Japan (the “Borrower”);
AND
JAPAN BANK FOR INTERNATIONAL COOPERATION (with its successors, “JBIC”).
WHEREAS:
(A)
(B)
(C)
The Borrower intends to directly or indirectly acquire (the “Target Acquisition”) pursuant to the Offer
Documents or Scheme Documents, as applicable (each as defined below) all of the outstanding shares of
the Target which are subject to the Takeover Offer or Scheme (as the case may be), which acquisition
will be effected pursuant to a Takeover Offer or Scheme (each as defined below).
In connection with the Target Acquisition, the Borrower has requested that JBIC extend credit to the
Borrower in the form of term loans in an aggregate principal amount not to exceed three billion seven
hundred million U.S. Dollars (US$3,700,000,000) with the proceeds to be applied towards the Certain
Funds Purposes.
JBIC has agreed as to extend a loan facility for the Target Acquisition to the Borrower on the terms and
conditions hereinafter set forth.
IT IS AGREED as follows:
1.
Definitions
Capitalized terms used in this Agreement have, unless the context otherwise requires, the meanings assigned to
them in Attachment 2 (Definitions).
2.
2.1
Facility and Currency
Facility
JBIC hereby agrees to make available to the Borrower, on and subject to the terms and conditions of this
Agreement, a loan facility in U.S. Dollars in an aggregate amount not exceeding three billion seven
hundred million U.S. Dollars (US$ 3,700,000,000) (the “Facility”).
2.2
Currency
The currency in which the Disbursement and all payments hereunder (other than any payment pursuant
to Clause 8.2 (Other Payment Obligations)) shall be made is U.S. Dollars (the “Eligible Currency”)
(the Eligible Currency and the Relevant Currency collectively being referred to as the “Specified
Currency”).
3.
Use of Proceeds
The entire proceeds disbursed by JBIC hereunder shall be applied by the Borrower solely towards
Certain Funds Purposes.
1
4.
4.1
Conditions Precedent and Disbursement
Conditions Precedent Documents
No Disbursement shall be made unless and until JBIC issues a notice to the Borrower that JBIC has
received all of the Conditions Precedent Documents provided in Attachment 3 Part 1 (Condition
Precedent Documents) in form and substance reasonably satisfactory to JBIC (the “Documents
Receipt”). JBIC shall issue the Documents Receipt to the Borrower promptly after the date on which
JBIC receives them.
4.2
Further Conditions to Disbursement
(a)
(b)
JBIC may refuse to make the Disbursement if any of the conditions precedent in Attachment 3
Part 2 (Further Conditions Precedent) is not satisfied or fulfilled as of the date of the
Disbursement.
During the Certain Funds Period and notwithstanding any other provision to the contrary in the
Loan Documents, JBIC shall not, unless a Certain Funds Default has occurred and is
continuing or would result from a proposed borrowing or a Certain Funds Representation
remains incorrect or, if a Certain Funds Representation does not include a materiality concept,
incorrect in any material respect, be entitled to:
(i)
(ii)
(iii)
(iv)
(v)
cancel the Facility or any of its Commitments;
rescind, terminate or cancel the Loan Documents or the Commitments or exercise any
similar right or remedy or make or enforce any claim under the Loan Documents it
may have to the extent to do so would prevent or limit (A) the making of the
Disbursement for Certain Funds Purposes; or (B) the application of amounts standing
to the credit of an Escrow Account for Certain Funds Purposes;
refuse to make the Disbursement for Certain Funds Purposes unless the conditions set
out in Attachment 3 Part 1 (Condition Precedent Documents) or Attachment 3 Part 2
(Further Conditions Precedent) have not been satisfied;
exercise any right of set-off or counterclaim in respect of the Disbursement to the
extent to do so would prevent or limit (A) the making of the Disbursement for Certain
Funds Purposes; or (B) the application of amounts standing to the credit of an Escrow
Account for Certain Funds Purposes; or
cancel, accelerate or cause repayment or prepayment of any amounts owing under any
Loan Document to the extent to do so would prevent or limit (A) the making of the
Disbursement for Certain Funds Purposes; or (B) the application of amounts standing
to the credit of an Escrow Account for Certain Funds Purposes,
provided that immediately upon the expiry of the Certain Funds Period all such rights,
remedies and entitlements shall be available to JBIC notwithstanding that they may not have
been used or been available for use during the Certain Funds Period.
4.3
Disbursement
The Disbursement shall be made:
(a)
(b)
(c)
(d)
in a single disbursement;
during the Certain Funds Period;
subject to the terms and conditions hereof; and
in accordance with the Disbursement Procedures set forth in Attachment 4 (Disbursement
Procedure).
2
The date on which the Disbursement is made shall be the “Disbursement Date”. JBIC shall notify the
Borrower of the Disbursement Date as soon as practicable upon its occurrence and such notice shall be
conclusive and binding.
4.4
Disbursement and Facility
The amount of the Disbursement shall at no time exceed the Facility.
4.5
Termination of Commitment
Unless previously terminated, any Commitments still undrawn shall terminate in full at 5:00 p.m.
(Tokyo time) on the earlier of (i) the date on which all of the Certain Funds Purposes have been
achieved without the making of the Disbursement, (ii) the date on which the Certain Funds Period
terminates and (iii) the Disbursement Date.
5.
5.1
Repayment
Repayment of Loan
(a)
(b)
The aggregate principal amount disbursed to the Borrower hereunder, and from time to time
outstanding, shall be referred to as the “Loan.”
In accordance with the Amortization Schedule provided in Attachment 5 (Planned
Amortization Schedule) (the “Planned Amortization Schedule”), the Borrower shall repay the
Loan to JBIC in full in one single instalment on December 11th 2025 (the “Repayment Date”),
provided that if the said date is not a Business day, the payment shall be made on the following
Business Day.
5.2
Arrangement of the Amortization Schedule
(a)
(b)
(c)
After the Disbursement Date, JBIC will prepare and deliver to the Borrower a notice together
with the Amortization Schedule (the “Amortization Notice”).
After JBIC has issued the Amortization Notice,
if any amendment of the Amortization
Schedule shall be made under this Agreement, JBIC will prepare and deliver to the Borrower a
notice together with the revised Amortization Schedule.
Such Amortization Schedule delivered by JBIC in Paragraph (a) or (b) shall be conclusive in
the absence of manifest error.
6.
6.1
Interest and Overdue Payment
Interest
6.1.1
Interest
Interest on the Loan for each Interest Period (the “Interest”) shall:
(a)
(b)
accrue at the Interest Rate; and
be payable in arrears for each Interest Period on each Interest Payment Date.
6.1.2
Rate of Interest
(a)
(b)
The Interest Rate shall be the Floating Rate plus the Margin (the “Interest Rate”).
The Margin shall be zero point six percent (0.6 %) per annum (the “Margin”).
3
6.1.3
Interest Payment Date
(a)
(b)
The Interest Payment Dates shall be June 11th and December 11th in each year (each an
“Interest Payment Date”).
If any Interest Payment Date would otherwise fall on a day which is not a Business Day, such
Interest Payment Date shall be the immediately succeeding Business Day.
6.1.4
Interest Period
The Interest Period shall be the period (x) from and including:
(a)
(b)
(in the case of the initial payment of interest with regard to the Disbursement) the day on which
the Disbursement is made under this Agreement; or
(after such initial payment of interest) the immediately preceding Interest Payment Date,
and (y) up to and excluding the Interest Payment Date (the “Interest Period”).
6.2
Overdue Interest
6.2.1
Overdue Interest
(a)
If the Borrower fails to pay any principal or interest payable under this Agreement on its due
date (such overdue amount being the “Overdue Amount”), the Borrower shall pay JBIC on
demand, to the extent permitted by applicable Law, overdue interest on such Overdue Amount
(the “Overdue Interest”).
(b)
The Overdue Interest shall accrue:
(i)
(ii)
on a day to day basis at the Overdue Interest Rate for the Overdue Period; and
as well after as before judgment in accordance with this Clause.
(c)
Payment of the Overdue Interest by the Borrower shall not prejudice the right of JBIC to
exercise any of its other rights or claims hereunder, at law or otherwise, in particular its rights
under Clause 12 (Events of Default).
6.2.2
Overdue Interest Rate
(a)
(b)
(c)
The Overdue Interest Rate shall be (x) the Floating Rate plus (y) the Margin plus (z) two
percent (2.00%) per annum (the “Overdue Interest Rate”).
Such Overdue Interest Rate shall be:
(i)
(ii)
initially determined on the due date of the relevant Overdue Amount; and
as long as such relevant Overdue Amount is outstanding, revised on the same calendar
day as the Interest Payment Date (the “Revision Date”).
Upon request by the Borrower, JBIC will promptly notify the Borrower of the Overdue Interest
Rate; provided that the Borrower’s obligation to pay such Overdue Interest shall not be
conditional upon notification of the relevant rate to the Borrower and such determination by
JBIC shall be conclusive in the absence of manifest error.
6.2.3
Overdue Period
The Overdue Period shall be the period (x) from and including the due date of such Overdue Amount
(y) up to and excluding the date of actual receipt thereof by JBIC (the “Overdue Period”).
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6.3
Basis of Calculation
(a)
(b)
Any Interest or Overdue Interest in this Clause shall accrue on the basis of a year of 360 days
and in each case for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest or such fees are payable. Each
determination by JBIC of an interest rate hereunder shall be conclusive and binding for all
purposes, absent demonstrable error.
Fractional sums of less than one-hundredth (1/100) of one U.S. Dollar (US $0.01) shall be
disregarded
7.
7.1
Prepayment
Voluntary Prepayment
With effect from the date after the first (1st) anniversary of the Disbursement, upon not less than
ninety (90) days’ prior irrevocable notice in writing to JBIC, the Borrower may prepay all or any part of
the Loan each which has been outstanding for a period of at least one year, (x) on a Interest Payment
Date or (y) on any other date otherwise approved by JBIC in writing provided that the Borrower shall
pay:
(a)
(b)
amount of the prepaid principal together with all interest accrued thereon and all other amounts
payable hereunder on the date of such prepayment; and
a prepayment premium of one half of one per cent (0.5%) of the amount of such prepaid
principal.
7.2
Mandatory Prepayment
(a)
Each of the following events is a Mandatory Prepayment Event:
(i)
any change in applicable Law or in the interpretation thereof shall make it unlawful
for JBIC:
(A)
(B)
to give effect to or perform its obligations hereunder; or
to maintain its Loan or other amounts outstanding hereunder; or
(ii)
the Borrower is, in the reasonable judgment of JBIC, in breach of Clause 10.3
(Environmental and Social Conditions).
(b)
On the occurrence of
JBIC may (subject
Clause 4.2(b)(Further Conditions to Disbursement)), by notice in writing to the Borrower:
any Mandatory Prepayment Event,
to
(i)
(ii)
(iii)
suspend the Disbursement; and/or
cancel the Unutilized Amount of the Facility; and/or
demand the Borrower to prepay the Loan, together with all interest accrued thereon
and all other amounts then payable hereunder (but without any premium).
provided, however,
that notice to demand the Borrower’s prepayment of the Loan in
accordance with item (iii) above shall be issued to the Borrower not less than fifteen (15) days
prior to the contemplated prepayment date of the Loan.
7.3
Fixed Date of Prepayment
Once the date for any prepayment in this Clause has been fixed by notice provided in Clauses 7.1
(Voluntary Prepayment) and 7.2 (Mandatory Prepayment), respectively, such date shall be deemed as
the due date for the amounts to be paid.
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7.4
Application of Prepaid Amount
The prepaid principal hereunder shall be applied to the repayment installment of the Loan in the inverse
order of their maturity provided in the Amortization Schedule.
7.5
Amounts Prepaid
Amounts prepaid pursuant hereto shall not be reborrowed.
8.
8.1
Manner of Payment and Other Payment Obligations
Manner of Payment and Account of JBIC
8.1.1 Manner of Payment
(a)
All payments to be made by the Borrower under this Agreement shall be made:
(i)
(ii)
(iii)
in the Specified Currency in accordance with Clause 2.2 (Currency);
free and clear of any set-off or counterclaim, or any Tax; and
in immediately available funds to the JBIC’s Account not later than 11:00 a.m., Tokyo
time, on the due date for payment thereof.
(b)
Any such payment made on such due date but after 11:00 a.m., Tokyo time, shall be deemed to
have been made on the immediately succeeding Business Day and the Overdue Interest shall
accrue in accordance with provisions hereunder.
8.1.2
Account of JBIC
The JBIC’s Account is the bank account in Tokyo designated by JBIC in writing on or about the date of
this Agreement.
8.2
Other Payment Obligations
(a)
The Borrower shall pay or cause to be paid or shall indemnify JBIC against:
(i)
(ii)
(iii)
(iv)
the costs and expenses for obtaining and delivering the opinion(s), and any other
documents and evidence submitted as the Conditions Precedent Documents;
any Tax (regardless of deduction or withholding of Tax) and other public charge in
connection with the entry into, performance or enforcement of this Agreement
(namely, if the Borrower is required to make a payment to JBIC under this Agreement
subject to the deduction or withholding of Tax, the sum payable by the Borrower to
JBIC shall be increased to the extent necessary to ensure that JBIC receives and
retains a net sum equal to the sum which it would have received and retained had no
such deduction or withholding been required);
any banking charges or fees incurred in connection with the Disbursement or any
payment to JBIC (including any prepayment) under this Agreement; and
all losses, liabilities, reasonable costs and expenses (including reasonable legal fees)
incurred in contemplation of, or in connection with:
(A)
the negotiation, preparation,
administration and
implementation of this Agreement and any amendment to, waiver of or
consent under this Agreement, or any prepayment at the request of or as a
result of a material change in the circumstances of the Borrower; and
execution, delivery,
6
(b)
(c)
(B)
the occurrence of a Default or the enforcement of, or the preservation or
perfection of any right of JBIC under this Agreement,
and JBIC shall provide to the Borrower a reasonably detailed statement of the expenses
referred to above.
Without prejudice to the provisions of this Clause above, even if any amount to be paid by the
Borrower to any Person other than JBIC under Paragraph (a) includes any Tax, the Borrower
shall pay such amount in full, to the extent permitted by applicable Law.
All amounts payable by the Borrower under this Clause shall be paid in the currency in which
any tax, duty, penalty, fee, expense, charge, interest, loss, cost or liability is denominated or, if
JBIC so requests, the amount of the same in any other currency at the current rate of exchange
specified by JBIC (such denominated currency and other currency, collectively being referred
to as the “Relevant Currency”).
8.3
Different Currency Receipt
(a)
(b)
If:
(i)
(ii)
JBIC’s receipt of any amount, tender or recovery (whether pursuant to any judgment
or otherwise) is expressed, paid or made in any currency other than the Specified
Currency; and
such receipt falls short of the full amount in such Specified Currency when converted
by JBIC in their usual foreign exchange practices,
the obligation of the Borrower under this Agreement shall not be discharged or satisfied by
such receipt to the extent of such sum falling short (the “Short Value”).
The Borrower shall indemnify JBIC against the amount of the Short Value (as a primary
obligation enforceable as an alternative or additional cause of action for the purpose of
recovery in such Specified Currency), and such indemnity shall not be affected by any
judgment obtained for any other sum due under this Agreement.
8.4
Insufficient Payment
If the amount of any payment made by the Borrower is less than the total amount due and payable as of
the date on which such payment is actually made, then:
(a)
(b)
the Borrower shall be deemed to have waived any right which it may have to make any
appropriation hereof; and
JBIC may apply and appropriate the payment so made in or towards the satisfaction of any or
all of the amounts which are due or overdue for payment on such day in the order decided upon
by JBIC in its sole discretion.
9.
9.1
Representations and Warranties
Representations and Warranties
(a)
(b)
The Borrower represents and warrants in this Clause for the benefit of JBIC.
The Borrower acknowledges that JBIC has entered into this Agreement in reliance on the
representations and warranties.
9.1.1
Status of Borrower and its Business
The Borrower is duly organized, validly existing and in good standing (to the extent that such concept
exists) under the laws of its jurisdiction of organization.
7
9.1.2
Power and Internal Authorization
(a)
The execution, delivery and performance by the Borrower of this Agreement and the other
Loan Documents to which it is a party, and the consummation of the transactions contemplated
hereby and thereby, and the completion of the Target Acquisition, (i) are within the Borrower’s
organizational powers, (ii) have been duly authorized by all necessary organizational action,
(iii) do not contravene (A) the Borrower’s charter, articles of incorporation or by-laws or other
organizational documents or (B) any law or regulation binding on or affecting the Borrower or
(C) any restriction binding on or affecting the Borrower and (iv) will not result in or require the
creation or imposition of any Lien upon or with respect to any of the properties of the
Consolidated Group (other than Liens created or required to be created pursuant to the terms
hereof), except, in the case of subclauses (iii)(B), (iii)(C) and (iv), as would not be reasonably
expected to have a Material Adverse Effect.
(b)
The Borrower has full power to own its assets and carry on its business as being conducted at
the date of this Agreement.
9.1.3
Public Requirement
No authorization or approval or other action by, and no notice to or filing with, any Governmental
Authority or regulatory body is required for the due execution, delivery and performance by the
Borrower of this Agreement and the consummation of the transactions contemplated hereby, and the
completion of the Target Acquisition, other than (i) the Panel, as directed by the Panel pursuant to the
requirements of the City Code, anti-trust regulators, as directed by anti-trust regulators, as contemplated
by the Scheme Documents or (as the case may be) Takeover Offer Documents or as is obtained by the
time required and (ii) the Bank of Japan with respect to post-facto filings that may be required under the
Foreign Exchange Act in connection with the performance of this Agreement.
9.1.4
Form and Effect of this Agreement
This Agreement and the other Loan Documents have been duly executed and delivered by the Borrower.
This Agreement and the other Loan Documents are legal, valid and binding obligations of the Borrower,
enforceable against
the Borrower in accordance with its terms, except as affected by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally
and general principles of equity (whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
9.1.5
No Certain Funds Default
No Certain Funds Default is outstanding or would result from the execution of, the performance of, or
any transaction contemplated by, this Agreement.
9.1.6
No Litigation
There is no action, suit, investigation, litigation or proceeding (including, without limitation, any
Environmental Action), affecting the Consolidated Group pending or, to the knowledge of the Borrower,
threatened before any court, governmental agency or arbitrator that would reasonably be expected to be
adversely determined, and if so determined, would reasonably be expected to have a material adverse
effect on the financial condition or results of operations of the Consolidated Group taken as a whole
(other than the litigation set forth in the Disclosure Letter).
9.1.7
Immunity
Neither the Borrower nor any of its assets has any right of immunity from suit, execution, attachment or
other legal process in any legal proceedings in relation to this Agreement.
8
9.1.8
Environmental Review
(a)
(b)
In the ordinary course of its business, the Borrower conducts the Necessary Environmental
Review.
On the basis of the Necessary Environmental Review, the Borrower has reasonably concluded
that such liabilities and costs are unlikely to have any Material Adverse Effect.
9.1.9
Relevant Information
(a)
All written information (other than the Projections) concerning the Borrower, the Target and
their Subsidiaries and the transactions contemplated hereby or otherwise prepared by or on
behalf of the Borrower and its Subsidiaries and furnished to JBIC in connection with the
negotiation of, or pursuant to the terms of, this Agreement when taken as a whole (and with
respect to information regarding the Target Group, to the Borrower’s knowledge), was true and
correct in all material respects as of the date when furnished by such Person to JBIC and did
not, taken as a whole, when so furnished contain any untrue statement of a material fact as of
any such date or omit to state a material fact necessary in order to make the statements
contained therein, taken as a whole, not misleading in light of the circumstances under which
such statements were made. The Projections and estimates and information of a general
economic nature prepared by or on behalf of the Borrower or its Subsidiaries and that have
been furnished by such Person to JBIC in connection with the transactions contemplated
hereby have been prepared in good faith based upon assumptions believed by such Person to be
reasonable as of the date of such Projections (it being understood that actual results may vary
materially from the Projections).
9.1.10 Financial Information.
The Borrower has heretofore furnished to JBIC (i) its consolidated balance sheet at March 31, 2017 and
the related consolidated statements of operations, shareholders’ equity and cash flows for the fiscal year
ended March 31, 2017, in each case reported on by KPMG AZSA LLC, independent public accountants
and (ii) the consolidated balance sheet of the Target as December 31, 2017 and the related consolidated
statements of operations, shareholders’ equity and cash flows for the fiscal year ended December 31,
2017. Such financial statements (to the Borrower’s knowledge with respect to the financial statements of
the Target) present fairly, in all material respects, the consolidated financial position and results of
operations and cash flows of the Borrower and the Target, as applicable, and their respective
consolidated Subsidiaries as of such dates and for such periods in accordance with IFRS and GAAP, as
applicable, except as may be indicated in the notes thereto and subject to year-end audit adjustments and
the absence of footnotes in the case of unaudited financial statements.
9.1.11 Anti-Corruption / Sanctions / Anti-Social Groups
(a)
The Borrower has implemented and maintains in effect policies and procedures reasonably
designed to promote compliance by the Borrower,
its Subsidiaries and their respective
directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions,
and the Borrower, its Subsidiaries and their respective officers and directors and to the
knowledge of the Borrower its employees and agents, are in compliance with Anti-Corruption
Laws and applicable Sanctions in all material respects. None of (i) the Borrower, any
Subsidiary, any of their respective directors or officers or to the knowledge of the Borrower or
such Subsidiary employees, or (ii) to the best knowledge of the Borrower, any agent of the
Borrower or any agent of any Subsidiary that will act in any capacity in connection with or
benefit from the credit facility established hereby, is a Sanctioned Person.
(b)
No Disbursement or use of the proceeds thereof will violate any applicable Anti- Corruption
Law or applicable Sanctions.
9
(c)
The Borrower is not classified, does not belong to nor is it associated with an Anti- Social
Group, does not have an Anti-Social Relationship and has not engaged in Anti- Social Conduct,
whether directly or indirectly through a third party.
9.1.12 Scheme
(a)
(b)
(c)
The Borrower has delivered to JBIC a complete and correct copy of the Scheme Documents (if
and when issued) or, as the case may be, the Offer Documents (if and when issued), including
all schedules and exhibits thereto. The release of the Offer Press Announcement and the
posting of the Takeover Offer Documents if a Takeover Offer is pursued has been or will be,
prior to their release or posting (as the case may be), duly authorized by the Borrower. Each of
the material obligations of the Borrower under the Takeover Offer Documents is or will be,
when entered into and delivered, the legal, valid and binding obligation of the Borrower,
enforceable against such Persons in accordance with its terms in each case, except as may be
limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the rights
and remedies of creditors generally and (ii) general principles of equity.
The Scheme Press Release and the Scheme Circular (in each case if and when issued) when
taken as a whole: (i) except for the information that relates to the Target or the Target Group,
do not (or will not if and when issued) contain (to the best of its knowledge and belief (having
taken all reasonable care to ensure that such is the case)) any statements which are not in
accordance with the material facts, or where appropriate, do not omit anything likely to affect
the import of such information and (ii) contain all the material terms of the Scheme.
If the Target Acquisition is effected by way of Scheme, each of the Scheme Documents
complies in all material respects with the Jersey Companies Law and the City Code, subject to
any applicable waivers by or requirements of the Panel.
(d)
The Borrower is not an EEA Financial Institution.
9.1.13 Margin Stock
Following application of the proceeds of the Disbursement, not more than 25 percent of the value of the
assets of the Borrower and of the Consolidated Group, on a Consolidated basis, subject to the provisions
of Clause 11.13 (No Encumbrance) will be Margin Stock. No part of the proceeds of the Disbursement
have been used or will be used for any purpose that entails a violation of any of the regulations of the
Board, including Regulations T, U and X of the Board.
9.1.14 ERISA
(a)
(b)
No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan
which would reasonably be expected to have a Material Adverse Effect.
Neither the Borrower nor any ERISA Affiliate (i) is reasonably expected to incur any
Withdrawal Liability to any Multiemployer Plan or has incurred any Withdrawal Liability that
has not been satisfied in full or (ii) has been notified by the sponsor of a Multiemployer Plan
that such Multiemployer Plan is in reorganization (within the meaning of Section 4241 of
ERISA) or has been determined to be in “endangered” or “critical’ status (within the meaning
of Section 432 of the Code or Section 305 of ERISA), and no such Multiemployer Plan is
reasonably expected to be in reorganization or in “endangered” or “critical” status.
9.1.15 Environmental—operations
(i) The operations and properties of the Consolidated Group comply, and have complied for the previous
three years, in all respects with all applicable Environmental Laws and Environmental Permits except to
10
the extent that the failure to so comply, either individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect; (ii) all past non-compliance with such Environmental Laws
and Environmental Permits has been resolved without any ongoing obligations or costs except to the
extent that such non-compliance, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect; and (iii) to the Borrower’s knowledge, no circumstances exist that
would be reasonably expected to (A) form the basis of an Environmental Action against a member of
the Consolidated Group or any of its properties that, either individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect or (B) cause any such property to be subject
to any restrictions on ownership, occupancy, use or transferability under any Environmental Law that,
either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
9.1.16 Environmental—properties
(i) None of the properties currently or formerly owned or operated by a member of the Consolidated
Group is listed or formally proposed for listing on the NPL or on the CERCLIS or any analogous
foreign, state or local list; (ii) to the Borrower’s knowledge, there are no, and never have been any,
underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or
lagoons in which Hazardous Materials are being or have been treated, stored or disposed of on any
property currently owned or operated by any member of the Consolidated Group or, to the Borrower’s
knowledge, on any property formerly owned or operated by a member of the Consolidated Group that,
either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect;
(iii) to the Borrower’s knowledge, there is no asbestos or asbestos-containing material on any property
currently owned or operated by a member of the Consolidated Group the mitigation of which, either
individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; and
(iv) to the Borrower’s knowledge, no Hazardous Materials have been released, discharged or disposed
of on any property currently or formerly owned, leased or operated by a member of the Consolidated
Group for which a member of the Consolidated Group could be expected to be made liable to remediate
under Environmental Law except in each case as would not have a Material Adverse Effect.
9.1.17 Environmental—investigation
No member of the Consolidated Group is undertaking either individually or together with other
potentially responsible parties, any investigation or assessment or remedial or response action relating to
any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or
operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the
requirements of any Environmental Law that, either individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect; and, to the Borrower’s knowledge, all Hazardous
Materials generated, used, treated, handled or stored at, or transported to or from, any property currently
or formerly owned or operated by a member of the Consolidated Group, or any offsite locations to
which a member of the Consolidated Group sent Hazardous Materials for treatment or disposal, have
been disposed of in a manner that, either individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect.
9.1.18
Investment Company Act
The Borrower is not an “investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940 (United States), as amended.
9.1.19 Pari passu
The Disbursement and all related obligations of the Borrower under this Agreement rank pari passu with
all other unsecured obligations of the Borrower that are not, by their terms, expressly subordinate to the
obligations of the Borrower hereunder.
11
9.1.20 Use of Proceeds
The proceeds of the Disbursement will be used in accordance with Clause 3 (Use of Proceeds).
9.2
Times for Making Representations
The representations and warranties set out in this Clause 9 are made by the Borrower on the date of this
Agreement, and each representation or warranty is deemed to be repeated by the Borrower on and as of
the date of the Disbursement, with reference to the facts then existing.
10.
General Undertakings and Environmental and Social Considerations
10.1
“Know your customer” checks
If:
(a)
(b)
(c)
the introduction of or any change in (or in the interpretation, administration or application of)
any law or regulation made after the date of this Agreement;
any change in the status of the Borrower (or of a Holding Company of the Borrower) after the
date of this Agreement; or
a proposed assignment or transfer by JBIC of any of its rights and obligations under this
Agreement to another person,
obliges JBIC (or, in the case of paragraph (c) above, any prospective assignee or transferee) to comply
with applicable “know your customer” and anti-money laundering rules and regulations, including the
Criminal Proceeds Transfer Prevention Act of Japan (Law No. 22 of 2007, as amended)
in
circumstances where the necessary information is not already available to it, the Borrower shall
promptly upon the request of JBIC supply, or procure the supply of, such documentation and other
evidence as is reasonably requested by JBIC (for itself or on behalf of any prospective assignee or
transferee) in order for the JBIC or, in the case of the event described in paragraph (c) above, any
prospective assignee or transferee to carry out and be satisfied it has complied with all applicable “know
your customer” and anti-money laundering rules and regulations, including the Criminal Proceeds
Transfer Prevention Act of Japan (Law No. 22 of 2007, as amended) pursuant to the transactions
contemplated in the Agreement.
10.2
Notifications
(a)
The Borrower shall immediately notify JBIC if it becomes aware of:
(i)
(ii)
the imposition of any Law materially affecting the Borrower or
Acquisition; and
the Target
any material change in the nature of the business activities of the Consolidated Group,
taken as a whole.
(b)
The Borrower shall promptly notify JBIC if it becomes aware of the occurrence of:
(i)
(ii)
any event or circumstance which interferes or threatens to interfere with the
implementation, completion or operation of the Target Acquisition; and
any other matter which materially affects the corporate or business activities or
existence of the Consolidated Group, taken as a whole.
(c)
Immediately upon becoming aware of the occurrence of any Default, the Borrower shall notify
JBIC of such Default (and the steps, if any, being taken to remedy it).
12
10.3
Environmental and Social Considerations
10.3.1 Due Attention
The Borrower shall pay due attention to the protection and conservation of the environment and
ecology, including, but not limited to, giving due consideration to such issues as air pollution, water
pollution, industrial waste treatment and ecological changes to the environment in connection with the
use of the proceeds of the Loan.
10.3.2 Requirements under the JBIC Environmental Guidelines
(a)
(b)
(c)
The Borrower shall report to JBIC on measures and monitoring related to the Environmental
and Social Considerations undertaken by the Borrower in connection with the Target
Acquisition in accordance with instructions from JBIC. If, due to unforeseen circumstances,
there is a possibility that relevant local environmental laws and standards may not be observed,
the Borrower shall promptly report this to JBIC. The Borrower shall furnish to JBIC, at least
once a year, a monitoring form on the Target Acquisition in accordance with instructions from
JBIC.
If any problems regarding the Environmental and Social Considerations arise, the Borrower
shall make efforts for discussions to be held between the Borrower and stakeholders of the
Target Acquisition (including local residents and local non- governmental organizations
affected by the Target Acquisition).
When the government of Ireland (including local governments) has important roles to play in
terms of the Environmental and Social Considerations, the Borrower shall endeavor to enter
into agreements (including arrangements or other similar form satisfactory to JBIC) with the
government (and/or the project proponent).
11.
Particular Covenants
11.1
Compliance with Laws, Etc.
The Borrower will:
(a)
(b)
Comply, and cause each member of the Consolidated Group to comply, with all applicable
laws, rules, regulations and orders (such compliance to include, without limitation, compliance
with ERISA and Environmental Laws), except to the extent that the failure to so comply, either
individually or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect; and
maintain in effect and enforce policies and procedures reasonably designed to promote
compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees
and agents with Anti-Corruption Laws and applicable Sanctions.
11.2
Payment of Taxes, Etc.
Pay and discharge, or cause to be paid and discharged, before the same shall become delinquent, all
taxes, assessments and governmental charges levied or imposed upon a member of the Consolidated
Group or upon the income, profits or property of a member of the Consolidated Group, in each case
except to the extent that (i) the amount, applicability or validity thereof is being contested in good faith
and by proper proceedings and with respect to which reserves in conformity with applicable accounting
standards have been provided or (ii) the failure to pay such taxes, assessments and charges, either
individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
13
11.3 Maintenance of Insurance
Except where the failure to do so would reasonably be expected to result in a Material Adverse Effect,
maintain, and cause each member of the Consolidated Group to maintain, insurance with responsible
and reputable insurance companies or associations (or pursuant to self- insurance arrangements) in such
amounts (after giving effect to any self-insurance which the Borrower believes (in the good faith
judgement of management of the Borrower) is reasonable and prudent in light of the size and nature of
its business) and covering such risks as is usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which any member of the Consolidated
Group operates.
11.4
Preservation of Existence, Etc.
Do, or cause to be done, all things necessary to preserve and keep in full force and effect its (i) existence
and (ii) rights (charter and statutory) and franchises; provided, however, that the Borrower may
consummate any merger or consolidation permitted under Clause 11.15(b); and provided further that the
Borrower shall not be required to preserve any such right or franchise if the management of the
Borrower shall determine that the preservation thereof is no longer desirable in the conduct of the
business of the Borrower and that the loss thereof is not disadvantageous in any material respect to
JBIC.
11.5
Visitation Rights
At any reasonable time and from time to time during normal business hours (but not more than once
annually if no Default has occurred and is continuing), upon no less than ten (10) days’ prior notice to
the Borrower, permit JBIC, or any agents or representatives thereof coordinated through JBIC, to
examine and make copies of and abstracts from the records and books of account, and visit the
properties, of the Consolidated Group, and to discuss the affairs, finances and accounts of the
Consolidated Group with any of the members of the senior treasury staff of the Borrower.
11.6
Keeping of Books
Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and business of the Consolidated
Group sufficient to permit the preparation of financial statements in accordance with IFRS.
11.7 Maintenance of Properties, Etc.
Cause all of its properties that are used or useful in the conduct of its business or the business of any
member of the Consolidated Group to be maintained and kept in good condition, repair and working
order (ordinary wear and tear excepted) and supplied with all necessary equipment, and cause to be
made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Borrower may be necessary so that the business carried on in connection therewith may
be properly and advantageously conducted at all times, except, in each case, where the failure to do so
would not reasonably be expected to result in a Material Adverse Effect.
11.8
Reporting Requirements.
(a)
Furnish to JBIC:
(i)
as soon as available and in any event within sixty (60) days after the end of each of the
first three quarters of each fiscal year of the Borrower, a Consolidated balance sheet of
the Consolidated Group as of the end of such quarter and Consolidated statements of
income and cash flows of the Consolidated Group for the period commencing at the
14
(ii)
(iii)
(iv)
(v)
(vi)
end of the previous fiscal year and ending with the end of such quarter, duly certified
by the Chief Financial Officer or the Treasurer of the Borrower as having been
prepared in accordance with IFRS (subject to the absence of footnotes and year end
audit adjustments);
as soon as available and in any event within one hundred twenty (120) days after the
end of each fiscal year of the Borrower, a copy of the annual audit report for such year
for
the
the Consolidated Group, containing a Consolidated balance sheet of
Consolidated Group as of the end of such fiscal year and Consolidated statements of
income and cash flows of the Consolidated Group for such fiscal year, in each case
accompanied by an unqualified opinion or an opinion reasonably acceptable to JBIC
by any independent public accountants of recognized national standing;
simultaneously with each delivery of the financial statements referred to in Subclauses
(a)(i) and (a)(ii) of this Clause 11.8, a certificate of the Chief Executive Officer, Chief
Financial Officer or the Treasurer of the Borrower in substantially the form of
Attachment 6 (Form of Compliance Certificate) hereto certifying that no Default or
Event of Default has occurred and is continuing (or if such event has occurred and is
continuing the actions being taken by the Borrower to cure such Default or Event of
Default), including, if such covenant is tested at such time, setting forth in reasonable
detail
compliance with Clause
11.17(Financial Covenants);
calculations necessary to demonstrate
the
as soon as possible and in any event within five (5) days after any Responsible Officer
of the Borrower shall have obtained knowledge of the occurrence of each Default
continuing on the date of such statement, a statement of a Responsible Officer of the
Borrower setting forth details of such Default and the action that the Borrower has
taken and proposes to take with respect thereto;
promptly after the sending or filing thereof, copies of all reports that the Borrower
sends to any of its security holders, in their capacity as such, and copies of all reports
and registration statements that members of the Consolidated Group file with the
Prime Minister of Japan through the Financial Services Agency of Japan,
the
Securities and Exchange Commission or any national securities exchange;
promptly after a Responsible Officer of the Borrower obtains knowledge of the
commencement thereof, notice of all actions, suits, investigations, litigations and
proceedings before any court, governmental agency or arbitrator
that would
reasonably be expected to be adversely determined, and if so determined, would
reasonably be expected to have a Material Adverse Effect subject, in each case, to any
regulatory restrictions relating to the supply of such
confidentiality,
information; and
legal or
(b)
(vii)
such other information respecting the Consolidated Group as JBIC may from time to
time reasonably request.
The Borrower shall be deemed to have delivered the financial statements and other information
referred to in paragraphs (i), (ii) and (v) above when such financial statements and other
information have been posted on the Borrower’s internet website or the website of the
Financial Services Agency of Japan, the Securities and Exchange Commission or any national
securities exchange (in each case, to the extent such website is accessible by the JBIC without
charge) and the Borrower has notified JBIC by electronic mail of such posting. If JBIC requests
hard copies of such financial statements and other information, the Borrower shall furnish these
to JBIC provided that no request shall affect that delivery has deemed to occur in accordance
with the immediately preceding sentence.
15
11.9
Conduct of the Scheme
To the extent applicable, the Borrower shall or it shall procure that the applicable members of the
Consolidated Group shall:
(a)
(b)
(c)
(d)
(e)
(f)
provide evidence that a Scheme Circular is issued and dispatched as soon as is reasonably
practicable and in any event within 28 days (or such longer period as may be agreed with the
Panel) after the issuance of the Original Scheme Press Release unless, during that period the
Borrower has elected to convert the Target Acquisition from a Scheme to a Takeover Offer, in
which case the Takeover Offer Document shall be issued and dispatched as soon as reasonably
practicable and in any event within 28 days (or such longer period as may be agreed with the
Panel) after the issuance of the Offer Press Announcement;
comply in all material respects with the City Code (subject to any waivers or dispensations
granted by the Panel or the Court) and all other applicable laws and regulations in relation to
the Takeover Offer or Scheme;
except as consented to by JBIC in writing (such consent not to be unreasonably withheld,
delayed or conditioned) and save to the extent that following the issue of a Scheme Press
Release or an Offer Press Announcement the Borrower elects to proceed with the Target
Acquisition by way of a Takeover Offer or Scheme respectively, ensure that (i) if the Target
Acquisition is effected by way of a Scheme, the Scheme Circular corresponds in all material
respects to the terms and conditions of the Scheme as contained in the Scheme Press Release to
which it relates or (ii) if the Target Acquisition is effected by way of a Takeover Offer, the
Takeover Offer Document corresponds in all material respects to the terms and conditions of
the Takeover Offer as contained in the corresponding Offer Press Announcement, subject to
any variation required by the Court and to any variations required by the Panel or which are not
materially adverse to the interests of JBIC (or where the prior written consent of JBIC has been
given);
ensure that the Scheme Documents, or, if the Target Acquisition is effected by way of a
Takeover Offer, the Offer Documents, provided to JBIC contain all the material terms and
conditions of the Scheme or Takeover Offer, as at that date, as applicable;
not make or approve any increase in the proposed amount of cash consideration payable per
Target Share or make any other acquisition of any Target Share (including pursuant to a
Takeover Offer) at a price that results in an increase in the cash consideration payable per
Target Share stated in the Original Scheme Press Release, unless such modification in price is
not materially adverse to the interests of JBIC (or where the prior written consent of JBIC has
been given);
except as consented to by JBIC in writing in the event that the matter is material to the interests
of JBIC (such consent not to be unreasonably withheld, delayed, or conditioned), not (i) amend
or waive any term of the Scheme Documents or Takeover Offer Documents, as applicable, in a
manner materially adverse to the interests of JBIC from those in the Original Scheme Press
Release, or (ii) if the Target Acquisition is proceeding as a Takeover Offer, amend or waive the
Acceptance Condition, save for, (a) in the case of clause (i), any amendment or waiver required
by the Panel, the City Code, a court or any other applicable law, regulation or regulatory body,
(b) in the case of clause (ii), a waiver of the Acceptance Condition to permit the Takeover
Offer to become unconditional with acceptance of Target Shares (excluding any shares held in
treasury) which, when aggregated with all Target Shares owned by the Borrower (directly or
indirectly), represent not less than 75% of all Target Shares (excluding any shares held in
treasury) as at
the date on which the Takeover Offer is declared unconditional as to
acceptances, (c) in the case of clause (i) and any condition detailed in the Original Scheme
Press Release, any waiver of a condition which would not have entitled the Borrower to lapse
the Scheme or Takeover Offer (as the case may be) under rule 13.5(a) of the City Code or
16
(g)
(h)
(i)
(j)
(d) an extension of the Long Stop Date (as defined in the Original Scheme Press Release) in the
event that any condition in paragraphs 4(c) to (j) in Part A of Appendix 1 to the Original
Scheme Press Release (or the equivalent provision in any Offer Press Announcement) has not
been satisfied by May 8, 2019;
not take any action which would require the Borrower to make a mandatory offer for the Target
Shares in accordance with Rule 9 of the City Code;
provide JBIC with copies of each Offer Document or Scheme Document (as applicable) and
such information as it may reasonably request regarding, in the case of a Takeover Offer, the
current level of acceptances subject to any confidentiality, legal, regulatory or other restrictions
relating to the supply of such information;
promptly deliver to JBIC the receiving agent certificate issued under Rule 10 of the City Code
to a Takeover Offer), any written
(if the Target Acquisition is being pursued pursuant
agreement between the Borrower or its Affiliates and Target to the extent material to the
interests of JBIC (as reasonably determined by the Borrower) in relation to the consummation
of the Target Acquisition (in each case, upon such documents or agreements being entered into
by a member of the Consolidated Group), and all other material announcements and documents
published by the Borrower or delivered by the Borrower to the Panel pursuant to the Takeover
Offer or Scheme (other than the cash confirmation) and all legally binding agreements entered
into by the Borrower in connection with the Takeover Offer or Scheme, in each case to the
extent the Borrower, acting reasonably, anticipates they will be material to the interests of the
JBIC in connection with the Transactions, except to the extent it is prohibited by legal
(including contractual) or regulatory obligations from doing so;
in the event that a Scheme is switched to a Takeover Offer or vice versa, (which the Borrower
shall be entitled to do on multiple occasions provided that it complies with the terms of this
Agreement), (i) within the applicable time periods provided in the definition of “Mandatory
Cancellation Event”, procure that an Offer Press Announcement or Scheme Press Release, as
the case may be, is issued, and (ii) except as consented to by JBIC in writing where such
matters are material to the interests of JBIC (such consent not to be unreasonably withheld,
delayed or conditioned), ensure that (A) where the Target Acquisition is then proceeding by
way of a Takeover Offer, the terms and conditions contained in the Offer Document include the
Acceptance Condition and (B) except for any reference in the Scheme Documents to the
recommendation of the Target Acquisition and the Scheme to the Scheme Shareholders by the
board of directors of the Target, the conditions to be satisfied in connection with the Target
Acquisition and contained in the Offer Documents or the Scheme Documents (whichever is
applicable) are otherwise consistent in all material respects with those contained in the Offer
Documents or Scheme Documents (whichever applied to the immediately preceding manner in
which it was proposed that the Target Acquisition would be effected) (to the extent applicable
for the legal form of a Takeover Offer or Scheme, as the case may be), in each case other than
(i) in the case of clause (B), any changes permitted or required by the Panel or the City Code or
any court of competent jurisdiction or are required to reflect the change in legal form to a
Takeover Offer or Scheme or (ii) changes that could have been made to the Scheme or a
Takeover Offer in accordance with the relevant provisions of this Agreement or which reflect
the requirements of the terms of this Agreement and the manner in which the Target
Acquisition may be effected, including, without limitation, changes to the price per Target
Share which are made in accordance with the relevant provisions of this Agreement or any
other agreement between the Borrower and JBIC;
(k)
in the case of a Takeover Offer, (i) not declare the Takeover Offer unconditional as to
acceptances until the Acceptance Condition has been satisfied and (ii) promptly upon the
Borrower acquiring Target Shares which represent not less than 90% in nominal value of the
Target Shares to which the Takeover Offer relates or, if the Takeover Offer relates to Target
17
Shares of different classes, not less than 90% in nominal value of the shares of any class to
which the Takeover Offer relates, ensure that notices under Article 117 of the Jersey
Companies Law in respect of Target Shares that the Borrower has not yet agreed to directly or
indirectly acquire are issued;
in the case of a Scheme, within ninety (90) days of the Scheme Effective Date, and in relation
to a Takeover Offer, within ninety (90) days after the later of (i) the Closing Date and (ii) the
date upon which the Borrower (directly or indirectly) owns and/or has agreed to own or acquire
and has received valid acceptances (which have not been withdrawn or cancelled) of Target
Shares (excluding any shares held in treasury), in respect of which, when aggregated with all
other Target Shares owned by the Borrower (directly or indirectly), represent not less than 75%
of all Target Shares (excluding any shares held in treasury), procure that such action as is
necessary is taken to de-list the Target Shares from the Official List of the Financial Conduct
Authority and to cancel trading in the Target Shares on the main market for listed securities of
the London stock exchange and as soon as reasonably practicable thereafter, and subject always
to the Jersey Companies Law and any applicable listing rules, use its reasonable endeavours to
re-register Target as a private limited company;
except as consented by JBIC in writing, not give its consent with respect to any frustrating
action of the Target pursuant to Rule 21.1(c)(ii) of the City Code;
make all payments which form part of the consideration to the shareholders of the Target in
accordance with the terms of the Offer Documents or the Scheme Documents (whichever is
applicable) or as otherwise may be agreed with the Court and/or the Panel.
(l)
(m)
(n)
11.10 Records
The Borrower shall maintain or cause to be maintained reasonable records in respect of the use of the
proceeds of the Loan and the implementation of the Target Acquisition until at least two (2) years after
the Disbursement Date and enable JBIC’s representatives to examine such records.
11.11 Authorizations
The Borrower shall promptly obtain, maintain and comply with any authorization required under any
applicable Law in order to perform its obligations under, or for the legality, validity, enforceability or
admissibility in evidence of this Agreement, except to the extent that the failure to so comply, either
individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
11.12
Pari Passu
The Borrower shall ensure that the payment obligations under this Agreement at all times rank at least
pari passu with all other present and future unsecured and unsubordinated Debt of the Borrower, except
any claims that are mandatorily preferred by laws of general application to companies.
11.13 No Encumbrance
The Borrower shall not, without the prior written consent of JBIC, incur, issue, assume or guarantee, or
permit any member of the Consolidated Group to incur, issue, assume or guaranty, at any time, any
Borrowed Debt secured by a Lien on any property or asset now owned or hereafter acquired by the
Borrower or any member of the Consolidated Group (other than Unrestricted Margin Stock), without
effectively providing that the Disbursement outstanding at such time (together with, if the Borrower
shall so determine, any other Borrowed Debt of the Borrower or such member of the Consolidated
Group existing at such time or thereafter created that is not subordinate to the Disbursement) shall be
secured equally and ratably with (or prior to) such secured Borrowed Debt, so long as such secured
18
Borrowed Debt shall be so secured, unless, after giving effect thereto, the aggregate amount of all such
secured Borrowed Debt would not exceed $2,500,000,000; provided, however, that this Clause 11.13
shall not apply to, and there shall be excluded from secured Borrowed Debt in any computation under
this Clause 11.13, Borrowed Debt secured by:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Liens on property of, or on any shares of stock or Borrowed Debt of, any Person existing at the
time such Person becomes a member of the Consolidated Group;
Liens in favor of any member of the Consolidated Group;
Liens incurred in the ordinary course of business to secure the performance of tenders,
statutory or regulatory obligations, surety, stay, customs and appeal bonds, statutory bonds,
bids, leases, government contracts, trade contracts, performance and return of money bonds and
other similar obligations (exclusive of obligations for the payment of borrowed money);
Liens on property of a member of the Consolidated Group in favor of the United States or any
State thereof, or any department, agency or instrumentality or political subdivision of the
United States or any State thereof, or in favor of any other country, or any political subdivision
thereof, to secure partial, progress, advance or other payments pursuant to any contract or
statute;
Liens on property (including that of the Target and its Subsidiaries), shares of stock or
Borrowed Debt existing at the time of acquisition thereof (including acquisition through
merger or consolidation) or to secure the payment of all or any part of the purchase price or
construction or improvement cost thereof or to secure any Debt incurred prior to, at the time of,
or within one hundred eighty (180) days after, the acquisition of such property or shares or
Borrowed Debt or the completion of any such construction or improvement for the purpose of
financing all or any part of the purchase price or construction or improvement cost thereof;
Liens existing on the Effective Date;
(i) bankers’ Liens, rights of setoff, revocation, refund, chargeback or overdraft protection, and
other similar Liens existing solely with respect to cash and cash equivalents on deposit in one
or more accounts maintained by the Borrower or any member of the Consolidated Group, in
each case granted in the ordinary course of business in favor of the bank or banks with which
such accounts are maintained, securing amounts owing to such bank with respect to cash
management and operating account arrangements, including those involving pooled accounts
and netting arrangements and (ii) Liens or rights of setoff against credit balances of the
Borrower or any member of the Consolidated Group with credit card issuers or credit card
processors or amounts owing by payment card issuers or payment card processors to Borrower
or any member of the Consolidated Group in the ordinary course of business;
Liens arising from any monetization, securitization or other financing of accounts receivable or
other receivables (including any related rights or claims) or in connection with factoring
programs entered into in the ordinary course of business and consistent with past practice and
on a non-recourse basis to the Borrower and its Subsidiaries; provided, that such Liens do not
encumber any property or assets other than the accounts receivable or other receivables
(including any related rights or claims) subject to such monetization, securitization, financing
or factoring arrangement and any proceeds of the foregoing; provided, further,
the
aggregate principal amount of the obligations secured by such Liens shall not exceed (i) prior
the Disbursement Date,
to the Disbursement Date, $750,000,000 or
$1,500,000,000.
(ii) on or after
that
Liens incurred in connection with pollution control, industrial revenue or similar financing,
survey exceptions and such matters as an accurate survey would disclose, easements, trackage
rights, leases, licenses, special assessments, rights of way covenants, conditions, restrictions
19
to the use of real property, servicing agreements,
and declarations on or with respect
development agreements, site plan agreements and other similar encumbrances incurred in the
ordinary course of business and title defects or irregularities that are of a minor nature and that,
in the aggregate, do not interfere in any material respect with the ordinary conduct of the
business of the Borrower or any member of the Consolidated Group; and
(k)
any extension, renewal or replacement (or successive extensions, renewals or replacements), as
a whole or in part, of any Borrowed Debt secured by any Lien referred to in subclauses
(a) through (k) of this Clause 11.13; provided, that (i) such extension renewal or replacement
Lien shall be limited to all or a part of the same property, shares of stock or Debt that secured
the Lien extended, renewed or replaced (plus improvements on such property) and (ii) the
Borrowed Debt secured by such Lien at such time is not increased.
11.14 Disposal of Assets
(a)
The Borrower shall not, without the prior written consent of JBIC (such consent not to be
unreasonably withheld), sell, lease or transfer or otherwise dispose of, whether by a single
transaction or a series of transactions (whether or not related), assets or properties which would
have a material adverse effect on the ability of the Borrower to perform its payment obligations
under this Agreement, so long as the Borrower has agreed to an equivalent agreement in its
financing agreement and such agreement remains effective.
(b)
Paragraph (a) does not apply to any sale, lease, transfer or other disposal made in the ordinary
course of the Borrower’s business.
11.15 No Merger or Change of Business
The Borrower shall not, without the prior written consent of JBIC, merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets (other than Unrestricted Margin Stock) (whether now owned or
hereafter acquired) to, any Person, or permit any member of the Consolidated Group to do so, except
that:
(a)
(b)
(c)
any member of (x) the Consolidated Group other than the Borrower may merge or consolidate
with or into or (y) the Consolidated Group may dispose of assets to, in each case, any other
member of the Consolidated Group;
the Borrower may merge with any other Person so long as (i) the Borrower is the surviving
entity or (ii) the surviving entity shall succeed, by agreement reasonably satisfactory in form
and substance to the JBIC, to all of the businesses and operations of the Borrower and shall
assume all of the rights and obligations of the Borrower under this Agreement and the other
Loan Documents (it being understood that notwithstanding the foregoing, the consummation of
the Transactions shall not be prohibited by this Clause 11.15 or otherwise pursuant hereto);
any member of the Consolidated Group (other than the Borrower) may merge or consolidate
with or into another Person, convey, transfer, lease or otherwise dispose of all or any portion of
its assets so long as (i) the consideration received in respect of such merger, consolidation,
conveyance, transfer, lease or other disposition is at least equal to the fair market value of such
assets and (ii) no Material Adverse Effect would reasonably be expected to result from such
merger, consolidation, conveyance, transfer, lease or other disposition;
provided, in the cases of clause (a), (b) and (c) hereof, that no Default or Event of Default (or, during the
Certain Funds Period, no Certain Funds Default) shall have occurred and be continuing at the time of
such proposed transaction or would result therefrom.
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11.16 Additional or Substitutional Security / Guarantee
The Borrower shall, upon request by JBIC, immediately:
(a)
(b)
provide JBIC with such additional security; or
obtain such absolute, irrevocable and unconditional guarantee,
for the Loan as JBIC requires, in each case, such additional security or guarantee shall, within thirty
(30) days of JBIC’s first written demand therefor, be submitted to JBIC and shall be in form and
substance satisfactory to JBIC in all respects.
11.17
Financial Covenants
The Borrower shall ensure all of the Financial Covenants in Attachment 1 (Financial Covenants) shall
be observed.
11.18 Use of Proceeds
The proceeds of the Disbursement will be used in accordance with the provisions of Clause 3 (Use of
Proceeds). No part of the proceeds of the Disbursement will be used, whether directly or indirectly, for
any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and
X. The Borrower will not request the Disbursement, and the Borrower shall not use, and the Borrower
shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents
shall not use, the proceeds of the Disbursement (i) for payments to any Person in violation of any Anti-
Corruption Laws, (ii) for the purpose of funding, financing or facilitating any activities, business or
transaction of or with any Sanctioned Person, or in any Sanctioned Country, to the extent such activities,
businesses or transaction would be prohibited by Sanctions if conducted by a corporation incorporated
in the United States, Japan, the United Kingdom or in a European Union member state or (iii) in any
other manner that would result in the violation of any Sanctions applicable to any party hereto.
11.19 Anti-Social Conduct / Anti-Social Groups
Each party hereto shall ensure that (i) it is not classified as an Anti-Social Group, nor shall any such
party have any Anti-Social Relationship nor engage in any Anti-Social Conduct, whether directly or
indirectly through a third party and (ii) it shall not make any claim against any other party hereto for any
damages or losses suffered or incurred as a result of such other party exercising its rights under this
Agreement as a result of any breach of this Clause 11.19 or any misrepresentation in connection with
Clause 9.1.11 (Anti-Corruption / Sanctions / Anti-Social Groups).
12.
12.1
Events of Default
Events of Default
Each of the events set out in this Clause is an Event of Default, on the occurrence of which JBIC may
(subject to Clause 4.2(b) (Further Conditions to Disbursement)) by notice in writing to the Borrower:
(a)
(b)
(c)
suspend the Disbursement; and/or
cancel the Unutilized Amount of the Facility; and/or
declare that any amounts outstanding under this Agreement are immediately due and payable.
12.2
Non-payment
The Borrower fails (i) to pay any principal when the same becomes due and payable or (ii) to pay any
interest or make any payment of fees or other amounts payable under this Agreement within five
(5) Business Days after the same becomes due and payable.
21
12.3
Breach of Other Obligations
(a)
(b)
The Borrower breaches any provision of Clause 11 (Particular Covenants) Subclauses 4
(Preservation of Existence, Etc.) (i), 8 (Reporting Requirements) (a)(iv), 9 (Conduct of the
Scheme) 12 (No Encumbrance), 15 (No Merger or Change of Business) or 17 (Financial
Covenants).
The Borrower breaches any provision of Clause 11 (Particular Covenants) Subclauses 5
(Visitation Rights), 8 (reporting Requirements) (a) (i)-(iii) or (v)-(vii), unless such breach:
(i)
(ii)
is capable of remedy; and
is remedied within ten (10) business days of the earlier of JBIC giving notice in
writing and the Borrower becoming aware of such non-compliance.
(c)
The Borrower breaches any provision of Clause 11 (Particular Covenants) other than
Subclauses listed in (a) and (b) above, unless such breach:
(i)
(ii)
is capable of remedy; and
is remedied within thirty (30) days of the earlier of JBIC giving notice in writing and
the Borrower becoming aware of such non-compliance.
(d)
The Borrower does not comply with any other term, condition or provision of this Agreement
than Clause 10.3 (Environmental and Social Considerations), unless
other
such
non-compliance:
(i)
(ii)
is capable of remedy; and
is remedied within thirty (30) days of the earlier of JBIC giving notice in writing and
the Borrower becoming aware of such non-compliance.
12.4 Misrepresentation
Any representation or warranty made or repeated by the Borrower in this Agreement, or in any other
document delivered by or on behalf of the Borrower under this Agreement is incorrect in any material
respect when made or deemed to be repeated unless the circumstances giving rise to the
misrepresentation:
(a)
(b)
are capable of remedy; and
are remedied within fifteen (15) days of the earlier of JBIC giving notice in writing and the
Borrower becoming aware of such misrepresentation.
12.5
Cross-Default
Any of the following occurs in relation to the Borrower or any Significant Subsidiary:
(a)
(b)
(c)
fails to pay any principal of or premium or interest on any Indebtedness that is outstanding in a
principal amount of at
least $200,000,000 in the aggregate (but excluding Indebtedness
outstanding hereunder) when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness;
any other event shall occur or condition shall exist under any agreement or instrument relating
to any such Indebtedness and shall continue after the applicable grace period, if any, specified
in such agreement or instrument, if the effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such Indebtedness; or
any such Indebtedness shall be declared to be due and payable, or required to be prepaid or
redeemed (other than by a regularly scheduled required prepayment or redemption), purchased
22
or defeased, or an offer to prepay, redeem, purchase or defease such Indebtedness shall be
required to be made, in each case prior to the stated maturity thereof.
12.6
Cross Default—Other JBIC Agreements
Notwithstanding Clause 12.5 (Cross-Default), JBIC becomes entitled, duly pursuant to the applicable
Other JBIC Agreements, to:
(a)
(b)
declare any Indebtedness under any such Other JBIC Agreement immediately due and payable
prior to its stated maturity; or
suspend any disbursement in respect of any such Other JBIC Agreement.
12.7
Reschedule, Cessation, Insolvency, Dissolution or Other Similar Event
The Borrower or any Significant Subsidiary shall generally not pay its debts as such debts become due,
or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any
Significant Subsidiary seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief, or composition of its debts under any law
relating to bankruptcy, insolvency, or reorganization or relief of debtors, or seeking the entry of an order
for relief or the appointment of receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding instituted against it (but not
instituted by it), such proceeding shall remain undismissed or unstayed for a period of sixty (60) days;
or the Borrower or any Significant Subsidiary shall take any corporate action to authorize any of the
actions set forth above in this Clause 12.7. With respect to the Borrower or any Significant Subsidiary
organized under the laws of Japan, the following shall constitute an Event of Default: if (i) the Borrower
makes an express declaration or implicit declaration of its inability to pay its debts to its creditors
generally (shiharai teishi); (ii) a bank clearinghouse refuses to process the Borrower’s checks (tegata
torihiki teishi shobun); or densai.net Co., Ltd. (iii) an order is issued by a court for the attachment
(whether preliminary or otherwise) or preservation of the Borrower’s material property, estate or other
right and is not discharged within sixty (60) days; (iv) a receiver or trustee is appointed for all or a
portion of the property or estate of the Borrower; (v) an involuntary petition for commencement of
bankruptcy (hasan), corporate reorganization (kaisha kosei), civil rehabilitation (minji saisei), special
liquidation (tokubetsu seisan) or similar proceedings are filed against
the Borrower and are not
discharged within sixty (60) days; (vi) the Borrower files a voluntary petition (including a petition filed
by a director of the Borrower) to commence, or a court of competent
jurisdiction approves an
involuntary petition with respect to and commences the procedure of, any of the proceedings specified
in subparagraph (v) above; (vii) a voluntary petition to commence a special conciliation proceeding
(tokutei choutei); or (viii) the Borrower adopts a resolution for liquidation at a meeting of its
shareholders.
12.8
Laws and Consents
(a)
(b)
It is or becomes unlawful for the Borrower to perform any of its obligations under this
Agreement.
Any Public Requirement in the Borrower’s Country, which is necessary for or advisable in
connection with:
(i)
the validity, enforceability or performance of this Agreement or any agreement or
instrument required under this Agreement; or
(ii)
the admissibility in evidence of this Agreement,
is revoked, is not issued or renewed on time, or ceases to remain in full force and effect.
23
(c)
This Agreement shall cease to be valid and binding obligations of the Borrower or the validity
of this Agreement shall be contested by the Borrower or the Borrower denies liability under
this Agreement in a way which is materially adverse to the interest of JBIC and any other
lenders pursuant to Clause14.1 (Assignment) hereof taken as a whole.
12.9
Clean-up
Notwithstanding anything in this Agreement to the contrary, for a period commencing on the Closing
Date and ending on the date falling one hundred eighty (180) days after the Closing Date (the
“Clean-up Date”), notwithstanding any other provision of any Loan Document, any breach of
covenants, misrepresentation or other default which arises with respect to the Target Group will be
deemed not to be a breach of representation or warranty, a breach of covenant or an Event of Default, as
the case may be, if:
(a)
(b)
(c)
it is capable of remedy and reasonable steps are being taken to remedy it;
the circumstances giving rise to it have not knowingly been procured by or approved by the
Borrower; and
it is not reasonably likely to have a Material Adverse Effect.
If the relevant circumstances are continuing on or after the Clean-up Date, there shall be a breach of
representation or warranty, breach of covenant or Event of Default, as the case may be, notwithstanding
the above.
13.
13.1
Governing Law and Dispute Resolution
Governing Law
This Agreement, will be construed in accordance with, and is governed by the law of Japan.
13.2
Jurisdiction
(a)
(b)
Subject to Clause 13.2(c) (Jurisdiction), the Tokyo District Court have exclusive jurisdiction to
settle any action, suit, dispute, or other legal proceeding arising out of, relating to or having any
connection with this Agreement (including any action, suit, dispute, or other legal proceeding
relating to any non-contractual obligation arising from or in connection with this Agreement
interpretation, performance, breach or
and any dispute regarding the existence, validity,
termination of this Agreement or the consequences of its nullity) (a “Dispute”).
The Borrower agrees that the courts referred to in Clause 13.2(a) (Jurisdiction) are the most
appropriate and convenient courts to settle Disputes and accordingly agrees not to assert (by
way of motion, as a defense or otherwise) that a Dispute has been brought in an inconvenient
forum, that the courts referred to in Clause 13.2(a) (Jurisdiction) are an improper venue for a
Dispute or that this Agreement or the subject matter of this Agreement may not be enforced in
or by such courts.
(c)
To the extent allowed by law, JBIC may take proceedings relating to a Dispute in any other
courts with jurisdiction, and concurrent proceedings in any number of jurisdictions.
13.3 Waiver of Immunities
(a)
To the fullest extent permitted by law, the Borrower, with respect to itself and its revenues and
assets (irrespective of their use or intended use), irrevocably and unconditionally:
(i)
waives and agrees not to claim any sovereign, diplomatic or other immunity, from the
jurisdiction of the courts referred to in Clause 13.2(a) (Jurisdiction) in relation to any
24
(ii)
(iii)
Dispute (including to the extent that such immunity may be attributed to it), and
agrees to ensure that no such claim is made on its behalf;
to the jurisdiction of the courts referred to in Clause 13.2(a) (Jurisdiction) and the
courts of any other jurisdiction in relation to the recognition of any judgment or order
of the court referred to in Clause 13.2(a) (Jurisdiction) or the courts of any other
jurisdiction in relation to any Dispute and waives and agrees not to claim any
sovereign, diplomatic or other immunity from the jurisdiction of the courts referred to
in Clause 13.2(a) (Jurisdiction) or the courts of any other jurisdiction in relation to the
recognition of any such judgment or court order and agrees to ensure that no such
claim is made on its behalf; and
consents to the enforcement of any order or judgment made or given in connection
with any Dispute and the giving of any relief in the courts referred to in Clause 13.2(a)
(Jurisdiction) and the courts of any other jurisdiction whether before or after final
judgment including, without limitation (i) relief by way of interim or final injunction
or order for specific performance or recovery of any property; (ii) attachment of its
assets; and (iii) enforcement or execution against any property, revenues or other
assets whatsoever (irrespective of their use or intended use) and waives and agrees not
to claim any sovereign, diplomatic or other immunity from the jurisdiction of the
courts referred to in Clause 13.2(a) (Jurisdiction) or the courts of any other
jurisdiction in relation to such enforcement and the giving of such relief (including to
the extent that such immunity may be attributed to it), and agrees to ensure that no
such claim is made on its behalf.
(b)
The Borrower irrevocably and unconditionally acknowledges that the execution, delivery and
performance of this Agreement constitute private and commercial (and not public) acts of the
Borrower.
14.
Miscellaneous Provisions
14.1
Assignment
(a)
(b)
(c)
Subject to Paragraph (b) and (c) below, this Agreement shall be binding upon and inure to the
benefit of the Borrower and JBIC and their respective successors and assigns.
The Borrower may not assign or transfer any or all of its rights and/or obligations under this
Agreement without the prior written consent of JBIC.
JBIC may assign or transfer any or all of its rights and/or obligations under this Agreement
following good faith consultation with the Borrower, provided that during the Certain Funds
Period, JBIC shall not be permitted to make any such assignment or transfer.
14.2
No Release
Any claim or dispute arising out of or in connection with any other contract or agreement, whether or
not related to the Target Acquisition, shall not:
(a)
(b)
have any effect upon the Borrower’s obligations under this Agreement; and
in any way be deemed to release the Borrower from such obligations being absolute and
unconditional.
14.3
No Waiver, Remedies Cumulative
(a)
Any term of this Agreement may be amended or waived with the agreement of the Borrower
and JBIC.
25
(b)
The rights of JBIC under this Agreement:
(i)
(ii)
(iii)
may be exercised as often as necessary;
are cumulative and not exclusive of its rights under general law; and
may be waived only in writing and then only in the instance and purpose for which it
was given.
(c)
Any delay in exercising or non-exercise of any right or remedy by JBIC is not a waiver of that
right nor shall any single or partial exercise of any right or remedy prevent any further or other
exercise of any other right or remedy.
14.4
Partial Illegality
If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any
jurisdiction, that will not affect the legality, validity or enforceability in:
(a)
(b)
that jurisdiction of any other term of this Agreement; or
other jurisdictions of that provision or any other term of this Agreement.
14.5
Contract Construction
(a)
Headings: Clause and Sub-Clause headings and the Table of Contents in this Agreement are
inserted for ease of reference only and shall have no effect on the interpretation of any of the
provisions hereof.
(b)
References: In this Agreement, references to:
(i)
(ii)
(iii)
(iv)
(v)
this Agreement or any other agreement or document are to this Agreement or, as the
case may be, such other agreement or document as the same may be amended, varied,
novated or supplemented from time to time;
Clauses, Sub-Clauses, Paragraphs or Attachments are to Clauses, Sub-Clauses,
Paragraphs or Attachments of this Agreement;
any act, statute, ordinance or enactment shall be deemed to include references to such
act, statute, ordinance or enactment as re-enacted, amended, extended, consolidated or
replaced and any orders, decrees, proclamations, regulations, instruments or other
subordinate legislation made and enforced from time to time thereunder;
any Person shall be construed so as to include its successors, permitted assigns and
permitted transferees; and
a “successor” shall be construed so as to include a successor in title of such party and
any Person who under the Laws of its jurisdiction or domicile has assumed the rights
and obligations of such party under this Agreement or by which, under such Laws,
rights and obligations have been assumed.
(c)
(d)
Singular and Plural: Where the context so requires, words importing the singular number
shall include the plural and vice versa.
Attachments: The Attachments to this Agreement form an integral part hereof.
14.6
Confidentiality
Each of the Borrower and JBIC shall treat this Agreement as confidential and shall not disclose to any
Person any provision of or information regarding this Agreement without the prior written consent of
26
JBIC, except to the extent that (i) such disclosure is required by applicable Law, or regulations or by any
subpoena or similar legal process including to the Panel or pursuant to the City Code; (ii) such
disclosure is requested by Ministry of Finance, Board of Audit of Japan, or any other regulatory
authority purporting to have jurisdiction over it or its Affiliates; (iii) such disclosure is made to its
Affiliates or to its own and its Affiliates’ respective managers, administrators, trustees, partners,
directors, officers, employees, agents, attorneys, certified public accountants, licensed tax accountants,
other advisors (and their legal advisors) and other representatives (it being understood that the Persons
to whom such disclosure is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential); (iv) such disclosure is requested in connection with
the exercise of any remedies hereunder or any action or proceeding relating to this Agreement or the
enforcement of rights hereunder or thereunder; (v) such disclosure is subject to an agreement containing
provisions substantially the same as those of this Clause and is made, to (a) any assignee of or
participant in, or any prospective assignee of or participant in, any of its rights or obligations under this
Agreement, (b) any actual or prospective party (or its managers, administrators, trustees, partners,
directors, officers, employees, agents, advisors and other representatives) to any swap or derivative or
similar transaction under which payments are to be made by reference to the Borrower and its
obligations, this Agreement or payments hereunder, (c) any rating agency, (d) the CUSIP Service
Bureau or any similar organization or (e) any Person to whom or for whose benefit JBIC has created a
security interest in all or any portion of its rights under this Agreement pursuant to Clause 14.1 or (vi) to
the extent such Information (x) becomes publicly available other than as a result of a breach of this
Section or (y) becomes available to JBIC on a non-confidential basis from a source other than the
Borrower. JBIC acknowledges that its ability to disclose information concerning the Transactions is
restricted by the City Code and the Panel and that Clause 14.6 is subject to those restrictions.
For purposes of this Agreement, “Information” means this Agreement and the other Loan Documents
and all information received in writing and clearly identified as confidential or proprietary at that time
or thereafter without undue delay from the Consolidated Group relating to the Consolidated Group or
any of their respective businesses, other than any such information that is available to JBIC on a
non-confidential basis prior to disclosure by the Consolidated Group and other than information
pertaining to this Agreement routinely provided by arrangers to data service providers, including league
table providers, that serve the lending industry. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the confidentiality of such Information
as such Person would accord to its own confidential information.
14.7
Change of Evidence of Authority
(a)
If there is any change in the form or substance of the Evidence of Authority after the date of the
Documents Receipt, the Borrower must promptly:
(i)
(ii)
notify JBIC in writing of such change; and
provide JBIC with the relevant Evidence of Authority accompanied by the Specimen
Signatures in respect of such change.
(b)
JBIC may rely upon and refer to the Evidence of Authority previously received by JBIC until
JBIC receives the revised Evidence of Authority.
14.8
Use of English Language
Any document or material to be provided in connection with this Agreement must be:
(a)
(b)
in English or Japanese; or
in the language of the Borrower’s Country accompanied by a certified English translation,
which translation shall prevail unless the document is a statutory or other official document.
27
14.9
Communications
Unless otherwise specified in this Agreement, all communications between the parties hereto must be
by:
(a)
(b)
(c)
registered air mail, with any such communication deemed to have been duly given or made
seven (7) days after being deposited in the mail;
internationally recognized courier services, with any such communication deemed to have been
duly given or made when such internationally recognized courier service is received by the
recipient; or
facsimile (promptly confirmed by registered air mail or internationally recognized courier
services), with any such communication deemed to have been duly given or made when such
facsimile is received by the recipient,
to the following addresses or at such other address as any party may designate by written notice to the
other party:
The contact details of the Borrower for this purpose are:
Address:
Fax number:
Attention:
Takeda Pharmaceutical
Company Limited
1-1, Nihonbashi-Honcho
2-Chome, Chuo-ku
Tokyo 103-8668, Japan
81-3-3278-2198
Global Treasury and
Finance Management
Head.
The contact details of JBIC for this purpose are:
Address:
Fax number:
Attention:
Japan Bank for International
Cooperation
4-1, Ohtemachi 1-chome,
Chiyoda-ku,
Tokyo 100-8144, Japan
81-3-5218-3967
Director General, Industry
Finance Group, Corporate
Finance Department.
14.10 Abbreviation
This Agreement may be referred to as “JBIC Loan to Takeda” in communications between JBIC and the
Borrower, as well as in relevant documents.
[Remainder of Page Intentionally Left Blank]
28
IN WITNESS WHEREOF, the Borrower and JBIC, acting through their duly authorized representatives, have
caused this Agreement to be duly executed in duplicate in the English language and signed in their respective
names on the several dates and at the several places herein below written. The date of signature by JBIC in
Tokyo, Japan shall be deemed to be the date of conclusion of this Agreement and the office of JBIC in Tokyo,
Japan shall be deemed to be the place of signing of this Agreement.
TAKEDA PHARMACEUTICAL
COMPANY LIMITED
Japan Bank for International Cooperation
By
/s/ Costa Saroukos
Name: Costa Saroukos
Title: Chief Financial Officer
Date: December 3, 2018
Place: 1-1, Nihonbashi-Honcho 2-Chome,
Chuo-ku Tokyo 103-8668, Japan
By
Name:
Title:
Date:
Place:
Signature Page to
Loan Agreement
IN WITNESS WHEREOF, the Borrower and JBIC, acting through their duly authorized representatives, have
caused this Agreement to be duly executed in duplicate in the English language and signed in their respective
names on the several dates and at the several places herein below written. The date of signature by JBIC in
Tokyo, Japan shall be deemed to be the date of conclusion of this Agreement and the office of JBIC in Tokyo,
Japan shall be deemed to be the place of signing of this Agreement.
TAKEDA PHARMACEUTICAL
COMPANY LIMITED
Japan Bank for International Cooperation
By
Name:
Title:
Date:
Place:
/s/ Kazuhiko Tanaka
By
Name: Kazuhiko Tanaka
Title: Managing Executive Officer
Global Head of Industry Finance Group
Date: December 3, 2018
Place: Tokyo, Japan
Signature Page to
Loan Agreement
Attachment 1
Financial Covenants
1.
Beginning on the later of (i) the last day of the first fiscal half year ending at least one full fiscal quarter
after the Closing Date (which for the avoidance of doubt shall be no later than March 31, 2020) and
(ii) (A) if the fiscal year end is December 31, June 30 2019, or (B) if the fiscal year end is March 31,
September 30 2019 and the last day of each fiscal half year ending thereafter, the Borrower will not
permit, as of the last day of any such fiscal half year (each such date, the “Testing Date”) the ratio of
(x) Consolidated Net Debt at such time to (y) Consolidated EBITDA of the Borrower for the four
(4) consecutive fiscal quarter period ending as of such date to exceed the ratio set forth in the applicable
table below for such applicable Testing Date:
Testing Date (if fiscal year end is March 31)
Ratio Level
September 30 2019 (if the Closing Date occurs
on or prior to June 30 2019)
March 31 2020 and September 30 2020
March 31 2021 and September 30 2021
March 31 2022, September 30 2022, March 31
2023 and September 30 2023
5.95 to 1.00
5.35 to 1.00
4.30 to 1.00
4.00 to 1.00
March 31 2024 and September 30 2024
3.75 to 1.00
March 31 2025 and thereafter
3.50 to 1.00
(if the Term Loan Maturity Date has not
occurred, 4.00 to 1.00)
(if the Term Loan Maturity Date has not
occurred, 4.00 to 1.00)
2.
The Borrower shall ensure that (a) remains greater than seventy five percent (75%) of (b):
(a)
(b)
the total equity listed in the consolidated statement of financial position on the last day of each
fiscal year (from which the exchange differences on translation of foreign operations listed in
the consolidated statement of changes in equity on the last day of each fiscal year is deducted);
the total equity listed in the consolidated statement of financial position on the last day of the
most recent second quarterly finance period (from which the exchange differences on
translation of foreign operations listed in the consolidated statement of changes in equity on the
last day of the most recent second quarterly finance period is deducted).
3.
The Borrower shall ensure that (a) remains greater than seventy five present (75%) of (b):
(a)
(b)
the total equity listed in the consolidated statement of financial position on the last day of each
second quarterly finance period (from which the exchange differences on translation of foreign
operations listed in the consolidated statement of changes in equity on the last day of each
second quarterly finance period is deducted);
the total equity listed in the consolidated statement of financial position on the last day of the
most recent fiscal year (from which the exchange differences on translation of foreign
operations listed in the consolidated statement of changes in equity on the last day of the most
recent fiscal year is deducted).
4.
5.
The Borrower’s profit before tax listed in the consolidated statement of profit or loss on the last day of
each fiscal year shall not be negative for two (2) consecutive fiscal year.
So far as and to the extent that any clauses of any Syndicated Loan which is substantially equivalent to
the Clauses 2, 3 or 4 above is terminated, amended, restated or waived, such termination, amendment,
31
6.
7.
8.
restatement or waiver shall apply mutatis mutandis to this Agreement following mutual consultation
between JBIC and the Borrower in good faith and in a timely manner.
If a Testing Date would have occurred in the fiscal quarter in which the Borrower changed its fiscal year
end to December 31 (the “Fiscal Year Change”) but does not because of such Fiscal Year Change, the
last day of such fiscal quarter shall be a Testing Date notwithstanding the Fiscal Year Change.
Notwithstanding the foregoing, in the event that the Borrower incurs indebtedness in an amount no less
than US$ 5,000,000,000 in connection with an Acquisition and the Borrower’s Public Debt Rating is
equal to or higher than each of (x) Baa3 from Moody’s and (y) BBB- from S&P, then the Borrower shall
be permitted on one (1) occasion during the term of this Agreement to allow the maximum ratio of
Consolidated Net Debt to Consolidated EBITDA permitted pursuant to this Attachment to be increased
to 5.00 to 1.00 (if the then applicable required ratio level is lower than 5.00 to 1.00); provided that on
the second Testing Date after the Testing Date on which such maximum ratio was increased to 5.00 to
1.00, the maximum ratio permitted under this Attachment shall be 4.50 to 1.00, on the fourth Testing
Date after the Testing Date on which such maximum ratio was increased to 5.00 to 1.00, the maximum
ratio permitted under this Attachment shall be 4.00 to 1.00, on the sixth Testing Date after the Testing
Date on which such maximum ratio was increased to 5.00 to 1.00, the maximum ratio permitted under
this Attachment shall be 3.75 to 1.00 (if the Term Loan Maturity Date has not occurred, 4.00 to 1.00)
and on the eighth Testing Date after the Testing Date on which such maximum ratio was increased to
5.00 to 1.00, the maximum ratio permitted under this Attachment shall be 3.50 to 1.00 (if the Term Loan
Maturity Date has not occurred, 4.00 to 1.00).
For purposes of calculating the aggregate principal amount of the Consolidated Net Debt of the
Borrower on any such date, the currency exchange rate used for such calculation shall be the rate used in
the annual or semi-annual financial statements for such date; provided, however, that if the Borrower
determines that an average exchange rate is a more accurate reflection of the value of such currency
over such four (4) consecutive fiscal quarter period, the currency exchange rate used may be, at the
option of the Borrower, the currency exchange rate used for the statement of income of the Borrower for
such fiscal half year.
9.
For the purposes of this Attachment:
“Acquisition” means any acquisition (whether by purchase, merger, consolidation or otherwise) or
series of related acquisitions by the Borrower or any Subsidiary after the Effective Date of (i) at least a
majority of the assets of (or at least a majority of the assets constituting a business unit, division,
product line or line of business of) any Person, or (ii) at least the majority of the Equity Interests in a
Person or division or line of a Person.
“Borrowed Debt” means any Debt for money borrowed, including loans, hybrid securities, debt
convertible into Equity Interests and any Debt represented by notes, bonds, debentures or other similar
evidences of Debt for money borrowed.
“Consolidated” refers to the consolidation of accounts in accordance with IFRS.
“Consolidated EBITDA” means, for any fiscal period, the Consolidated net profit of the Consolidated
Group for such period determined in accordance with IFRS plus the following, to the extent deducted in
calculating such Consolidated net profit: (a) the provision for Federal, state, local and foreign taxes
based on income, profits, revenue, business activities, capital or similar measures payable by the
Consolidated Group in each case, as set forth on the financial statements of the Consolidated Group,
(b) share of loss of investments accounted for using the equity method, (c) Consolidated Interest
Expense and dividend expense, (d) any losses (including all fees and expenses or charges relating
thereto) on the retirement of debt, (e) any extraordinary, unusual, nonrecurring or non-cash impairments,
charges, expenses or losses (including impairments, charges, fees, expenses and losses incurred in
connection with the Transactions or any issuance of Debt or equity, acquisitions,
investments,
restructuring activities, asset sales or divestitures permitted hereunder, purchase accounting effects,
derivatives transactions and other finance expenses and other operating expenses), (f) non-cash stock
32
option expenses, non-cash equity-based compensation and/or non-cash expenses related to stock-based
compensation, (g) any foreign currency exchange losses, (h) losses (including all fees and expenses or
charges relating thereto) on sales of assets outside of the ordinary course of business and losses from
discontinued operations and (i) depreciation and amortization expense and minus, to the extent included
in calculating such Consolidated net profit for such period, the sum of (i) share of profit of investments
accounted for using the equity method, (ii) interest and dividend income, (iii) any gains (less all fees and
expenses or charges relating thereto) on the retirement of debt, (iv) any extraordinary, unusual,
nonrecurring or non-cash income (including other finance income ), (v) gains (less all fees and expenses
or charges relating thereto) on the sales of assets outside of the ordinary course of business and gains
from discontinued operations (without duplication of any amounts added back in Clause (a) of this
definition) and (vi) any foreign currency exchange gains, all as determined on a Consolidated basis.
Consolidated EBITDA will be calculated on a pro forma basis as if the Transactions and any related
incurrence or repayment of Debt by any member of the Consolidated Group had occurred on the first
day of the relevant period, but shall not take into account any cost savings or synergies projected to be
realized as a result of such acquisition or disposition other than cost savings or cost synergies that are
factually supportable and quantifiable pro forma cost savings or expense reductions related to
operational efficiencies (including the entry into any material contract or arrangement), strategic
initiatives or purchasing improvements and other cost savings, improvements or cost synergies, in each
case, that have been realized, or are reasonably expected to be realized, by any member of the
Consolidated Group based upon actions to be taken within 12 months after the consummation of the
action as if such cost savings, expense reductions, improvements and cost synergies occurred on the first
day of the relevant period; provided that the aggregate amount of such cost savings and cost synergies,
together with any cost savings and cost synergies included in the calculation of Consolidated EBITDA
pursuant to the immediately succeeding sentence, shall not exceed, for any such fiscal period, ten
percent (10%) of Consolidated EBITDA for such period (as calculated without giving effect this
sentence or the immediately succeeding sentence). In addition, in the event that any member of the
Consolidated Group acquired or disposed of any Person, business unit or line of business or made any
investment during the relevant period, Consolidated EBITDA will be determined giving pro forma
effect to such acquisition, disposition or investment as if such acquisition, disposition or investment and
any related incurrence or repayment of Debt had occurred on the first day of the relevant period, but
shall not take into account any cost savings or synergies projected to be realized as a result of such
acquisition or disposition other than cost savings or cost synergies that are factually supportable and
quantifiable pro forma cost savings or expense reductions related to operational efficiencies (including
the entry into any material contract or arrangement), strategic initiatives or purchasing improvements
and other cost savings, improvements or cost synergies, in each case, that have been realized, or are
reasonably expected to be realized, by any member of the Consolidated Group based upon actions to be
taken within 12 months after the consummation of the action as if such cost savings, expense reductions,
improvements and cost synergies occurred on the first day of the relevant period; provided that the
aggregate amount of such cost savings and cost synergies, together with any cost savings and cost
synergies included in the calculation of Consolidated EBITDA pursuant to the immediately preceding
sentence, shall not exceed, for any such fiscal period, ten percent (10%) of Consolidated EBITDA for
such period (as calculated without giving effect this sentence or the immediately preceding sentence).
“Consolidated Interest Expense” means, for any fiscal period, the total interest expense of the
Consolidated Group on a Consolidated basis determined in accordance with IFRS, including the
imputed interest component of capitalized lease obligations during such period, and all commissions,
discounts and other fees and charges owed with respect to letters of credit, if any, and net costs under
Hedge Agreements; provided that if any member of the Consolidated Group acquired or disposed of any
Person or line of business during the relevant period (including for the avoidance of doubt the
Transactions), Consolidated Interest Expense will be determined giving pro forma effect
to any
incurrence or repayment of Debt related to such acquisition or disposition as if such incurrence or
repayment of Debt had occurred on the first day of the relevant period.
33
“Consolidated Net Assets” means the aggregate amount of assets (less applicable reserves and other
properly deductible items) after deducting therefrom all current
liabilities, as set forth on the
Consolidated balance sheet of the Consolidated Group most recently furnished to the JBIC pursuant to
Clause 11.8 (Reporting Requirements) (i)(ii) prior to the time as of which Consolidated Net Assets shall
be determined.
“Consolidated Net Debt” means, as of any date of determination, the aggregate amount of Borrowed
Debt of the Consolidated Group determined on a Consolidated basis as of such date, minus all
unrestricted cash and cash equivalents of the Consolidated Group.
“Consolidated Tangible Assets” means, as of any date of determination thereof, Consolidated Total
Assets minus, without duplication, (x) the Intangible Assets of the Consolidated Group and (y) goodwill
of the Consolidated Group, in each case on such date.
“Consolidated Total Assets” means, as of the date of any determination thereof, total assets of the
Consolidated Group calculated in accordance with IFRS on a consolidated basis as of such date.
“Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed
money, (b) all obligations of such Person for the deferred purchase price of property or services that
would appear as a liability on the balance sheet of such Person prepared in accordance with IFRS (other
than trade payables incurred in the ordinary course of such Person’s business), (c) all obligations of such
Person evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such
Person created or arising under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such property), (e) all obligations
of such Person as lessee under leases that have been or should be, in accordance with IFRS, recorded as
capital leases, (f) all obligations, contingent or otherwise, of such Person in respect of acceptances,
letters of credit or similar extensions of credit, (g) all obligations of such Person in respect of Hedge
Agreements, (h) all Debt of others referred to in Clauses (a) through (g) above or Clause (i) below
directly guaranteed in any manner by such Person, or the payment of which is otherwise provided for by
such Person, and (i) all Debt referred to in Clauses (a) through (h) above secured by any Lien on
property (including, without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such Debt; provided, however,
that the amount of such Debt will be the lesser of (x) the fair market value of such asset at such date of
determination and (y) the amount of such other Debt.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a
limited liability company, beneficial interests in a trust or other equity ownership interests in a Person,
and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such
equity interest.
“Hedge Agreements” means interest rate swap, cap or collar agreements, interest rate future or option
contracts, currency swap agreements, currency future or option contracts and other similar agreements.
“Intangible Assets” means the aggregate amount, for the Consolidated Group on a consolidated basis,
of all assets classified as intangible assets under IFRS, including, without limitation, customer lists,
acquired technology, computer software,
trademarks, patents, copyrights, organization expenses,
franchises, licenses, trade names, brand names, mailing lists, catalogs, unamortized debt discount and
capitalized research and development costs.
“Syndicated Loan” means each of :
(a)
a syndicated loan agreement dated 23 July 2013 entered into among, inter alia, the Borrower as
borrower, various financial institutions indicated therein as lenders, Sumitomo Mitsui Banking
Corporation as the agent and Sumitomo Mitsui Banking Corporation and MUFG Bank, Ltd. as
the arrangers;
34
(b)
(c)
a syndicated loan agreement dated 22 April 2016 entered into among, inter alia, the Borrower
as borrower, various financial
institutions indicated therein as lenders, Sumitomo Mitsui
Banking Corporation as the agent and Sumitomo Mitsui Banking Corporation and MUFG
Bank, Ltd. as the arrangers; and
a syndicated loan agreement dated 31 March 2017 entered into among, inter alia, the Borrower
as borrower, various financial
institutions indicated therein as lenders, Sumitomo Mitsui
Banking Corporation as the agent and Sumitomo Mitsui Banking Corporation and MUFG
Bank, Ltd. as the arrangers.
“Term Loan” means the term loan credit agreement dated 8 June 2018 entered into among, the
Borrower as borrower, various financial institutions indicated therein as lenders and JPMorgan Chase
Bank, N.A. as administrative agent.
“Term Loan Maturity Date” means the Maturity Date defined in the Term Loan.
35
Attachment 2
Definitions
“Acceptance Condition” means, in respect of a Takeover Offer, the condition to the Takeover Offer
with respect to the number of acceptances to the Takeover Offer which must be secured to declare the
Takeover Offer unconditional as to acceptances (as set out in the Offer Press Announcement).
“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, controls, is
controlled by or is under common control with such Person or is a director or officer of such Person. For
purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and
“under common control with”) of a Person means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person, whether through the
ownership of Voting Stock, by contract or otherwise.
“Amortization Notice” has the meaning given in Paragraph (a) of Clause 5.2 (Arrangement of the
Amortization Schedule).
“Amortization Schedule” means the schedule of the dates and amounts of repayments of the Loan, as
amended from time to time in accordance with Clause 5 (Repayment).
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the
Borrower or any of its Subsidiaries from time to time concerning or relating to bribery or corruption.
“Anti-Social Conduct” means (i) a demand and conduct with force and arms; (ii) an unreasonable
demand and conduct having no legal cause; (iii) threatening or committing violent behavior relating to
its business transactions; (iv) an action to defame the reputation or interfere with the business of JBIC
by spreading rumor, using fraudulent means or resorting to force; or (v) other actions similar or
analogous to any of the foregoing in any jurisdiction.
“Anti-Social Group” means:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
an organized crime group (as defined in the Law relating to Prevention of Unjustifiable Acts by
Gang Members of Japan (Law No. 77 of 1991, as amended));
a member of an organized crime group;
a person who used to be a member of an organized crime group but has only ceased to be a
member of an organized crime group for a period of less than 5 years;
quasi-member of an organized crime group;
a related or associated company of an organized crime group;
a corporate racketeer or blackmailer advocating social cause or a special intelligence organized
crime group; or
a member of any other criminal force similar or analogous to any of the foregoing in any
jurisdiction.
“Anti-Social Relationship” means in relation a Person:
(a)
(b)
(c)
(d)
(e)
an Anti-Social Group controls its management;
an Anti-Social Group is substantively involved in its management;
it has entered into arrangements with an Anti-Social Group for the purpose of, or which have
the effect of, unfairly benefiting itself or a third party or prejudicing a third party;
it is involved in the provision of funds or other benefits to an Anti-Social Group; or
any of its directors or any other person who is substantively involved in its management has a
socially objectionable relationship with an Anti-Social Group.
“Board” means the Board of Governors of the Federal Reserve System of the United States of America.
36
“Borrower” has the meaning given in the opening Paragraph of this Agreement.
“Borrower’s Country” means Japan
“Business Day” means a day on which banks and other financial institutions are open for foreign
exchange business in Tokyo, London and New York.
“CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability
Information System maintained by the U.S. Environmental Protection Agency.
“Certain Funds Default” means an Event of Default arising from any of the following (other than in
respect of any Subsidiary of the Borrower, the Target or any Subsidiary of the Target, or a breach of a
procurement obligation with respect to any Subsidiary of the Borrower, the Target or any Subsidiary of
the Target):
(a)
(b)
(c)
(d)
Clause 12.2 (Non-payment) (in so far as it relates to payment of principal and/or interest only);
Clause 12.3 (Breach of Other Obligations) as it relates to the failure to perform any of the
following covenants:
(i)
(ii)
(iii)
(iv)
Clause 11.4 (i) (Preservation of Existence)
Clause 11.9 (Conduct of the Scheme) (other than paragraphs (h), (i) and (k) thereof);
Clause 11.13 (No Encumbrance); or
Clause 11.15 (No Merger or Change of Business);
Clause 12.4 (Misrepresentation) as it relates to a Certain Funds Representation; or
Clause 12.7 (Reschedule, Cessation, Insolvency, Dissolution or Other Similar Event) in relation
to the Borrower, but excluding, in relation to involuntary proceedings referenced therein, any
Event of Default caused by a frivolous or vexatious action, proceeding or petition in respect of
which no order or decree in respect of such involuntary proceeding shall have been entered.
“Certain Funds Period” means the period commencing on the Effective Date and ending on the earlier
of (i) the date on which a Mandatory Cancellation Event occurs, for the avoidance of doubt, on such
date but immediately after the relevant Mandatory Cancellation Event occurs or first exists or (ii) if the
Borrower has served written notice to JBIC in accordance with the definition of Commitment
Termination Date to extend the Commitment Termination Date to the date that is 60 days after the
Closing Date so that up to $2,100,000,000 Commitments remain outstanding until such date, the date
that is 60 days after the Closing Date.
“Certain Funds Purposes” means:
(a)
where the Target Acquisition proceeds by way of a Scheme:
(i)
(ii)
(iii)
(iv)
payment (directly or indirectly) of the cash price payable by the Borrower to the
holders of the Scheme Shares in consideration of the acquisition of such Scheme
Shares pursuant to the Scheme;
financing (directly or indirectly) the consideration payable to holders of options to
acquire Target Shares pursuant to any proposal in respect of those options as required
by the City Code;
financing (directly or indirectly) the fees, costs and expenses in respect of the
Transactions; and
repayment of certain Existing Target Indebtedness (which the Borrower may from
time to time elect); or
37
(b)
where the Target Acquisition proceeds by way of a Takeover Offer:
(i)
(ii)
(iii)
(iv)
(v)
payment (directly or indirectly) of all or part of the cash price payable by the
Borrower to the holders of the Target Shares subject to the Takeover Offer in
consideration of the acquisition of such Target Shares pursuant to the Takeover Offer;
payment (directly or indirectly) of the cash consideration payable to the holders of
Target Shares pursuant to the operation by Borrower of the procedures contained in
Articles 117 and 121 of the Jersey Companies Law;
financing (directly or indirectly) the consideration payable to holders of options to
acquire Target Shares pursuant to any proposal in respect of those options as required
by the City Code;
financing (directly or indirectly) the fees, costs and expenses in respect of the
Transactions; and
repayment of certain Existing Target Indebtedness (which the Borrower may from
time to time elect).
“Certain Funds Representations” means each of the following:
(a)
(b)
(c)
(d)
(e)
Clause 9.1.1 (Status of Borrower and its Business);
Clause 9.1.2(a) (Power and Internal Authorization) Subclauses (i), (ii) and (iii) (but excluding
9.1.2(a)(iii)(C) and also excluding subclause 9.1.2(a)(iv));
Clause 9.1.3 (Public Requirement);
Clause 9.1.4 (Form and Effect of this Agreement); and
Clause 9.1.12 (a), (b)(ii) and (c) (Scheme),
in each case only insofar as it relates to the Borrower (excluding, for the avoidance of doubt, any
Subsidiary of the Borrower, Target or any Subsidiary of Target).
“City Code” means the City Code on Takeovers and Mergers applicable, inter alia, to takeovers of
listed companies in the United Kingdom and to Jersey listed companies pursuant to the Companies
(Takeovers and Mergers Panel) (Jersey) Law 2009.
“Clean-up Date” has the meaning given in Clause 12.9 (Clean-up).
“Closing Date” means the date on which each of the conditions set forth in Attachment 3 Part 2
(Further Conditions Precedent) have been satisfied (or waived in accordance with Clause 14.3)
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Commitment” means the commitment of JBIC to make the Disbursement pursuant to this Loan.
“Commitment Termination Date” means the earlier of (a) the date on which a Mandatory
Cancellation Event occurs, for the avoidance of doubt, on such date but immediately after the relevant
Mandatory Cancellation Event occurs or first exists; provided that, if the Closing Date has occurred
prior to the date described in this Clause (a), up to $2,100,000,000 of Commitments shall remain
outstanding until the date that is sixty (60) days after the Closing Date if so elected by the Borrower by
written notice to JBIC prior to the Closing Date and (b) the date on which the Commitments are
terminated in full in accordance with Clause 4.5 (Termination of Commitment) or, subject to Clause
4.2(b) (Further Conditions to Disbursement), Clause 12.1(Events of Default).
“Conditions Precedent Documents” means the documents specified in Clause 4.1 (Conditioned
Precedent Documents).
“Consolidated Group” means, prior to the consummation of the Target Acquisition, the Borrower and
the Borrower and its
its Subsidiaries (excluding the Target and its Subsidiaries) and thereafter,
Subsidiaries (including the Target and its Subsidiaries).
38
“Court” means the Royal Court of Jersey.
“Court Meeting” means the meeting or meetings of Scheme Shareholders (or any adjournment thereof)
to be convened by order of the Court under Article 125(1) of the Jersey Companies Law for the
purposes of considering and, if thought fit, approving the Scheme.
“Court Order” means the Act of Court sanctioning the Scheme under Article 125(2) of the Jersey
Companies Law.
“Default” means any condition or event which constitutes an Event of Default or which with the giving
of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
“Disbursement” means the disbursement under the Facility in accordance with the provisions of this
Agreement.
“Disbursement Date” has the meaning given in Clause 4.3 (Disbursement).
“Disbursement Procedures” means
(Disbursement Procedure).
the disbursement procedures
set
forth in Attachment 4
“Disclosure Letter” means that certain disclosure letter dated as of the Effective Date from the
Borrower to JBIC.
“Dispute” has the meaning given in Paragraph (a) of Clause 13.2 (Jurisdiction).
“Documents Receipt” has the meaning given in Clause 4.1 (Conditions Precedent Documents).
“EEA Financial Institution” means (a) any institution established in any EEA Member Country which
is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA
Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any
institution established in an EEA Member Country which is a subsidiary of an institution described in
clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland,
Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with
public administrative authority of any EEA Member Country (including any delegee) having
responsibility for the resolution of any EEA Financial Institution.
“Effective Date” means the date of the Documents Receipt issued pursuant to Clause 4.1 (Conditions
Precedent Documents).
“Eligible Currency” has the meaning given in Clause 2.2 (Currency).
“Environmental Action” means any action,
suit, demand, demand letter, claim, notice of
noncompliance or violation, notice of liability or potential liability investigation, proceeding, consent
order or consent agreement relating in any way to any Environmental Law, Environmental Permit or
Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the
environment,
limitation, (a) by any governmental or regulatory authority for
enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any
governmental or regulatory authority or any third party for damages, contribution, indemnification, cost
recovery, compensation or injunctive relief.
including, without
“Environmental and Social Considerations” means the considerations described in Clause 10.3
(Environmental and Social Considerations) and the JBIC Environmental Guidelines;
“Environmental Law” means any applicable federal, state, local or foreign statute; law (including
common law); ordinance; rule; regulation; code; final and binding court order; judgment; decree or
judicial or agency interpretation, policy or guidance; or agency order relating to pollution or protection
of the environment, health, safety or natural resources, including, without limitation, those relating to
treatment, storage, disposal, release or discharge of Hazardous
the use, handing,
Materials.
transportation,
39
“Environmental Permit” means any permit, approval,
authorization required under any Environmental Law.
identification number,
license or other
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time,
and the applicable regulations promulgated thereunder.
“ERISA Affiliate” means any trade or business (whether or not incorporated) that is a member of the
Borrower’s controlled group, or under common control with the Borrower, within the meaning of
Section 414 of the Code.
“ERISA Event” means:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(i) the occurrence of a reportable event, within the meaning of Section4043 of ERISA, with
respect to any Single Employer Plan unless the 30-day notice requirement with respect to such
the requirements of subsection (1) of
event has been waived by the PBGC, or
Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are being met
with a contributing sponsor, as defined in Section 4001 (a)(l 3) of ERISA, of a Single
Employer Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of
Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the
following 30 days unless the 30-day notice requirement has been waived by the PBGC;
(ii)
the application for a minimum funding waiver with respect to a Single Employer Plan;
the termination of or provision of a notice of intent to terminate any Plan pursuant to
Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA) or otherwise so as to incur liability of the Borrower or
any ERISA Affiliate under Title IV of ERISA (other than premiums due to the PBGC);
the cessation of operations at a facility of the Borrower or any ERISA Affiliate in the
circumstances described in Section 4062(e) of ERISA;
the withdrawal by the Borrower or any ERISA Affiliate from a Multiple Employer Plan during
a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
the conditions for the imposition of a lien under Section 303(k) of ERISA shall have been met
with respect to any Plan; or
the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of
ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that
could constitute grounds for the termination of a Plan, or the appointment of a trustee to
administer a Single Employer Plan or Multiple Employer Plan.
“Escrow Account” means any account established for the purpose of depositing funds prior to their
being applied towards Certain Funds Purposes.
“Events of Default” has the meaning given in Clause 12.1 (Events of Default).
“Evidence of Authority” means the documentary evidence of the authority of each Person who:
(a)
(b)
has signed this Agreement on behalf of the Borrower; and
will sign the statements, reports, certificates and other documents required under this
Agreement or will otherwise act as a representative of the Borrower in relation to the
implementation, administration or performance of this Agreement,
(such documentary evidence to include certified copies of all corporate consents obtained in order to
authorize the execution, delivery and performance by the Borrower of this Agreement and the
transactions contemplated hereby).
“Existing Target Indebtedness” means indebtedness of the Target existing on the Closing Date.
40
“Facility” means the loan facility described in Clause 2.1 (Facility).
“Financial Covenants” has the meaning given in Clause 11.17 (Financial Covenants).
“Floating Rate” means, with respect to any Interest Period or Overdue Period:
(a)
(b)
the rate per annum (on the basis of a year of three hundred sixty (360) days) quoted on the
Reuters page LIBOR01 for
the purpose of displaying London interbank offered rate
administered by ICE Benchmark Administration Limited (or any other Person which takes over
the administration of that rate) in U.S. Dollars (“LIBOR”) or if such page ceases to display,
such other page on Reuters which displays such rate or on such other service as may be duly
selected by JBIC as suitable for determining LIBOR, for a period of six (6) months, at
approximately 11:00 a.m., London time, on each Quotation Date; or
if no rate is quoted on such pages on each such Quotation Date, the average (rounded upwards,
if necessary, to the nearest one-sixteenth of one per cent (1/16%)) of the rates per annum for a
period of six (6) months at which deposits in U.S. Dollars are offered to at least three
Reference Banks, as set out below,
in each case, at
approximately 11:00 a.m., London time, on each such Quotation Date. “Reference Banks”
shall mean three (3) banks duly selected by JBIC. In the event that such rate is not available at
such time for any reason, then “Floating Rate” for such Interest Period or Overdue Period
shall be duly determined by JBIC,
in the London interbank market,
and if, in either case, that rate is less than zero, the Floating Rate shall be deemed to be zero.
“Foreign Exchange Act” means the Foreign Exchange and Foreign Trade Act of Japan (Law No. 59 of
2009, as amended).
“General Meeting” means the extraordinary general meeting of the holders of Target Shares (or any
adjournment thereof) to be convened in connection with the implementation of a Scheme.
“Governmental Authority” means the government of Japan, the United States of America, or any other
nation or any political subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising executive,’ legislative,
judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
“Hazardous Materials” means (a) petroleum and petroleum products, byproducts or breakdown
products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas
and (b) any other chemicals, materials or substances designated, classified or regulated as “hazardous”
or “toxic” or as a “pollutant” or “contaminant” or for which liability may be imposed, under any
Environmental Law.
“IFRS” means the International Financial Reporting Standards, as promulgated by the International
Accounting Standards Board (or any successor board or agency), as in effect on the Effective Date.
“Indebtedness” means any obligation (whether incurred as principal or surety) for the payment or
repayment of money, whether present or future, actual or contingent, and for or in respect of:
(a)
(b)
(c)
(d)
(e)
(f)
amounts borrowed;
amounts of any deferred purchase price of property or services, the payment of which has been
deferred in excess of thirty (30) days;
guarantee, letters of credit or banker’s acceptances;
amounts payable under or evidenced by bonds, debentures, notes or other similar instruments;
leases or hire purchase contracts, which would in accordance with generally accepted
accounting principles be treated as finance or capital leases; or
amounts raised under any other transaction (including, without limitation, any forward sale or
purchase agreement) having the commercial effect of a borrowing.
41
“Interest” has the meaning given in Clause 6.1.1 (Interest).
“Interest Payment Date” has the meaning given in Clause 6.1.3 (Interest Payment Date).
“Interest Period” has the meaning given in Clause 6.1.4 (Interest Period).
“Interest Rate” has the meaning given in Clause 6.1.2 (Rate of Interest).
“JBIC” means Japan Bank for International Cooperation.
“JBIC Environmental Guidelines” means the “JBIC Guidelines for Confirmation of Environmental
and Social Considerations” (January 2015).
“JBIC’s Account” means the bank account described in Clause 8.1.2 (Account of JBIC).
“Jersey Companies Law” means the Companies (Jersey) Law 1991.
“Law” means any convention, treaty, law, ordinance, decree, rule, directive, regulation, judicial or
arbitral decision, or voluntary restraint, policy or guideline or any of the provisions of the foregoing (as
amended, supplemented or replaced from time to time) binding on or affecting the party referred to in
the context in which the term is used.
“LIBOR Business Day” means a day on which dealings in deposits in U.S. Dollars are carried on in the
London interbank market.
“Lien” means any lien, security interest or other charge or encumbrance of any kind, or any other type
of preferential arrangement, intended as a security interest, including, without limitation, the lien or
retained security title of a conditional vendor and any easement, right of way or other encumbrance on
title to real property.
“Litigation” means any of court proceedings, arbitration proceedings or administrative proceedings.
“Loan” has the meaning given in Clause 5.1 (Repayment of Loan).
“Loan Documents” means this Agreement and any amendments, notes or notices entered into in
connection herewith.
“Long Stop Date” means 8 August 2019 or such other date as may be agreed in writing between JBIC
and the Borrower.
“Mandatory Cancellation Event” means the occurrence of any of the following conditions or events:
(a)
where the Target Acquisition proceeds by way of a Scheme:
(i)
(ii)
(iii)
(iv)
the Court Meeting is held (and not adjourned or otherwise postponed) to approve the
Scheme at which a vote is held to approve the Scheme, but the Scheme is not so
approved in accordance with Article 125(2) of the Jersey Companies Law by the
requisite majority of the Scheme Shareholders at such Court Meeting;
the General Meeting is held (and not adjourned or otherwise postponed) to pass the
Scheme Resolutions at which a vote is held on the Scheme Resolutions, but the
Scheme Resolutions are not passed by the requisite majority of the shareholders of
Target at such General Meeting;
an application for the issuance of the Court Order is made to the Court (and not
adjourned or otherwise postponed) but the Court (in its final judgment) refuses to
grant the Court Order;
either the Scheme lapses or it is withdrawn with the consent of the Panel or by order
of the Court; or
(v)
the date which is 15 days after the Scheme Effective Date;
unless, in respect of paragraphs (i) to (iv) inclusive above, for the purpose of switching from a
Scheme to a Takeover Offer, within five (5) Business Days of such event the Borrower has
42
notified JBIC that the Borrower intends to issue, and then within ten (10) Business Days after
delivery of such notice the Borrower does issue, an Offer Press Announcement and provides a
copy to JBIC (in which case no Mandatory Cancellation Event shall have occurred);
(b)
where the Target Acquisition proceeds by way of a Takeover Offer:
(i)
(ii)
such Takeover Offer lapses, terminates or is withdrawn unless, for the purpose of
switching from a Takeover Offer to a Scheme, within five (5) Business Days of such
event the Borrower has notified JBIC that the Borrower intends to issue, and then
within ten (10) Business Days after delivery of such notice the Borrower does issue, a
Scheme Press Release and provides a copy to JBIC (in which case no Mandatory
Cancellation Event shall have occurred); or
the date which is six (6) weeks after the date (or to the extent necessary to address a
minority shareholder’s application to the Court in protest thereof and written notice is
provided to JBIC on or prior to the end of such initial six (6) week period, twelve
weeks after the date) that the Borrower serves notice under Article 117 of the Jersey
Companies Law to buy out minority shareholders;
the date upon which all payments made or to be made for Certain Funds Purposes have been
paid in full in cleared funds; or
the date which is 15 days after the Long Stop Date.
(c)
(d)
“Mandatory Prepayment Event” means each of the events listed in Clause 7.2 (Mandatory
Prepayment).
“Margin” has the meaning given in Clause 6.1.2 (Rate of Interest).
“Margin Stock” has the meaning provided in Regulation U.
“Material Adverse Effect” means a material adverse effect on (a) the financial condition or results of
operations of the Borrower or the Consolidated Group taken as a whole, (b) the rights and remedies of
JBIC under this Agreement, taken as a whole, (c) the ability of the Borrower to perform its or their
payment obligations under this Agreement.
“Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to
which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions,
or has within any of the preceding five plan years made or accrued an obligation to make contributions.
“Multiple Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA,
that (a) is maintained for employees of the Borrower or any ERISA Affiliate and at least one Person
other than the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the
Borrower or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event
such plan has been or were to be terminated.
“Necessary Environmental Review” means an ongoing review:
(a)
(b)
of the effect of local environmental Laws and standards on the business, operations and
properties of the Borrower and its subsidiaries; and
in the course of which the Borrower identifies and evaluates liabilities and costs related thereto
(including, without
in
compliance with applicable operating constraints, disposal of wastes and possible liabilities to
employees and other third parties).
to any clean-up or closure of properties,
limitation, with respect
“NPL” means the National Priorities List under
Compensation and Liability Act of 1980, as amended from time to time.
the Comprehensive Environmental Response,
“Offer Documents” means the Takeover Offer Document and the Offer Press Announcement.
43
“Offer Press Announcement” means a press announcement released by or on behalf of the Borrower in
accordance with Rule 2.7 of the City Code announcing that the Target Acquisition is to be effected by a
Takeover Offer and setting out the terms and conditions of the Takeover Offer.
“Original Scheme Press Release” means the Scheme Press Release released by the Borrower on
May 8, 2018.
“Other JBIC Agreement” means any agreement other than this Agreement involving the borrowing of
money or the extension of credit or any guarantee or indemnity between the Borrower or any Subsidiary
of the Borrower and JBIC (either acting alone or acting together with one or more other banks or
financial institutions or acting through a special purpose company). For the avoidance of doubt, this
includes any contract initially entered into with the Borrower on or before 31 March 2012, by any of
The Export-Import Bank of Japan, Japan Bank for International Cooperation and/or Japan Bank for
International Cooperation which constitutes the international arm of Japan Finance Corporation (each of
which being a predecessor organization of JBIC).
“Overdue Amount” has the meaning given in Paragraph (a) of Clause 6.2.1 (Overdue Interest).
“Overdue Interest” has the meaning given in Paragraph (a) of Clause 6.2.1 (Overdue Interest).
“Overdue Interest Rate” has the meaning given in Paragraph (a) of Clause 6.2.2 (Overdue Interest
Rate).
“Overdue Period” has the meaning given in Clause 6.2.3 (Overdue Period).
“Panel” means the Panel on Takeovers and Mergers.
“Person” means an individual, partnership, corporation (including a business trust),
joint stock
company, trust, unincorporated association, joint venture, limited liability company or other entity, or a
government or any political subdivision or agency thereof.
“Plan” means a Single Employer Plan or a Multiple Employer Plan.
“Planned Amortization Schedule” has the meaning given in Paragraph (b) of Clause 5.1 (Repayment
of Loan).
“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA,
as amended from time to time.
“Projections” means any projections and any forward-looking statements (including statements with
respect to booked business) of the Consolidated Group furnished to JBIC by or on behalf of the
Borrower prior to the Closing Date.
“Public Requirement” means approvals, authorizations, consents, licenses, recordations and filings,
registrations, and other acts, in any court, central bank, government or other public office or elsewhere.
“Quotation Date” means:
(a)
(b)
with respect to any Interest Period, the day which is two (2) LIBOR Business Days prior to the
commencement of such Interest Period; and
with respect to any Overdue Period, the day which is two (2) LIBOR Business Days prior to:
(i)
(ii)
the day on which the Overdue Amount becomes due and payable (for the period from
and including such due date up to and excluding the immediately succeeding Revision
Date (in the case where such period includes the date of actual receipt of the payment
by JBIC, up to and excluding such date)); or
each succeeding Revision Date (for the subsequent period from and including such
Revision Date up to and excluding the immediately succeeding Interest Payment Date
(in the case where such period includes the date of actual receipt of the payment by
JBIC, up to and excluding such date))
44
“Relevant Currency” has the meaning given in Paragraph (c) of Clause 8.2 (Other Payment
Obligations).
“Relevant Information” means:
(a)
(b)
any information which has been provided by the Borrower in connection with this Agreement
or the Target Acquisition; and
any and all facts which materially and adversely affect or may affect (to the extent the
Borrower can now reasonably foresee), the business, operations or financial condition of the
Borrower or the ability of the Borrower to perform its obligations under this Agreement.
“Repayment Date” has the meaning given in Paragraph (b) of Clause 5.1 (Repayment of Loan);
“Responsible Officer” means, with respect to the Borrower, the Chief Executive Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Head of Corporate Law,
Japan Legal and the General Counsel of the Borrower (or other executive officer of the Borrower
performing similar functions) or any other officer of the Borrower responsible for overseeing or
reviewing compliance with this Agreement
“Restricted Margin Stock” means Margin Stock owned by the Consolidated Group the value of which
(determined as required under clause 2(i) of the definition of “Indirectly Secured” set forth in
Regulation U) represents not more than 25% of the aggregate value (determined as required under
clause (2)(i) of the definition of “Indirectly Secured” set forth in Regulation U), on a consolidated basis,
of the property and assets of the Consolidated Group (excluding any Margin Stock) that is subject to the
provisions of Clause 11.13 (No Encumbrance) or Clause 11.15 (No Merger or Change of Business).
“Revision Date” has the meaning given in Paragraph (b) of Clause 6.2.2 (Overdue Interest Rate);
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or
target of comprehensive Sanctions (at the time of this Agreement, Crimea, Cuba, Iran, North Korea,
Sudan and Syria).
“Sanctioned Person” means, at any time:
(a)
(b)
(c)
(d)
any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the
U.S. Department of State, the Ministry of Finance of Japan, the United Nations Security
Council, the European Union, Her Majesty’s Treasury of the United Kingdom, any relevant
and applicable European Union member state or other relevant sanctions authority;
any Person operating, organized or resident in a Sanctioned Country;
any Person owned or controlled by any such Person or Persons described in the foregoing
Clauses (a) or (b); or
any Person otherwise the subject of any Sanctions.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or
enforced from time to time by (a) the U.S. government, including those administered by OFAC or the
U.S. Department of State, (b) the Japanese government, including those imposed under the Foreign
Exchange Act and the Import Trade Control Order of Japan (Cabinet Order No. 414 of 1949, as
amended) or (c) the United Nations Security Council, the European Union, Her Majesty’s Treasury of
the United Kingdom or any relevant and applicable European Union member state or other relevant
sanctions authority.
“Scheme” means a scheme of arrangement to be effected under Article 125 of the Jersey Companies
Law between Target and the Scheme Shareholders pursuant to which the Borrower will become the
holder of all of the Scheme Shares in accordance with the Scheme Documents, subject to such changes
and amendments to the extent not prohibited by the Loan Documents.
45
“Scheme Circular” means the document issued by or on behalf of Target to the Scheme Shareholders
setting out the terms and conditions of and an explanatory statement in relation to the Scheme, stating
the recommendation of the Target Acquisition and the Scheme to the Scheme Shareholders by the board
of directors of Target and setting out the notices of the Court Meeting and the General Meeting as such
document may be amended from time to time to the extent such amendment is not prohibited by the
Loan Documents.
“Scheme Documents” means, collectively (a) the Scheme Press Release, (b) the Scheme Circular,
(c) the Scheme Resolutions and (d) any other document issued by or on behalf of Target to its
shareholders in respect of the Scheme and any other document designated as a “Scheme Document” by
JBIC and the Borrower.
“Scheme Effective Date” means the date on which the Court Order sanctioning the Scheme is duly
delivered on behalf of Target to the Registrar in accordance with Article 125(3) of the Jersey Companies
Law.
“Scheme Press Release” means a press announcement released by the Borrower in accordance with
Rule 2.7 of the City Code announcing that the Target Acquisition is to be effected by a Scheme and
setting out the terms and conditions of the Scheme.
“Scheme Resolutions” means the resolutions of the shareholders of Target which are required to
implement the Scheme and which are referred to and substantially in the form set out in the Scheme
Circular and which are to be proposed at the General Meeting.
“Scheme Shareholders” means the registered holders of Scheme Shares at the relevant time.
“Scheme Shares” means the Target Shares which are subject to the Scheme in accordance with its
terms.
“Short Value” has the meaning given in Clause 8.3 (Different Currency Receipt).
“Significant Subsidiary” means any Subsidiary of the Borrower that constitutes a “significant
subsidiary” under Regulation S-X promulgated by the Securities and Exchange Commission, as in effect
from time to time.
“Single Employer Plan” means a single employer plan, as defined in Section 4001 (a)( 15) of ERISA,
that (a) is maintained for employees of the Borrower or any ERISA Affiliate and no Person other than
the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower
or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has
been or were to be terminated.
“Specified Currency” has the meaning given in Clause 2.2 (Currency).
“Specimen Signatures” means authenticated, as per Borrower’s existing procedures, specimen of
signatures of and certificates of incumbency in respect of any Person(s) who are referred to in the
Evidence of Authority.
“Subsidiary” means, with respect to any Person, any corporation, partnership, joint venture, limited
liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding
capital stock having ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest
in the capital or profits of such limited liability company, partnership or joint venture or (c) the
beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s
other Subsidiaries.
“Takeover Offer” means a “takeover offer” within the meaning of Article 116(1) of the Jersey
Companies Law proposed to be made by the Borrower to acquire (directly or indirectly) Target Shares,
46
substantially on the terms and conditions set out in an Offer Press Announcement (as such offer may be
amended in any way which is not prohibited by the terms of the Loan Documents).
“Takeover Offer Document” means the document issued by or on behalf of the Borrower and
dispatched to shareholders of the Target in respect of a Takeover Offer containing the terms and
conditions of the Takeover Offer reflecting the Offer Press Announcement in all material respects as
such document may be amended from time to time to the extent such amendment is not prohibited by
the Loan Documents.
“Target” means Shire plc.
“Target Acquisition” means the direct or indirect acquisition, pursuant to the Offer Documents or
Scheme Documents, as applicable, of the Target Shares, which acquisition will be effected pursuant to a
Takeover Offer or Scheme.
“Target Group” means the Target and its Subsidiaries.
“Target Shares” means all of the issued and to be issued ordinary shares in the capital of the Target
(including any issued pursuant to the exercise of any options or awards or other instruments convertible
into or exchangeable for shares of the Target).
“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, withholdings
(including back-up withholdings), assessments, fees or other like charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable thereto.
“Transactions” means the Target Acquisition, the entry into this Agreement and the transactions
contemplated hereby, the borrowings by the Borrower under the Commitments, and in each case, related
fees costs and expenses.
“Unrestricted Margin Stock” means any Margin Stock owned by the Consolidated Group which is not
Restricted Margin Stock.
“Unutilized Amount” means an amount equal to the difference between (A) the amount of the Facility
and (B) the total aggregate amount actually disbursed to the Borrower under this Agreement.
“U.S. Dollars” or “US$” means the lawful currency of the United States of America from time to time.
“Voting Stock” means shares of capital stock issued by a corporation, or equivalent interests in any
other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such Person, even if the right so to
vote has been suspended by the happening of such a contingency.
“Withdrawal Liability” has the meaning specified in Part I of Subtitle E of Title IV of ERISA.
47
Attachment 3
Conditions Precedent
Part 1 Conditions Precedent Documents to the Disbursement
(a)
(b)
JBIC (or its counsel) shall have received from each party hereto either (i) a counterpart of this
Agreement and the other Loan Documents signed on behalf of such party or (ii) written
evidence reasonably satisfactory to JBIC (which may include .pdf or facsimile transmission of
a signed signature page of this Agreement) that such party has signed a counterpart of this
Agreement.
All fees and other amounts then due and payable by the Borrower to JBIC under the Loan
Documents or pursuant to any fee or similar letters relating to the Loan Documents shall be
paid, to the extent invoiced by the relevant person at least one Business Day prior to the
Effective Date and to the extent such amounts are payable on or prior to the Effective Date.
(c)
JBIC shall have received on or before the Effective Date, each dated on or about such date:
(i)
(ii)
(iii)
(iv)
(v)
Certified copies of the resolutions or similar authorizing documentation of the
governing bodies of the Borrower authorizing such Person to enter into and perform
its obligations under the Loan Documents to which it is a party;
Certified copies of
incorporation, certificate of
incorporation and bylaws (or comparable organizational documents) and any
amendments thereto;
the Borrower’s articles of
A certificate of commercial registry (rireki jikou zenbu shomeisho) of the Borrower
issued by a Legal Affairs Bureau and certifying that all information required to be
registered under the laws of Japan has been registered in the commercial registry;
A customary certificate of the Borrower certifying the names and true signatures of
the officers of the Borrower authorized to sign this Agreement and the other
documents to be delivered by it hereunder; and
A favorable opinion letter of Gaikokuho Kyodo-Jigyo Horitsu Jimusho Linklaters, in
each case in form and substance reasonably satisfactory to JBIC.
(d)
(e)
JBIC shall have received a copy, certified by the Borrower, of the Original Scheme Press
Release.
JBIC shall have received, at least three (3) Business Days prior to the Effective Date, so long as
requested no less than ten (10) Business Days prior to the Effective Date, all documentation
and other information required by regulatory authorities under applicable “know your
customer” and anti-money laundering rules and regulations, including the Criminal Proceeds
Transfer Prevention Act of Japan (Law No. 22 of 2007, as amended), in each case relating to
the Borrower and its Subsidiaries, including the Borrower.
(f)
JBIC shall have received a copy of the Disclosure Letter, it being acknowledged that JBIC shall
not have any approval right as regards the form or contents of the Disclosure Letter.
Part 2 Further Conditions Precedent
(a)
(b)
The Effective Date shall have occurred.
If the Target Acquisition is effected by way of a Scheme, JBIC shall have received:
(i)
a certificate of the Borrower signed by a director certifying:
(A)
that the confirmation provided to JBIC pursuant to paragraph (c)(iv) of Part 1
of Attachment 3 remains correct, or otherwise a new confirmation in
substantially the same form setting out the names and true signatures of the
officers of the Borrower authorized to sign the documents to be delivered by
it under this Agreement;
48
(B)
(C)
(D)
(E)
(F)
the date on which the Scheme Circular was posted to the shareholders of the
Target;
the date on which the Court has sanctioned the Scheme and that the Court
Order has been duly delivered to the Registrar in accordance with Article
125(3) of the Jersey Companies Law;
confirmation as to the satisfaction of each condition set forth in Clauses
(d) and (e) below;
the Target Acquisition shall have been, or, within the time period permitted
by the City Code, shall be, consummated in all material respects in
accordance with the terms and conditions of the Scheme Documents except
to the extent not prohibited by the Loan Documents; and
each copy of the documents specified in paragraph (ii) below is correct and
complete and has not been amended or superseded on or prior to the Closing
Date, except to the extent such changes thereto have been required pursuant
to the City Code or required by the Panel or by a court of competent
jurisdiction or to the extent not prohibited by the Loan Documents; and
(ii)
a copy of the Scheme Circular which is consistent in all material respects with the
terms and conditions in the Scheme Press Release and the Scheme Resolutions, in
each case, except to the extent changes thereto have been required pursuant to the City
Code or required by the Panel or by a court of competent jurisdiction or are not
prohibited by the Loan Documents.
(c)
If the Target Acquisition is effected by way of a Takeover Offer, the JBIC shall have received:
(i)
a certificate of the Borrower signed by a director certifying:
(A)
(B)
(C)
(D)
the date on which the Takeover Offer Document was posted to the
shareholders of the Target;
confirmation as to the satisfaction of each condition set forth in clauses
(d) and (e) below;
each copy of the documents specified in paragraph (ii) below is correct and
complete and has not been amended or superseded on or prior to the Closing
Date, except to the extent such changes thereto have been required pursuant
to the City Code or required by the Panel or are not prohibited by the Loan
Documents; and
the Takeover Offer has been declared unconditional in all respects without
any material amendment, modification or waiver of the conditions to the
Takeover Offer or of the Acceptance Condition except to the extent not
prohibited by the Loan Documents; and
(ii)
a copy of the Takeover Offer Document which is consistent in all material respects
with the terms and conditions in the Offer Press Announcement, except to the extent
changes thereto have been required pursuant to the City Code or required by the Panel
or a court of competent jurisdiction or are permitted under the Loan Documents.
(d)
On the date of the applicable borrowing request and on the proposed date of such borrowing
(x) no Certain Funds Default is continuing or would result from the proposed Disbursement
and (y) all the Certain Funds Representations are true or, if a Certain Funds Representation
does not include a materiality concept, true in all material respects.
49
(e)
(f)
JBIC shall have received a Request for Disbursement in accordance with the Disbursement
Procedure.
JBIC shall have received a pro forma consolidated balance sheet and related pro forma
consolidated statement of income of the Borrower and its Subsidiaries as of and for the twelve-
month period ending on the last day of the most recently completed four- fiscal quarter period
ended at least 45 days prior to the Closing Date prepared after giving effect to the Transactions
as if the Transactions had occurred as of such date (in the case of such balance sheet) or at the
beginning of such period (in the case of such statement of income) (the “Pro-Forma
Financials”), it being acknowledged that JBIC shall not have any approval right as regards the
form or contents of the Pro-Forma Financials.
(g)
It is not illegal for JBIC to lend and there is no injunction, restraining order or equivalent
prohibiting JBIC from lending the Loan or restricting the application of the proceeds thereof.
50
Attachment 4
Disbursement Procedure
Unless otherwise agreed in writing by the parties to this Agreement, the Disbursement under this Agreement
shall be made in accordance with the following procedures:
1.
1.1
1.2
1.3
2.
2.1
2.2
Request for Disbursement
If the Borrower shall seek Disbursement in respect of the Target Acquisition, the Borrower shall, at least
three (3) Business Days prior to the intended date of Disbursement, submit to JBIC a duly completed
Request for Disbursement as per the attached Form 1 signed by the Borrower and accompanied by a
duly completed and signed Statement of Expenditures as per the attached Form 2.
The Request for Disbursement and the Statement of Expenditures shall be reviewed by JBIC as to its
compliance with the provisions of this Agreement. If the Request for Disbursement results in Certain
Funds Default or a Certain Funds Representation remains incorrect or, if a Certain Funds Representation
does not include a materiality concept, incorrect in any material respect, JBIC may refuse to make the
Disbursement.
The Borrower shall submit to JBIC a revised Statement of Expenditures promptly after such expenditure
occurred.
Disbursement
The Disbursement, not later than the third (3rd) Business Day following receipt by JBIC of the Request
for Disbursement, shall be made to the Borrower on the intended date of Disbursement in the Eligible
Currency by means of a telegraphic transfer into the Borrower’s account in the name of the Borrower set
forth in the Request for Disbursement (the “Account”) in accordance with this Agreement including,
without limitation, Clause 4 (Conditions Precedent and Disbursement) of this Agreement and this
Attachment 4 (Disbursement Procedure), provided that, if the said intended date of Disbursement is not
a Business Day, the Disbursement shall be made on the immediately succeeding Business Day.
The receipt of remittance by the Borrower denominated in the Eligible Currency into the Account shall
be the Disbursement of the Facility under this Agreement and shall, as from the date of such receipt,
constitute a valid and binding obligation upon the Borrower in respect of repayment of the
corresponding amount of the Loan and the payment of interest and any other amount payable hereunder
in relation thereto.
2.3
The Borrower shall issue a notice of the receipt of remittance in form and substance reasonably
satisfactory to JBIC promptly after the receipt of remittance.
2.4
No more than one (1) Disbursement shall be made hereunder.
3.
General
On the day on which the Disbursement shall be made, the amount of the Facility shall be reduced by the
amount of the Disbursement. Notwithstanding any provision of this Agreement to the contrary, JBIC
shall not be required to make the Disbursement hereunder if, as a result thereof, the amount of the
Facility would thereby be exceeded.
51
Request for Disbursement
(JBIC Loan to Takeda)
(Form 1)
Date:
Serial No.:
Japan Bank for International Cooperation
4-1, Ohtemachi 1-chome,
Chiyoda-ku, Tokyo 100-8144, Japan
Attn:
Director General
Industry Finance Group
Corporate Finance Department
Dear Sirs:
In accordance with Section 1 (Request for Disbursement) of Attachment 4 to the loan agreement dated
, (JBIC Loan to Takeda) (the “Agreement”), we hereby request you to disburse the amount specified
below. Terms used herein and not defined herein have the meanings given thereto in the Agreement.
Date of Disbursement:
Disbursement Amount in the Eligible Currency:
Please make the Disbursement of the above-mentioned amount by means of a telegraphic transfer into the
following account.
Bank Name/Branch Name:
Address of the Branch:
Account Name/Account Number:
SWIFT:
We enclose the Statement of Expenditures specifying the above-mentioned amount for your Disbursement
and the Disbursement Plan.
We hereby certify that, as at the date hereof, (x) no Certain Funds Default is continuing or would result from
the Disbursement requested herein and (y) all the Certain Funds Representations are true, or, if a Certain Funds
Representation does not include a materiality construct, true in all material respects.
Yours faithfully,
(name of the Borrower)
(name and title of signer)
52
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53
Attachment 5
Planned Amortization Schedule
Installment Number
1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
Date Due
December 11th, 2025
Amount in U.S.Dollars
US$ 3,700,000,000.00
US$ 3,700,000,000.00
54
Attachment 6
Form of Compliance Certificate
Japan Bank for International Cooperation
4-1, Otemachi 1-chome, Chiyoda-ku,
Tokyo 100-8144
Attention: Director General
Industry Finance Group
Corporate Finance Department
Facsimile: +81-3-5218-3967
Ladies and Gentlemen:
[Date]
Reference is hereby made to the loan agreement dated as of
2018 (as the same day may be
amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), between
Takeda Pharmaceutical Company Limited (the “Borrower”) and JBIC. Capitalized term used but not defined
herein shall have the meanings assigned to such terms in the Loan Agreement.
The undersigned is the [Chief Executive Officer / Chief Financial Officer / Treasurer] of the Borrower
(the “Authorized Officer”) and, as such, the undersigned is authorized to execute and deliver this Compliance
Certificate to the JBIC on behalf of the Borrower in accordance with clause 11.8(a)(iii) of the Loan Agreement.
The Authorized Officer hereby certifies as follows, in his/ her capacity as an officer of the Borrower and not in
his/ her individual capacity:
1.
2.
3.
I have review the terms of the Loan Agreement and I have made, or caused to be made under
my supervision, a view in reasonable detail of the transactions and conditions of the
Consolidated Group during the accounting period covered by the financial statements have
been prepared in accordance with IFRS (subject to the absence of footnotes and year end audit
adjustments); and
The examinations described in paragraph 1 did not disclose[, except as set forth below], and I
have no knowledge of the existence of any condition or event which constitutes a Default or
Event of Default during or at the end of accounting period covered by the attached financial
statements or as of the date of this Compliance Certificate; and
a.
[Please specify in reasonable detail each condition or event which
constitutes a Default or Event of Default and any action taken or
proposed to be taken with respect thereto]:and
The Borrower is in compliance with the each of the Financial Covenants as shown in the
calculations attached hereto as Annex II.
55
FINANCIAL STATEMENTS FOR PERIOD ENDING [
]
[To be attached unless the Borrower is deemed to have delivered the financial statements pursuant to
Paragraph (b) of Clause 11.8 (Reporting Requirements)]
ANNEX I
56
CALCULATION OF COMPLIANCE WITH FINANCIAL COVENANTS
[To be attached]
ANNEX II
57
Consent of Independent Registered Public Accounting Firm
Exhibit 15.1
To the Board of Directors
Takeda Pharmaceutical Company Limited:
We consent to the use of our report dated September 10, 2018, with respect to the consolidated statements of
financial position of Takeda Pharmaceutical Company Limited and subsidiaries as of March 31, 2018 and 2017,
and the related consolidated statements of income, income and other comprehensive income, changes in equity,
and cash flows for each of the years in the three-year period ended March 31, 2018, and the related notes,
included herein and to the reference to our firm under the heading “Statement by Experts” in this registration
statement on Form 20-F.
/s/ KPMG AZSA LLC
Tokyo, Japan
December 6, 2018
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form 20-F of our report dated February 16, 2018 relating
to the consolidated financial statements and the financial statement schedule of Shire plc, appearing in this
Registration Statement.
We also consent to the reference to us under the heading “Statement by Experts” in such Registration Statement.
Exhibit 15.2
/s/ DELOITTE LLP
London, United Kingdom
December 6, 2018
Exhibit 99.1
1. Condensed Interim Consolidated Financial Statements
(1) Condensed Interim Consolidated Statements of Income (Unaudited)
JPY (millions)
Six months period ended
September 30,
Three months period ended
September 30,
Note
2017
2018
Note
2017
2018
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . .
Research and development expenses . . . . . . . . . . . .
Amortization and impairment losses on intangible
assets associated with products . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . .
4
5
6
4
881,416
(242,741)
(297,263)
(155,096)
880,611
(231,341)
(293,783)
(151,432)
433,177
(121,873)
(151,396)
(79,408)
430,777
(110,751)
(148,755)
(79,466)
(56,885)
136,935
(32,017)
(48,288)
32,331
(16,142)
(24,395)
5,635
(22,366)
(24,267)
23,047
(17,499)
Operating profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
234,349
171,956
39,374
73,086
Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share of profit of investments accounted for using
the equity method . . . . . . . . . . . . . . . . . . . . . . . . .
Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expenses . . . . . . . . . . . . . . . . . . . . . . . .
14,116
(15,983)
4,411
(19,618)
506
4,031
232,988
(60,318)
160,780
(34,291)
Net profit for the period . . . . . . . . . . . . . . . . . . . . . .
172,670
126,489
Attributable to:
Owners of the Company . . . . . . . . . . . . . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . .
172,816
(146)
126,668
(179)
Net profit for the period . . . . . . . . . . . . . . . . . .
172,670
126,489
619
(6,019)
772
34,746
(7,065)
27,681
28,027
(346)
27,681
2,469
(9,109)
471
66,917
(18,508)
48,409
48,426
(17)
48,409
Earnings per share (JPY)
Basic earnings per share . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . .
7
7
221.43
219.98
161.76
160.93
7
7
35.89
35.67
61.73
61.48
See accompanying notes to condensed interim consolidated financial statements.
1
(2) Condensed Interim Consolidated Statements of Income and Other Comprehensive Income (Unaudited)
Net profit for the period . . . . . . . . . . . . . . . . .
172,670
126,489
27,681
48,409
JPY (millions)
Six months period ended
September 30,
Three months period ended
September 30,
Note
2017
2018
Note
2017
2018
Other comprehensive income:
Items that will not be reclassified to profit or
loss:
Changes in fair value of financial assets
measured at fair value through other
comprehensive income . . . . . . . . . . . .
Re-measurement gain (loss) on defined
benefit plans . . . . . . . . . . . . . . . . . . . .
Items to be reclassified subsequently to profit
or loss:
Exchange differences on translation of
—
688
688
13,008
(163)
12,845
—
9,279
10
10
802
10,081
foreign operations . . . . . . . . . . . . . . . .
86,421
66,680
32,618
60,718
Net changes on revaluation of
available-for-sale financial assets . . . .
Cash flow hedges . . . . . . . . . . . . . . . . . .
Hedging cost . . . . . . . . . . . . . . . . . . . . . .
Share of other comprehensive income
(loss) of investments accounted for
using the equity method . . . . . . . . . . .
8,113
1,523
691
—
1,704
(152)
3,778
724
161
—
(884)
(199)
36
(171)
18
(81)
96,784
68,061
37,299
59,554
Other comprehensive income for the period,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
97,472
80,906
37,309
69,635
Total comprehensive income for the
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
270,142
207,395
64,990
118,044
Attributable to:
Owners of the Company . . . . . . . . . . . . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . .
269,943
199
207,742
(347)
65,142
(152)
118,148
(104)
Total comprehensive income for the
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
270,142
207,395
64,990
118,044
See accompanying notes to condensed interim consolidated financial statements.
2
(3) Condensed Interim Consolidated Statements of Financial Position (Unaudited)
Note
As of March 31, 2018
As of September 30, 2018
JPY (millions)
ASSETS
NON-CURRENT ASSETS:
Property, plant and equipment
. . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments accounted for using the equity
method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial assets . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current assets . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-current assets . . . . . . . . . . . . . . . . . . . . . .
CURRENT ASSETS:
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade and other receivables . . . . . . . . . . . . . . . . . . .
Other financial assets . . . . . . . . . . . . . . . . . . . . . . . .
Income tax receivables . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
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1,029,248
1,014,264
107,949
196,436
77,977
64,980
3,027,655
212,944
420,247
80,646
8,545
57,912
294,522
3,992
1,078,808
4,106,463
533,088
1,085,706
1,067,172
115,174
221,210
90,522
54,024
3,166,896
233,304
461,436
20,281
7,483
68,130
317,080
229
1,107,943
4,274,839
3
Note
As of March 31, 2018
As of September 30, 2018
JPY (millions)
LIABILITIES AND EQUITY
LIABILITIES
NON-CURRENT LIABILITIES:
Bonds and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . . .
Net defined benefit liabilities . . . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . .
985,644
91,223
87,611
28,042
68,300
90,725
879,621
79,619
88,822
23,912
65,517
120,995
Total non-current liabilities . . . . . . . . . . . . . . . . . . .
1,351,545
1,258,486
CURRENT LIABILITIES:
Bonds and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade and other payables . . . . . . . . . . . . . . . . . . . . .
Other financial liabilities . . . . . . . . . . . . . . . . . . . . .
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . .
Liabilities held for sale . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . .
12
18
240,259
29,613
67,694
132,781
263,930
3,214
737,509
120,913
225,752
41,310
61,296
144,367
250,554
—
844,192
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,089,054
2,102,678
EQUITY
Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other components of equity . . . . . . . . . . . . . . . . . . .
Other comprehensive income related to assets held
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity attributable to owners of the Company . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . .
77,914
90,740
(74,373)
1,557,307
350,631
(4,795)
1,997,424
19,985
2,017,409
4,106,463
77,942
81,777
(57,167)
1,648,094
417,712
—
2,168,358
3,803
2,172,161
4,274,839
See accompanying notes to condensed interim consolidated financial statements.
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(5) Condensed Interim Consolidated Statements of Cash Flows (Unaudited)
Cash flows from operating activities:
Net profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Reversal of) Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
Loss (gain) on sales and disposal of property, plant and equipment
Gain on divestment of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sales of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance income and expenses, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share of gain of associates accounted for using the equity method . . . . . . . . . . . . . . .
Income tax expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:
Increase in trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash generated from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax refunds and interest on tax refunds received . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of property, plant and equipment
Proceeds from sales of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and redemption of investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of businesses, net of cash and cash equivalents acquired . . . . . . . . . . . . .
Proceeds from sales of business, net of cash and cash equivalents divested . . . . . . . .
Proceeds from withdrawal of restricted deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash from (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:
Net decrease in short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of obligations under finance lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility fees paid for loan agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at the beginning of the year (Consolidated statements of
financial position) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents reclassified back from assets held for sale . . . . . . . . . . . . . . . . .
Cash and cash equivalents at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effects of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY (millions)
Six months period ended September 30,
2017
2018
172,670
93,420
(9,229)
8,572
50
(3,086)
(106,619)
6,646
1,867
(506)
60,318
(35,033)
(3,019)
(7,559)
(4,825)
(2,778)
170,889
(28,168)
24,309
167,030
1,083
6,094
(36,303)
76
(46,910)
(5,787)
14,346
(17,787)
85,036
—
23,344
23,192
(403,948)
337,154
56,299
(18,729)
(3,587)
(70,966)
—
(1,297)
—
(3,056)
(108,130)
82,092
319,455
21,797
341,252
7,551
430,895
126,489
77,976
690
9,384
(5,623)
(2,266)
(14,365)
(1,230)
15,207
(4,031)
34,291
(44,721)
(21,485)
(230)
1,594
(35,001)
136,679
(20,407)
1,562
117,834
1,037
1,575
(37,314)
6,046
(21,105)
(10,340)
38,196
(66,749)
27,199
71,774
(12,461)
(2,142)
(362)
—
—
(1,158)
(4,467)
(71,448)
(2,392)
(1,284)
(15,404)
(659)
(97,174)
18,518
294,522
451
294,973
3,589
317,080
See accompanying notes to condensed interim consolidated financial statements.
7
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
1 Reporting Entity
Takeda Pharmaceutical Company Limited (the “Company”) is a public company incorporated in Japan.
The Company and its subsidiaries (collectively, “Takeda”) is a major global pharmaceutical group and is
engaged in the research, development, manufacturing and marketing of pharmaceutical products,
over-the-counter (“OTC”) medicines and quasi-drug consumer products, and other healthcare products.
Takeda’s principal pharmaceutical products include medicines in the following therapeutic areas:
gastroenterology, oncology and neuroscience.
2 Basis of Preparation
(1) Compliance
Takeda has prepared the condensed interim consolidated financial statements in accordance with IAS34
“Interim Financial Reporting” as issued by the International Accounting Standards Board (“IASB”).
The condensed interim consolidated financial statements do not contain all the information required in
consolidated financial statements as of the end of a fiscal year. Therefore, the condensed interim
consolidated financial statements should be used with the consolidated financial statements as of and for
the fiscal year ended March 31, 2018.
(2) Functional Currency and Presentation Currency
The condensed interim consolidated financial statements are presented in Japanese yen (“JPY”), which
is the functional currency of the Company. All financial information presented in JPY has been rounded
to the nearest million, except when otherwise indicated.
(3) Approval of Financial Statements
Takeda’s condensed interim consolidated financial statements as of and for the period ended
September 30, 2018 were approved on November 8, 2018 by Representative Director, President & Chief
Executive Officer (“CEO”) Christophe Weber and Corporate Officer & Chief Financial Officer Costa
Saroukos.
(4) Use of Judgments, Estimates and Assumptions
The preparation of the condensed interim consolidated financial statements requires management to
make certain judgments, estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from these
estimates.
These estimates and underlying assumptions are reviewed on a continuous basis by the management.
Changes in these accounting estimates are recognized in the period in which the estimates are revised
and in any future periods affected.
The condensed interim consolidated financial statements are prepared based on the same judgments and
estimations as well as the accounting estimates and assumptions applied and described in Takeda’s
consolidated financial statements for the fiscal year ended March 31, 2018, except for new significant
judgments and uncertainty of the estimations related to the application of IFRS 9 ‘Financial instruments’
(“IFRS 9”) and IFRS 15 ‘Revenue from Contracts with Customers’ (“IFRS 15”) , which are described in
Note 3 “Significant Accounting Policies”.
8
3
Significant Accounting Policies
Significant accounting policies adopted for the condensed interim consolidated financial statements are the
same as those adopted for the consolidated financial statements of the fiscal year ended March 31, 2018
except for the policies required by IFRS 9 and IFRS 15.
Takeda calculated income tax expenses for the six months period ended September 30, 2018, based on the
estimated average annual effective tax rate.
IFRS 9 ‘Financial instruments’
IFRS 9 was adopted by Takeda as of April 1, 2018. IFRS 9 replaces the majority of the requirements of
IAS 39 ‘Financial Instruments: Recognition and Measurement’ and covers the classification, recognition,
measurement, and de-recognition of financial assets and financial liabilities, introduces a new impairment
model for financial assets based on expected losses rather than incurred losses and provides a new hedge
accounting model.
impact of
the adoption of
The principal
IFRS 9 for Takeda was the re-measurement of certain
available-for-sale financial instruments to fair value as of April 1, 2018. In addition, as a result of adoption,
Takeda elected to designate equity instruments as financial assets measured at fair value through other
comprehensive income (FVTOCI). This designation has been made on the basis of the facts and
circumstances that existed at the date of initial application. Changes in the fair value of financial assets at
FVTOCI are recognized in other comprehensive income, and the cumulative amount of other comprehensive
income is transferred to retained earnings when the instruments are derecognized due to liquidation or sale.
The classification of financial assets under IFRS 9 is generally based on the business model in which a
financial asset is managed and its contractual cash flow characteristics. The determination of the business
model within which a financial asset is held has been made on the basis of the facts and circumstances that
existed at the date of initial application.
The impairment of financial assets measured at amortized cost is assessed using an expected credit loss
(ECL) model where previously the incurred loss model was used. Given the nature of Takeda’s financial
assets, there was no significant impact on the provisions for doubtful accounts or impairments upon adoption
of the new standard.
The adoption of IFRS 9 has not had material impact on Takeda’s financial liabilities and derivatives.
The new hedge accounting model introduced by the standard requires hedge accounting relationships to be
based upon Takeda’s own risk management objectives and strategy, and to apply a more qualitative and
forward-looking approach to assessing hedge effectiveness. The model is to be discontinued only when the
relationships no longer qualify for hedge accounting. All hedging relationships designated under IAS39 at
March 31, 2018 met the criteria for hedge accounting under IFRS 9 at April 1, 2018 and are therefore
regarded as continuing hedging relationships.
to classification and measurement
Takeda applied IFRS 9 retrospectively with respect
(including
impairment) without restating previous years. These cumulative effects of initially applying IFRS 9 were
recognized in equity as of the date of initial application of IFRS 9 (April 1, 2018). As a result of the adoption
on the date of initial application, the opening balance of retained earnings and other components of equity
increased by 14,073 million JPY and 10,257 million JPY, respectively, while other financial assets
(non-current), other financial assets (current), deferred tax liabilities increased by 32,809 million JPY,
856 million JPY and 9,345 million JPY respectively, with non-controlling interests decreasing by 10 million
JPY.
In addition, under IAS 39, the currency basis spread was included in “Cash Flow Hedges” under other
components of equity. Under IFRS 9, this basis spread is separately accounted for and presented as
“Hedging Cost” under other components of equity. Takeda retrospectively applied the accounting treatment
9
of hedging cost and adjusted the comparative information. As of September 30, 2017 and March 31, 2018,
the amounts retrospectively recorded as “Hedging Cost” and deducted from “Cash Flow Hedges” were
691 million JPY and 1,606 million JPY, respectively.
Classifications and carrying amounts of financial assets under IAS 39 and IFRS 9 as of the date of adoption
were changed as presented in the table below. For investments in equity instruments, Takeda made an
irrevocable election at the time of initial recognition to account for the equity instruments at FVTOCI. There
were no changes to the classifications and carrying amounts of the financial liabilities.
IAS 39
Carrying
amount
IFRS 9
JPY (millions)
Carrying
amount
Cash and cash equivalents
Loans and receivables
294,522 Financial assets measured at
amortized cost
294,522
Derivatives
Financial assets measured at
fair value through profit or
loss
Derivative transactions to
Derivative transactions to
which hedge accounting is
applied
Trade and other receivables,
other financial assets
which hedge accounting is
applied
Loans and receivables
Equity instruments
Available-for-sale financial
Convertible notes
Total
assets
Loans and receivables
Financial assets measured at
fair value through profit or
loss
169,814
5,303
2,070
991,851
Financial assets measured at
fair value through profit or
loss
Derivative transactions to
which hedge accounting is
applied
762
2,527
516,853 Financial assets measured at
amortized cost
Financial assets measured at
fair value through other
comprehensive income
Financial assets measured at
fair value through profit or
loss
762
2,527
516,853
203,276
7,576
1,025,516
The following changes were made to the carrying amount of the financial assets as of the date of adoption.
IAS 39
Carrying
amount
Change in
classification
Re-
measurement
IFRS 9
Loans and receivables
816,678
(5,303)
—
Financial assets measured at
Financial assets measured at fair
value through profit or loss
Derivative transactions to which
hedge accounting is applied
Available-for-sale financial
assets
Total
2,832
5,303
2,527
169,814
991,851
—
—
—
203
—
33,462
33,665
amortized cost
Financial assets measured at fair
value through profit or loss
Derivative transactions to which
hedge accounting is applied
Financial assets measured at fair
value through other
comprehensive income
JPY (millions)
Carrying
amount
811,375
8,338
2,527
203,276
1,025,516
Measurement of Financial Instruments
Debt Instruments:
•
Amortized cost: Assets such as trade and other receivables that are held within a business model
whose objective is to hold financial assets in order to collect contractual cash flows and whose
contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding are measured at amortized cost. Trade receivables are
10
initially recognized at their invoiced amounts, including any related sales taxes less adjustments for
estimated revenue deductions such as rebates, and cash discounts. Provisions for doubtful trade
receivables are established using an ECL model. The provisions are based on a forward-looking
ECL, which includes possible default events on the trade receivables over the entire holding period
of the trade receivables. Takeda has elected to measure provisions for trade receivables and lease
receivables at an amount equal to lifetime ECL. Takeda uses provision matrix to calculate ECL.
These provisions represent the difference between the carrying amount of the trade receivables and
the lease receivables in the consolidated statements of financial position and the estimated net
collectible amount.
•
•
FVTOCI: Assets that are held within a business model whose objective is achieved by both
collecting contractual cash flows and selling financial assets and whose contractual terms give rise
on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding are measured at FVTOCI. When the financial asset is derecognized, the
cumulative gain or loss previously recognized in other comprehensive income is reclassified from
equity to net profit or loss.
Fair value through profit or loss (FVTPL): Assets that do not meet the criteria for amortized cost or
FVTOCI are measured at FVTPL. A gain or loss on debt instruments that is measured at FVTPL is
recognized in net profit or loss.
Equity Instruments:
•
Equity instruments are measured at FVTPL. However, on initial recognition, Takeda made an
irrevocable FVTOCI election (on an instrument-by-instrument basis) to present the subsequent
changes in the fair value of equity instruments in other comprehensive income. As at the reporting
date, Takeda designated all its equity instruments as financial assets at FVTOCI.
Derivatives and Hedge Accounting:
•
Derivatives are measured at FVTPL unless the derivative contracts are designated as hedging
instruments. Gains or losses on derivatives are recognized in net profit or loss. When the derivative
contracts are designated as hedging instruments in cash flow hedging relationships, the effective
portion of changes in fair value of derivatives is accumulated in other comprehensive income. The
currency basis spread is accounted for and presented as “Hedging Cost” under other components of
equity separately from “Cash Flow Hedges”.
IFRS 15 ‘Revenue from Contracts with Customers’
Takeda adopted IFRS 15 on April 1, 2018. The new standard provides a single, principles-based approach to
the recognition of revenue from all contracts with customers. The standard focuses on the identification of
performance obligations in a contract and requires revenue to be recognized when or as those performance
obligations are satisfied. The standard also has more detailed disclosure requirements.
The impacts of adoption of the new standard are summarized below:
•
•
Takeda derives revenue from sales of pharmaceutical products as well as other services where
control transfers to customers and performance obligations are satisfied either at the point in time of
shipment, receipt of the products by the customer or when the services are performed.
Takeda also recognizes royalty revenue relating to the out-licensing of intellectual property (IP),
which is recognized when the underlying sales have occurred, and revenue from other services such
as research and development of compounds out-licensed, which is recognized over the service
period.
11
•
Takeda’s revenue also includes revenue from out-licensing and granting of IP rights and Takeda
usually receives upfront payments or milestone payments for these arrangements. Revenue from the
upfront payments is generally recognized when Takeda provides a right to use the IP. Revenue from
the milestone payments is generally recognized at the point in time when it is highly probable that
the respective milestone event criteria are met, and a significant reversal in the amount of revenue
recognized will not occur.
These impacts of adoption of the new standard were immaterial. Takeda elected the modified retrospective
method upon adoption of IFRS 15. This method requires the recognition of the cumulative effect of initially
applying IFRS 15 in equity at the date of initial application of IFRS 15 (April 1, 2018) and Takeda did not
restate the result of prior years. As a result of the adoption of IFRS 15, due to the difference in allocation of
revenue to performance obligations, other non-current liabilities, other current liabilities, deferred tax assets
decreased by 1,247 million JPY, 495 million JPY and 414 million JPY respectively, and opening retained
earnings increased by 1,328 million JPY.
For the six months period ended September 30, 2018, the impact from adoption of IFRS 15 on the condensed
interim consolidated financial statements was immaterial compared to the financial statements under IAS 18.
As the results of the adoption of IFRS 15, Takeda updated and revised the related accounting policy as
follows:
Revenue on sales of Takeda products and services is recognized when a contractual promise to a customer
(performance obligation) has been fulfilled by transferring control over the promised goods and services to
the customer, generally at the point in time of shipment to or receipt of the products by the customer, or
when the services are performed. The amount of revenue to be recognized is based on the consideration
Takeda expects to receive in exchange for its goods and services. If a contract contains more than one
performance obligation,
the consideration is allocated based on the standalone selling price of each
performance obligation.
The consideration Takeda receives in exchange for its goods or services may be fixed or variable. Variable
consideration is only recognized when it is highly probable that a significant reversal will not occur. The
most common elements of variable consideration are listed below:
•
•
•
Rebates and discounts granted to government agencies, wholesalers, retail pharmacies, managed
healthcare organizations and other customers are estimated and recorded as a deduction from
revenue at the time the related revenues are recorded. They are calculated on the basis of historical
experience and the specific terms in the individual agreements.
Cash discounts are offered to customers and are provisioned and recorded as revenue deductions at
the time the related sales are recorded.
Sales return provisions are recognized and recorded as revenue deductions when there is historical
experience of Takeda agreeing to customer returns and Takeda can reasonably estimate expected
future returns. In doing so, the estimated rate of return is applied, determined based on historical
experience of customer returns and considering any other relevant factors. The rate is multiplied by
the amounts invoiced in order to estimate expected future returns.
Takeda also generates revenue in the form of royalty payments, upfront payments, and milestone payments
from the out-licensing of intellectual property (IP). Royalty revenue earned through a license is recognized
when the underlying sales have occurred. Revenue from upfront payment is generally recognized when
Takeda provides a right to use IP. Revenue from milestone payments is recognized at the point in time when
it is highly probable that the respective milestone event criteria is met, and a significant reversal in the
amount of revenue recognized will not occur.
Revenue from other services such as research and development of compounds that are out-licensed is
recognized over the service period.
12
4 Revenue
The disaggregation of revenue by goods and services is as follows:
Sales of pharmaceutical products
Royalty and service income
Total
Sales of pharmaceutical products
Royalty and service income
Total
Six months period ended September 30,
JPY (millions)
2017
838,266
43,150
881,416
2018
855,722
24,889
880,611
JPY (millions)
Three months period ended September 30,
2017
420,348
12,829
433,177
2018
418,891
11,886
430,777
The disaggregation of revenue by geographic location is as follows. This disaggregation provides revenue
attributable to countries or regions based on the customer location.
Six months period ended
September 30,
Japan
U.S.
Europe
and
Canada
Russia/
CIS
Latin
America
Asia
Other
Total
2017
2018
294,987
301,784
148,938
35,111
36,063
49,189
15,344
881,416
274,243
321,079
158,603
27,484
34,685
51,905
12,612
880,611
JPY (millions)
Other includes the Middle East, Oceania and Africa.
Three months period ended
September 30,
Japan
U.S.
Europe
and
Canada
Russia/
CIS
Latin
America
Asia
Other
Total
2017
2018
134,691
153,196
75,366
18,072
19,111
24,038
8,703
433,177
129,983
159,979
79,481
13,359
16,180
25,024
6,771
430,777
JPY (millions)
Other includes the Middle East, Oceania and Africa.
5 Other Operating Income
Other operating income for the six months period ended September 30, 2017 included the gain on the sale of
shares of 106,337 million JPY which was due to the sale of shareholding in Wako Pure Chemical, Ltd. to
FUJIFILM corporation.
Other operating income for the six months period ended September 30, 2018 included the gain on the sale of
shares of 18,381 million JPY which was due to the sale of shareholding in Guangdong Techpool Bio-Pharma
Co., Ltd.
to Shanghai Pharmaceutical Holding Co. Ltd. and SFund International Investment Fund
Management Limited.
6 Other Operating Expenses
Other operating expenses for the six months period ended September 30, 2017 included expenses from
reorganizations activities, which was mainly due to reductions in the workforce and consolidation of sites
13
and functions to improve the efficiency of its operations (“Restructuring expenses”). The amount of the
Restructuring expenses was 13,723 million JPY which included R&D transformation costs, and the post-
merger integration costs related to the acquisition of ARIAD Pharmaceuticals, Inc. as well as the expenses of
6,646 million JPY associated with changes in contingent considerations (*).
Other operating expenses for the six months period ended September 30, 2018 included the restructuring
expenses of 14,097 JPY related to global operating expense reduction initiative and R&D transformation
initiative as well as the proposed Shire acquisition. In addition, other operating expenses for the same period
also included the reversal of pre-launch inventory write-offs of (7,710) million JPY due to regulatory
approval and the loss of 4,016 million JPY which was due to the sale of shareholding in Multilab Indústria e
Comércio de Produtos Farmacê uticos Ltda. to Novamed Fabricação de Produtos Farmacêuticos Ltda.
(*) The contingent considerations are recognized at fair value as part of the purchase price when
specified future events arising from business combinations occur.
7 Earnings Per Share
The basis for calculating basic and diluted earnings per share (attributable to owners) is as follows:
Net profit for the period attributable to owners of the Company
Net profit attributable to owners of the Company
(million JPY)
Net profit used for calculation of earnings per share
(million JPY)
Weighted average number of ordinary shares outstanding during
the period (thousands of shares) [basic]
Dilutive effect (thousands of shares)
Weighted average number of ordinary shares outstanding during
the period (thousands of shares) [diluted]
Earnings per share
Basic (JPY)
Diluted (JPY)
Net profit for the period attributable to owners of the Company
Net profit attributable to owners of the Company (million
JPY)
Net profit used for calculation of earnings per share
(million JPY)
Weighted average number of ordinary shares outstanding during
the period (thousands of shares) [basic]
Dilutive effect (thousands of shares)
Weighted average number of ordinary shares outstanding during
the period (thousands of shares) [diluted]
Earnings per share
Basic (JPY)
Diluted (JPY)
14
Six months period ended September 30,
2017
2018
172,816
172,816
780,468
5,122
785,590
221.43
219.98
126,668
126,668
783,062
4,030
787,092
161.76
160.93
Three months period ended September 30,
2017
2018
28,027
28,027
780,971
4,853
785,824
35.89
35.67
48,426
48,426
784,436
3,248
787,684
61.73
61.48
8 Collaborations and Licensing Arrangements
Takeda is a party to certain collaborative and licensing arrangements. These agreements generally provide
for commercialization rights to a product or products being developed by the counterparty, and, in exchange,
often resulted in upfront payments upon execution of the agreement and resulting in an obligation that
requires Takeda to make future development, regulatory approval, or commercial milestone payments as
well as royalty payments. In some of these arrangements, Takeda and the licensee are both actively involved
in the development and commercialization of the licensed product, and have exposure to risks and rewards
that are dependent on its commercial success.
The significant agreements in collaboration and licensing during the six months period ended September 30,
2018 is described below.
Wave Life Sciences Ltd. (“Wave”)
the receipt of clearance under
In February 2018, Takeda entered into an agreement with Wave to discover, develop and commercialize
nucleic acid therapies for disorders of the central nervous system (“CNS”) and the agreement became
the Hart-Scott- Rodino Antitrust
effective in April 2018 after
Improvement Act (HSR Act). Under the agreement, Wave will provide Takeda the option to co-develop
and co-commercialize programs in areas of Huntington’s disease (HD), amyotrophic lateral sclerosis
(ALS), frontotemporal dementia (FTD) and spinocerebellar ataxia type 3 (SCA3). In addition, Takeda
will have the right
including
Alzheimer’s disease and Parkinson’s disease. The agreement required upfront payments, investment in
Wave and future contingent payments such as development and commercial milestone payments. Wave
will continue to independently advance its activities in neuromuscular diseases including its lead clinical
program for the treatment of Duchene muscular dystrophy (DMD).
to license multiple preclinical programs targeting CNS disorders,
9 Dividends
Dividends Declared and Paid
April 1, 2017 to September 30, 2017
April 1, 2018 to September 30, 2018
Total
dividends
(million
JPY)
71,133
71,507
Dividends
per Share
(JPY)
90.00
90.00
Basis Date
March 31, 2017
March 31, 2018
Effective Date
June 29, 2017
June 29, 2018
Dividends declared for which the effective date falls after September 30, 2018 are as follows:
Dividends Declared
Total
dividends
(million
JPY)
Dividends
per Share
(JPY)
Basis Date
Effective Date
Board of Directors on October 31, 2018
71,509
90.00
September 30, 2018 December 3, 2018
10 Financial Instruments
(1) Fair Value Measurements
(i) Financial assets and liabilities measured at fair value through profit or loss
The fair value of derivatives to which hedge accounting was not applied is measured at quoted
prices or quotes obtained from financial institutions, whose significant inputs to the valuation model
used are based on observable market data.
The fair value of convertible notes is measured using techniques such as the option pricing model.
15
Contingent consideration, resulting from business combinations, is valued at fair value at the
acquisition date as part of the business combination. When the contingent consideration meets the
definition of a financial liability, it is subsequently re-measured to fair value at each reporting date.
The determination of the fair value is based on discounted cash flows. The key assumptions taken
into consideration are the probability of meeting each performance target and the discount factor.
The fair value measurement of contingent considerations arising from business combinations is
stated in Note11, “Business Combinations.”
(ii) Financial assets measured at amortized cost
The carrying amount of financial assets measured at amortized cost approximate their fair values as
these assets are settled within a short period.
(iii) Equity instruments
The fair value of listed equity instruments is measured at quoted prices or quotes obtained from
financial institutions.
The fair value of unlisted equity instruments is measured using techniques such as the net asset
book value method and the multiples approach. Under the multiples approach, listed companies
similar to the target companies are selected, and the fair value is calculated using the stock index for
those similar companies.
(iv) Derivative transactions to which hedge accounting is applied
The fair value of derivative transactions to which hedge accounting is applied is measured in the
same manner as “(i) Financial assets and liabilities measured at fair value through profit or loss”.
(v) Financial liabilities measured at amortized cost
The fair value of bonds is measured at quotes obtained from financial institutions, and the fair value
of loans and finance leases are measured at the present value of future cash flows discounted using
the applicable effective interest rate, with consideration of the credit risk by each liability group
classified in a specified period.
Other current items are settled in a short period, and the coupon rates of other non-current items
reflect market interest rates. Therefore, the carrying amounts of these liabilities approximate their
fair values.
(2) Fair Value Hierarchy
Level 1: Fair value measured at quoted prices in active markets
Level 2: Fair value that is calculated using an observable price other than that categorized in Level 1
directly or indirectly
Level 3: Fair value that is calculated based on valuation techniques which include input that is not based
on observable market data
16
(3) Fair Value of Financial Instruments Carried at Cost
The carrying amount and fair value of financial instruments that are not recorded at fair value in the
condensed interim consolidated statements of financial position are as follows:
Bonds
Long-term loans
Finance leases
As of September 30, 2018
JPY (millions)
Carrying amount
176,402
823,199
55,264
Fair value
174,936
824,312
54,836
The amounts to be paid within a year are included. The fair value of bonds, long-term loans and finance
leases are classified as Level 2 in the fair value hierarchy.
This table excludes financial instruments that have carrying amounts that approximates fair value.
(4) Fair Value Measurement Recognized in the Condensed Interim Consolidated Statements of Financial
Position
As of September 30, 2018
Assets:
Financial assets measured at fair value through profit or
loss:
Derivatives
Convertible notes
Derivative transactions to which hedge accounting is
applied
Financial assets measured at fair value through other
comprehensive income:
Equity instruments
Total
Liabilities:
Level 1
Level 2
Level 3
JPY (millions)
Total
—
—
6,161
—
—
9,128
6,161
9,128
— 11,698
—
11,698
147,403
31
147,403
17,890
44,731
53,859
192,165
219,152
Financial liabilities measured at fair value through profit
or loss:
Derivatives
Contingent considerations arising from business
combinations
Derivative transactions to which hedge accounting is
applied
Total
—
—
—
—
5,258
—
5,258
—
29,762
29,762
1,906
7,164
—
29,762
1,906
36,926
Takeda recognizes transfers between levels of the fair value hierarchy, at the end of the reporting period
during which the change has occurred. There were no transfers among Level 1, Level 2 and Level 3 for the
six months period ended September 30, 2018.
Disclosures related to contingent considerations arising from business combinations are stated in Note 11,
“Business Combinations”.
17
(5) Reconciliation of Level 3 Financial Assets
Opening balance
Gain or loss:
Net profit
Other comprehensive income
Purchases
Sales
Other
Closing balance
JPY (millions)
Six months period ended
September 30, 2018
47,789
148
144
5,791
(10)
(3)
53,859
Gain or loss recorded in profit or loss relates to the financial assets measured at fair value through profit or
loss. These gains or losses are recognized as “financial income” or “financial expenses” in the condensed
interim consolidated statements of income.
Gain or loss recorded in other comprehensive income relates to the financial assets measured at fair value
through other comprehensive income. These gains or losses are recognized as “Changes in fair value of
financial assets measured at fair value through other comprehensive income” and “Exchange differences on
translation of foreign operations” in the condensed interim consolidated statements of income and other
comprehensive income.
The fair values of equity instruments are measured by Takeda’s accounting and finance departments using
available information as of each closing date based on Takeda’s accounting policy. The results of the fair
value measurement and the calculation process are reported to management as necessary.
The principle input that is not observable and used for the calculation of the fair value of equity instruments
classified as Level 3 is the EBITDA rate used for the multiples approach, ranging from 7.4 times to 17.5
times. The fair value of the equity instruments increases (decreases) as the EBITDA rate increases
(decreases).
11 Business Combinations
(1) Acquisitions
TiGenix NV (“TiGenix”)
On April 30, 2018, Takeda made an all cash voluntary public takeover bid for the entire issued ordinary
shares (“Ordinary Shares”), warrants (“Warrants”) and American Depositary Shares (“ADSs” and
together with the Ordinary Shares and the Warrants, the “Securities”) of TiGenix not already owned by
Takeda. On June 8, 2018, the Company acquired the Securities tendered in the first acceptance period
for 470.2 million EUR. In response to the takeover bid with the Securities already owned by Takeda,
Takeda acquired 90.8% of the voting rights.
TiGenix is a biopharmaceutical company developing novel stem cell therapies for serious medical
conditions. This acquisition will expand Takeda’s late stage gastroenterology (GI) pipeline with the U.S.
rights to Cx601 (darvadstrocel), a suspension of allogeneic expanded adipose-derived stem cells (eASC)
under investigation for the treatment of complex perianal fistulas in patients with non-active/mildly
active luminal Crohn’s disease (CD). Following the 2nd Takeover bid and a squeeze-out ended in July
2018, TiGenix became a wholly owned subsidiary of Takeda.
18
The following represents provisional fair value of assets acquired, liabilities assumed:
Intangible assets
Other assets
Deferred tax liabilities
Other liabilities
Basis adjustments
Goodwill
Total
The purchase consideration was comprised of the following:
Cash
The ordinary shares of TiGenix already owned by Takeda
immediately prior to the acquisition date
Total
JPY (millions)
Amount
63,421
5,541
(10,128)
(5,678)
(3,381)
20,228
70,003
JPY (millions)
Amount
67,319
2,684
70,003
Goodwill comprises excess earning power expected from the future business development. Goodwill is
not deductible for tax purposes.
The fair value primarily consisting of intangible assets, deferred tax liabilities and goodwill assumed as
of the acquisition date have been recorded provisionally based on the information available as of
September 30, 2018. These amounts are subject to change as the Company is in the process of reviewing
further details of the basis for the fair value measurement. For the three months period ended
September 30, 2018, goodwill at the acquisition date increased by 253 million JPY as a result of the
adjustment to the provisional fair value, while other assets decreased by 253 million JPY.
Takeda entered into a forward exchange contract to hedge foreign currency risks and applied the hedge
accounting to the contract. Basis adjustment represents a fair value of the hedging instrument of
3,381 million JPY that was added to the amount of goodwill at the acquisition date.
No gains or losses were recognized as a result of remeasurement of fair value of the ordinary shares of
TiGenix already owned by Takeda immediately prior to the acquisition date.
Acquisition-related costs of 767 million JPY which included agent fee and due diligence costs arising
from the acquisition were recorded in “Selling, general and administrative expenses”.
The revenue and the net profit of TiGenix for the post-acquisition period, which were recognized in the
condensed interim consolidated statements of income for the six months period ended September 30,
2018, were immaterial.
The impact on Takeda’s revenue and net profit for the six months period ended September 30, 2018
assuming the acquisition date of TiGenix had been as of the beginning of the reporting period was
immaterial.
(2) Contingent Considerations
The consideration for certain acquisitions includes amounts contingent upon future events such as the
achievement of development milestones and sales targets. At each reporting date, the fair value of
contingent considerations assumed in business combinations is re-measured based on risk-adjusted
future cash flows discounted using appropriate discount rate. The contingent considerations discussed
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below are the discounted royalty payable for a certain period based on future financial performance,
primarily consisting of the COLCRYS business which was acquired in the acquisition of URL Pharma.
Inc. in June 2012. There is no cap on the royalty payable for the COLCRYS business and the estimated
future royalty payments are calculated based on forecasted financial performance.
The fair value of contingent considerations is classified as Level 3 in the fair value hierarchy. The
definition of the fair value hierarchy is stated in Note 10, “Financial Instruments”.
1) Changes in the Fair Value of Contingent Considerations
As of the beginning of the period
Additions arising from business combinations
Changes in the fair value during the period (unrealized):
URL Pharma. Inc.
Other
Settled during the period:
URL Pharma. Inc.
Other
Reclassification to other payables
Foreign currency translation differences
Other
As of the end of the period
2) Sensitivity Analysis
JPY (millions)
Six months period ended
September 30, 2018
30,569
—
341
(92)
(1,129)
—
(1,774)
1,934
(87)
29,762
The following sensitivity analysis represents effect on the fair value of contingent considerations from
changes in major assumptions:
Revenue derived from the COLCRYS business
Discount rate
JPY (millions)
As of September 30,
2018
716
(716)
(178)
181
Increase by 5%
Decrease by 5%
Increase by 0.5%
Decrease by 0.5%
12 Disposal Groups Held for Sale
The disposal groups held for sale as of March 31, 2018, consisted mainly of a group of assets, liabilities, and
other comprehensive income related to Takeda’s consolidated subsidiary, Multilab Indústria e Comércio de
Produtos Farmacêuticos Ltda. and reclassified as held for sale. The shares of the subsidiary were sold in July
its entire shareholding of 51.34% in
2018. Takeda entered into an agreement
consolidated subsidiary Guangdong Techpool Bio-Pharma Co., Ltd. and reclassified related assets and
liabilities as held for sale as of June 30, 2018, and sold the shares of the subsidiary in August 2018.
in May 2018 to sell
13 Commitments and Contingent Liabilities
Litigation
Takeda is involved in various legal and administrative proceedings. The significant matter during the six
months period ended September 30, 2018 is described below. There are no significant updates from the
consolidated financial statements as of and for the year ended March 31, 2018 except for the matter below.
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Amitiza
In March 2017, Sucampo Pharmaceuticals, Inc. (“Sucampo”) (Takeda’s licensor) received a paragraph IV
certification directed to Amitiza from Amneal Pharmaceuticals, Inc. and in August 2017 received a
paragraph IV certification directed to Amitiza from Teva Pharmaceutical Industries Ltd. These parties
contend that the patents listed in The U.S. Food and Drug Administration’s Orange Book for Amitiza are
invalid and/or not infringed by their Abbreviated New Drug Application product. In response, Sucampo and
Takeda filed a patent infringement lawsuit against the parties. In June 2018, patent litigation against these
parties has been settled.
14 Subsequent Events
On May 8, 2018, the Company reached agreement with Shire plc (“Shire”) on the terms of a recommended
offer pursuant to which the Company will acquire the entire issued and to be issued ordinary shares of Shire
(the “Acquisition”).
The Company has entered into a 364-Day Bridge Credit Agreement of 30.85 billion USD (the “Bridge
Credit Agreement”) to finance funds necessary for the Acquisition on May 8, 2018. The commitments under
the Bridge Credit Agreement are contemplated to be reduced or refinanced. On June 8, 2018, the Company
has entered into a Term Loan Credit Agreement for an aggregate principal amount of up to 7.5 billion USD
to finance a portion funds necessary for the Acquisition, and upon the execution thereof, the commitments
under the Bridge Credit Agreement were reduced by up to 7.5 billion USD.
Further, on October 26, 2018, the Company has entered into a Senior Short Term Loan Facility Agreement
for an aggregate principal amount of up to 500 billion JPY (the “SSTL”) to finance a portion of funds
necessary for the Acquisition. Upon the execution of the SSTL, the commitments under the Bridge Credit
Agreement were reduced by up to 4.5 billion USD. The Company has also entered into a Subordinated
Syndicated Loan Agreement for an aggregate principal amount of up to 500 billion JPY to refinance the debt
to be borrowed pursuant to the SSTL.
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